CREDIT AND SECURITY AGREEMENT
Dated as of March 26, 1999
AUTO NETWORK GROUP, INC., an Arizona corporation (the "Borrower"),
and NORWEST BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"),
hereby agree as follows:
ARTICLE I
Definitions
Section 1.1 DEFINITIONS. For all purposes of this Agreement, except
as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounts" means all of the Borrower's accounts, as such term
is defined in the UCC, including without limitation the aggregate unpaid
obligations of customers and other account debtors to the Borrower arising out
of the sale or lease of goods or rendition of services by the Borrower on an
open account or deferred payment basis.
"Advance" means a Revolving Advance.
"Affiliate" or "Affiliates" means Pinnacle Dealer Services,
Inc., Auto Network of New Mexico, Inc., Autotradecenterinc.com and any other
Person controlled by, controlling or under common control with the Borrower,
including (without limitation) any Subsidiary of the Borrower. For purposes of
this definition, "control," when used with respect to any specified Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise.
"Agreement" means this Credit and Security Agreement, as
amended, supplemented or restated from time to time.
"Availability" means the positive difference, if any, between
(i) the Borrowing Base, and (ii) the outstanding principal balance of the
Revolving Note.
"Banking Day" means a day other than a Saturday, Sunday or
other day on which banks are generally not open for business in Phoenix,
Arizona.
"Base Rate" means the rate of interest publicly announced from
time to time by Norwest Bank Minnesota as its "base rate" or, if such bank
ceases to announce a rate so designated, any similar successor rate designated
by the Lender.
SKR:bss 287918.06 3/22/99
"Book Net Worth" means the aggregate of the common and
preferred stockholders' equity in the Borrower, determined in accordance with
GAAP.
"Borrowing Base" means, at any time and subject to change from
time to time in Lender's sole discretion, the lesser of:
(a) the Maximum Line; or
(b) the lesser of 85% of Eligible Accounts.
"Broker Guarantee" means a guarantee executed and delivered
by a broker to Borrower.
"Capital Expenditures" for a period means any expenditure of
money for the lease, purchase or other acquisition of any capital asset, or for
the lease of any other asset whether payable currently or in the future.
"Collateral" means all of the Borrower's Equipment, Motor
Vehicles, General Intangibles, Inventory, Receivables, Accounts, all sums on
deposit in any Collateral Account, and any items in any lockbox; together with
(i) all substitutions and replacements for and products of any of the foregoing;
(ii) proceeds of any and all of the foregoing; (iii) in the case of all tangible
goods, all accessions; (iv) all accessories, attachments, parts, equipment and
repairs now or hereafter attached or affixed to or used in connection with any
tangible goods; and (v) all warehouse receipts, bills of lading and other
documents of title now or hereafter covering such goods.
"Collateral Account" has the meaning given in the
Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement of even date herewith by and among the Borrower, Norwest Bank Arizona,
NA and the Lender.
"Commitment" means the Lender's commitment to make Advances to
or for the Borrower's account pursuant to Article II.
"Credit Facility" means the discretionary credit facility
being made available to the Borrower by the Lender pursuant to Article II.
"Debt" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in determining total
liabilities as shown on the liabilities side of a balance sheet of that Person
as of the date as of which Debt is to be determined. For purposes of determining
a Person's aggregate Debt at any time, "Debt" shall also include the aggregate
payments required to be made by such Person at any time under any lease that is
considered a capitalized lease under GAAP.
"Debt Service Coverage Ratio" means the ratio of (i) the sum
of (A) Funds from Operations and (B) Interest Expense MINUS (C) unfinanced
Capital Expenditures to (ii) the sum of (A) Current Maturities of Long Term Debt
and (B) Interest Expense.
SKR:bss 287918.06 3/22/99 2
"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the
first day of any month during which a Default or Event of Default has occurred
and ending on the date the Lender notifies the Borrower in writing that such
Default or Event of Default has been cured or waived.
"Default Rate" means an annual rate equal to three percent
(3%) over the Floating Rate, which rate shall change when and as the Floating
Rate changes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Eligible Accounts" means all unpaid Accounts, net of any
credits, except the following shall not in any event be deemed Eligible
Accounts:
(i) That portion of Accounts over the later of (A) 30
days past invoice date, or (B) 30 days from payment by Borrower of its purchase
price for the automobile giving rise to the Account;
(ii) That portion of Accounts that is disputed or
subject to a claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the
final delivery of goods or rendition of services, as applicable, by the Borrower
to the customer;
(iv) Accounts owed by any unit of government, whether
foreign or domestic (provided, however, that there shall be included in Eligible
Accounts that portion of Accounts owed by such units of government for which the
Borrower has provided evidence satisfactory to the Lender that (A) the Lender
has a first priority perfected security interest and (B) such Accounts may be
enforced by the Lender directly against such unit of government under all
applicable laws);
(v) Accounts owed by an account debtor located outside
the United States which are not (A) backed by a bank letter of credit naming the
Lender as beneficiary or assigned to the Lender, in the Lender's possession and
acceptable to the Lender in all respects, in its sole discretion, (B) covered by
a foreign receivables insurance policy acceptable to the Lender in its sole
discretion;
(vi) Accounts owed by an account debtor that is
insolvent, the subject of bankruptcy proceedings or has gone out of business;
(vii) Accounts owed by a shareholder, Subsidiary,
Affiliate, officer or employee of the Borrower;
SKR:bss 287918.06 3/22/99 3
(viii) Accounts not subject to a duly perfected security
interest in the Lender's favor or which are subject to any lien, security
interest or claim in favor of any Person other than the Lender including without
limitation any payment or performance bond;
(ix) That portion of Accounts that has been
restructured, extended, amended or modified;
(x) That portion of Accounts that constitutes
advertising, finance charges, service charges or sales or excise taxes;
(xi) Accounts owed by an account debtor, regardless of
whether otherwise eligible, if 10% or more of the total amount due under
Accounts from such debtor is ineligible under clauses (i), (ii)or (ix) above;
(xii) Accounts generated by the sale of Motor Vehicles
for which Lender has not received a copy of the certificate of title validly
executed by the seller which (i) shows no lienholder, or (ii) is not accompanied
by copies of all lien releases;
(xiii) Accounts generated by the sale of Motor Vehicles
which have not yet been purchased;
(xiv) Accounts owed by an account debtor regardless of
whether otherwise eligible, in excess of 15% of total Accounts; and
(xv) Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion.
"Eastlane Debt" has the meaning specified in Section 4.1(r).
"Environmental Laws" has the meaning specified in Section
5.12.
"Equipment" means all of the Borrower's equipment, as such
term is defined in the UCC, whether now owned or hereafter acquired, including
but not limited to all present and future machinery, vehicles, furniture,
fixtures, manufacturing equipment, shop equipment, office and recordkeeping
equipment, parts, tools, supplies, and including specifically (without
limitation) the goods described in any equipment schedule or list herewith or
hereafter furnished to the Lender by the Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Floating Rate" means an annual rate equal to the sum of the
Base Rate plus one and one-half percent (1.5%), which annual rate shall change
when and as the Base Rate changes.
"Funding Date" has the meaning given in Section 2.1.
SKR:bss 287918.06 3/22/99 4
"Funds From Operations" for a given period means the sum of
(i) Net Income, (ii) depreciation and amortization, (iii) deferred income taxes,
and (iv) other non-cash items, each as determined for such period in accordance
with GAAP.
"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the financial
statements described in Section 5.5, except for any change in accounting
practices to the extent that, due to a promulgation of the Financial Accounting
Standards Board changing or implementing any new accounting standard, the
Borrower either (i) is required to implement such change, or (ii) for future
periods will be required to and for the current period may in accordance with
generally accepted accounting principles implement such change, for its
financial statements to be in conformity with generally accepted accounting
principles (any such change is herein referred to as a "Required GAAP Change"),
provided that (1) the Borrower shall fully disclose in such financial statements
any such Required GAAP Change and the effects of the Required GAAP Change on the
Borrower's income, retained earnings or other accounts, as applicable, and (2)
the Borrower's financial covenants set forth in Sections 6.12, 6.13, 6.14 and
7.10 shall be adjusted as necessary to reflect the effects of such Required GAAP
Change.
"General Intangibles" means all of the Borrower's general
intangibles, as such term is defined in the UCC, whether now owned or hereafter
acquired, including (without limitation) all present and future patents, patent
applications, copyrights, trademarks, trade names, trade secrets, customer or
supplier lists and contracts, manuals, operating instructions, permits,
franchises, the right to use the Borrower's name, and the goodwill of the
Borrower's business.
"Guarantors" means Mike Stuart, Debbie Stuart; Mike
Moldenhauer; Hope Moldenhauer; Roger Butterwick and Sherry Butterwick.
"Hazardous Substance" has the meaning given in Section 5.12.
"Inventory" means all of the Borrower's inventory, as such
term is defined in the UCC, whether now owned or hereafter acquired, whether
consisting of whole goods, spare parts or components, supplies or materials,
whether acquired, held or furnished for sale, for lease or under service
contracts or for manufacture or processing, and wherever located.
"Loan Documents" means this Agreement, the Note and the
Security Documents.
"Maturity Date" means March 31, 2000.
"Maximum Line" means $3,000,000.00.
"Minimum Interest Charge" has the meaning given in Section
2.2(b).
"Motor Vehicles" means motor vehicles for which ownership is
evidenced by a Certificate of Title.
SKR:bss 287918.06 3/22/99 5
"Net Income" means fiscal year-to-date after-tax net income
from continuing operations as determined in accordance with GAAP.
"Net Loss" means fiscal year-to-date after tax net loss from
continuing operations as determined in accordance with GAAP.
"Norwest Bank Minnesota" means Norwest Bank Minnesota,
National Association.
"Note" means the Revolving Note.
"Obligations" means the Note and each and every other debt,
liability and obligation of every type and description which the Borrower may
now or at any time hereafter owe to the Lender, whether such debt, liability or
obligation now exists or is hereafter created or incurred, whether it arises in
a transaction involving the Lender alone or in a transaction involving other
creditors of the Borrower, and whether it is direct or indirect, due or to
become due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or sole, joint, several or joint and several, and including
specifically, but not limited to, all indebtedness of the Borrower arising under
this Agreement, the Note or any other loan or credit agreement or guaranty
between the Borrower and the Lender, whether now in effect or hereafter entered
into.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan" means an employee benefit plan or other plan maintained
for the Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where the Borrower conducts its
business and has any rights of possession, including (without limitation) the
premises legally described in Exhibit C attached hereto.
"Receivables" means each and every right of the Borrower to
the payment of money, whether such right to payment now exists or hereafter
arises, whether such right to payment arises out of a sale, lease or other
disposition of goods or other property, out of a rendering of services, out of a
loan, out of the overpayment of taxes or other liabilities, or otherwise arises
under any contract or agreement, whether such right to payment is created,
generated or earned by the Borrower or by some other person who subsequently
transfers such person's interest to the Borrower, whether such right to payment
is or is not already earned by performance, and howsoever such right to payment
may be evidenced, together with all other rights and interests (including all
liens and security interests) which the Borrower may at any time have by law or
agreement against any account debtor or other obligor obligated to make any such
payment or against any property of such account debtor or other obligor; all
including but not limited to all present and future accounts, contract rights,
loans and obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.
SKR:bss 287918.06 3/22/99 6
"Reportable Event" shall have the meaning assigned to that
term in Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.1.
"Revolving Note" means the Borrower's revolving promissory
note, payable to the order of the Lender in substantially the form of Exhibit A
hereto, as the same may hereafter be amended, supplemented or restated from time
to time, and any note or notes issued in substitution therefor, as the same may
hereafter be amended, supplemented or restated from time to time and any note or
notes issued in substitution therefor.
"Security Documents" means this Agreement, the Collateral
Account Agreement and any other document delivered to the Lender from time to
time to secure the Obligations, as the same may hereafter be amended,
supplemented or restated from time to time.
"Security Interest" has the meaning given in Section 3.1.
"Subordinated Debt" means the principal amount of indebtedness
owed by Borrower for which the Lender has received a valid Subordination
Agreement.
"Subordination Agreements" means the Debt Subordination
Agreements of even date herewith, executed by Mark Moldenhauer, Hope
Moldenhauer, Pinnacle Financial Corporation, Mike Stuart and Debbie Stuart, in
the Lender's favor and acknowledged by the Borrower, and any other subordination
agreement accepted by the Lender from time to time, as the same may hereafter be
amended, supplemented or restated from time to time.
"Subsidiary" means any corporation of which more than 50% of
the outstanding shares of capital stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
corporation, irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency, is at the time directly or indirectly owned by the Borrower, by
the Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"Termination Date" means the earliest of (i) the Maturity
Date, (ii) the date the Borrower terminates the Credit Facility, or (iii) the
date the Lender demands payment of the Obligations.
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.13 as the state whose laws shall
govern this Agreement, or in any other state whose laws are held to govern this
Agreement or any portion hereof.
Section 1.2 CROSS REFERENCES. All references in this Agreement to
Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
SKR:bss 287918.06 3/22/99 7
ARTICLE II
Amount and Terms of the Credit Facility
Section 2.1 REVOLVING ADVANCES. The Lender may, in its sole
discretion, make advances to the Borrower from time to time from the date all of
the conditions set forth in Section 4.1 are satisfied (the "Funding Date") to
the Termination Date, on the terms and subject to the conditions herein set
forth (the "Revolving Advances"). The Lender shall not consider any request for
a Revolving Advance if, after giving effect to such requested Revolving Advance,
the sum of the outstanding and unpaid Revolving Advances would exceed the
Borrowing Base. The Borrower's obligation to pay the Revolving Advances shall be
evidenced by the Revolving Note and shall be secured by the Collateral as
provided in Article III. Within the limits set forth in this Section 2.1, the
Borrower may request Revolving Advances, prepay pursuant to Section 2.7 and
request additional Revolving Advances. The Borrower agrees to comply with the
following procedures in requesting Revolving Advances under this Section 2.1:
(a) The Borrower shall make each request for a Revolving
Advance to the Lender before 11:00 a.m. (Phoenix time) of the day of the
requested Revolving Advance. Requests may be made in writing or by telephone,
specifying the date of the requested Revolving Advance and the amount thereof.
Each request shall be by (i) any officer of either of the entities constituting
the Borrower; or (ii) any person designated as the Borrower's agent by any
officer of either of the entities constituting the Borrower in a writing
delivered to the Lender; or (iii) any person whom the Lender reasonably believes
to be an officer of the Borrower or such a designated agent.
(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested Revolving
Advance by crediting the same to the Borrower's demand deposit account
maintained with Norwest Bank Arizona, NA unless the Lender and the Borrower
shall agree in writing to another manner of disbursement. Upon the Lender's
request, the Borrower shall promptly confirm each telephonic request for an
Advance by executing and delivering an appropriate confirmation certificate to
the Lender. The Borrower shall repay all Advances even if the Lender does not
receive such confirmation and even if the person requesting an Advance was not
in fact authorized to do so. Any request for an Advance, whether written or
telephonic, shall be deemed to be a representation by the Borrower that the
conditions set forth in Section 4.2 have been satisfied as of the time of the
request.
Section 2.2 INTEREST; MINIMUM INTEREST CHARGE; DEFAULT INTEREST;
PARTICIPATIONS; USURY. Interest accruing on the Note shall be due and payable in
arrears on the first day of each month.
(a) REVOLVING NOTE. Except as set forth in Sections 2.2(c),
2.2(e) and 2.2(f), the outstanding principal balance of the Revolving Note shall
bear interest at the Floating Rate.
(b) MINIMUM INTEREST CHARGE. Notwithstanding the interest
payable pursuant to Section 2.2(a), the Borrower shall pay to the Lender
interest of not less than $7,500.00 per calendar month (the "Minimum Interest
Charge") during the term of this Agreement, and the Borrower shall pay any
deficiency between the Minimum Interest Charge
SKR:bss 287918.06 3/22/99 8
and the amount of interest otherwise calculated under Sections 2.2(a) and 2.2(c)
on the date and in the manner provided in Section 2.4.
(c) DEFAULT INTEREST RATE. At any time during any Default
Period, in the Lender's sole discretion and without waiving any of its other
rights and remedies, the principal of the Advances outstanding from time to time
shall bear interest at the Default Rate, effective for any periods designated by
the Lender from time to time during that Default Period.
(d) PARTICIPATIONS. If any Person shall acquire a
participation in the Advances under this Agreement, the Borrower shall be
obligated to the Lender to pay the full amount of all interest calculated under
Section 2.2(a), along with all other fees, charges and other amounts due under
this Agreement, regardless if such Person elects to accept interest with respect
to its participation at a lower rate than the Floating Rate, or otherwise elects
to accept less than its pro rata share of such fees, charges and other amounts
due under this Agreement.
(e) USURY. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate permitted by
law. Notwithstanding anything to the contrary contained in any Loan Document,
all agreements which either now are or which shall become agreements between the
Borrower and the Lender are hereby limited so that in no contingency or event
whatsoever shall the total liability for payments in the nature of interest,
additional interest and other charges exceed the applicable limits imposed by
the usury laws of the State of Arizona. If any payments in the nature of
interest, additional interest and other charges made under any Loan Document are
held to be in excess of the applicable limits imposed by the usury laws of the
State of Arizona, it is agreed that any such amount held to be in excess shall
be considered payment of principal hereunder, and the indebtedness evidenced
hereby shall be reduced by such amount so that the total liability for payments
in the nature of interest, additional interest and other charges shall not
exceed the applicable limits imposed by the usury laws of the State of Arizona,
in compliance with the desires of the Borrower and the Lender. This provision
shall never be superseded or waived and shall control every other provision of
the Loan Documents and all agreements between the Borrower and the Lender, or
their successors and assigns.
(f) SAVINGS CLAUSE. The Borrower agrees that the interest rate
contracted for includes the interest rate set forth herein plus any other
charges or fees set forth herein and costs and expenses incident to this
transaction paid by the Borrower to the extent that some are deemed interest
under applicable law.
Section 2.3 FEES.
(a) ORIGINATION FEE. The Borrower hereby agrees to pay the
Lender a fully earned and non-refundable origination fee of $25,000.00 due and
payable upon the execution of this Agreement.
(b) UNUSED LINE FEE. For the purposes of this Section 2.3(b),
"Unused Amount" means the Maximum Line reduced by outstanding Revolving
Advances. The Borrower agrees to pay to the Lender an unused line fee at the
rate of one-quarter of one percent (0.25%) per annum on the average daily Unused
Amount from the date of this Agreement to and
SKR:bss 287918.06 3/22/99 9
including the Termination Date, due and payable monthly in arrears on the first
day of the month and on the Termination Date.
(c) AUDIT FEES. The Borrower hereby agrees to pay the Lender,
on demand, audit fees in connection with any audits or inspections conducted by
the Lender of any Collateral or the Borrower's operations or business at the
rates established from time to time by the Lender as its audit fees (which fees
are currently $60 per hour per auditor), together with all actual out-of-pocket
costs and expenses incurred in conducting any such audit or inspection.
(d) ADMINISTRATION FEE. The Borrower agrees to pay the Lender
a loan administration fee in the amount of $1,000.00 per month, due and payable
in advance on the first day of each month.
Section 2.4 COMPUTATION OF INTEREST AND FEES; WHEN INTEREST DUE AND
PAYABLE. Interest accruing on the outstanding principal balance of the Advances
and fees hereunder outstanding from time to time shall be computed on the basis
of actual number of days elapsed in a year of 360 days. Interest shall be
payable in arrears on the first day of each month and on the Termination Date.
Section 2.5 DISCRETIONARY NATURE OF THIS FACILITY; TERMINATION BY
THE LENDER; AUTOMATIC RENEWAL. This Agreement contains the terms and conditions
upon which the Lender presently expects to make Advances to the Borrower. Each
Advance by the Lender to the Borrower shall be in the Lender's sole discretion,
and the Lender need not show that an adverse change has occurred in the
Borrower's condition, financial or otherwise, or that any of the conditions of
Article IV have not been met, in order to refuse to make any requested Advance
or to demand payment of the Obligations. The Lender may at any time terminate
the Credit Facility whereupon the Lender shall no longer consider requests for
Advances under this Agreement. Unless terminated by the Lender at any time or by
the Borrower pursuant to Section 2.7, the Credit Facility shall remain in effect
until the Maturity Date.
Section 2.6 CAPITAL ADEQUACY. If any Related Lender determines at
any time that its Return has been reduced as a result of any Rule Change, such
Related Lender may require the Borrower to pay it the amount necessary to
restore its Return to what it would have been had there been no Rule Change. For
purposes of this Section 2.6:
(a) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital adequacy, or the
interpretation or administration thereof by any governmental or regulatory
authority, central bank or comparable agency, whether or not having the force of
law, that applies to any Related Lender. Such rules include rules requiring
financial institutions to maintain total capital in amounts based upon
percentages of outstanding loans, binding loan commitments and letters of
credit.
(b) "Return", for any period, means the return as determined
by such Related Lender on the Advances based upon its total capital requirements
and a reasonable attribution formula that takes account of the Capital Adequacy
Rules then in effect. Return may be calculated for each calendar quarter and for
the shorter period between the end of a calendar quarter and the date of
termination in whole of this Agreement.
SKR:bss 287918.06 3/22/99 10
(c) "Rule Change" means any change in any Capital Adequacy
Rule occurring after the date of this Agreement, but the term does not include
any changes in applicable requirements that at the Closing Date are scheduled to
take place under the existing Capital Adequacy Rules or any increases in the
capital that any Related Lender is required to maintain to the extent that the
increases are required due to a regulatory authority's assessment of the
financial condition of such Related Lender.
(d) "Related Lender" includes (but is not limited to) the
Lender, any parent corporation of the Lender and any assignee of any interest of
the Lender hereunder and any participant in the loans made hereunder.
Certificates of any Related Lender sent to the Borrower from time to time
claiming compensation under this Section 2.6, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional amount or
amounts to be paid to the Related Lender hereunder to restore its Return shall
be conclusive absent manifest error. In determining such amounts, the Related
Lender may use any reasonable averaging and attribution methods.
Section 2.7 VOLUNTARY PREPAYMENT; TERMINATION OF THE CREDIT FACILITY
BY THE BORROWER. Except as otherwise provided herein, the Borrower may prepay
the Advances in whole at any time or from time to time in part. The Borrower may
terminate the Credit Facility at any time if it (i) gives the Lender at least 30
days' prior written notice and (ii) pays the Lender termination fees in
accordance with Section 2.8. Subject to termination of the Credit Facility and
payment and performance of all Obligations, the Lender shall release or
terminate the Security Interest and the Security Documents to which the Borrower
is entitled by law.
Section 2.8 TERMINATION FEES; WAIVER OF TERMINATION FEES.
(a) TERMINATION FEES. If the Credit Facility is terminated (i)
for any reason as of a date other than a Maturity Date, or (ii) by the Borrower
as of a Maturity Date but without the Lender having received written notice of
such termination from the Borrower at least 90 days before such Maturity Date,
the Borrower shall pay to the Lender a fee in an amount equal to one percent
(1%) of the Maximum Line.
(b) WAIVER/REDUCTION OF TERMINATION FEES.
(i) The Borrower will not be required to pay the
termination fees otherwise due under this Section 2.8 if such termination is
made because of a refinancing by an affiliate of the Lender.
(ii) The termination fee otherwise due under this
Section 2.8 shall be reduced to an amount equal to one-half of one percent
(0.5%) of the Maximum Line, if but only if, (i) on the date of said termination
there is not a then existing Event of Default or Default Period, (ii) the
termination is made between January 1, 2000 and March 31, 2000, and (iii) Lender
has declined, during such period, to enter into an inventory financing
transaction with Borrower.
Section 2.9 MANDATORY PREPAYMENT. Without notice or demand, if the
outstanding principal balance of the Revolving Advances shall at any time exceed
the Borrowing
SKR:bss 287918.06 3/22/99 11
Base, the Borrower shall immediately prepay the Revolving Advances to the extent
necessary to eliminate such excess. Any payment received by the Lender under
this Section 2.9 or under Section 2.7 may be applied to the Obligations, in such
order and in such amounts as the Lender, in its discretion, may from time to
time determine. For each day or portion thereof that the Revolving Advances
shall exceed the Borrowing Base, the Borrower shall pay to the Lender an
overadvance charge (which charge shall be in addition to and not in lieu of any
other interest, fees, or charges payable by Borrower hereunder) in the amount of
$100.00; provided, however, that if such day occurs during a Default Period, the
overadvance charge for such day shall be $200.00.
Section 2.10 PAYMENT. All payments to the Lender shall be made in
immediately available funds and shall be applied to the Obligations 2 Banking
Days after receipt by the Lender. The Lender may hold all payments not
constituting immediately available funds for an additional three Banking Days
before applying them to the Obligations. Notwithstanding anything in Section
2.1, the Borrower hereby authorizes the Lender, in its discretion at any time or
from time to time without the Borrower's request and even if the conditions set
forth in Section 4.2 would not be satisfied, to make a Revolving Advance in an
amount equal to the portion of the Obligations from time to time due and
payable.
Section 2.11 PAYMENT ON NON-BANKING DAYS. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Banking Day,
such payment may be made on the next succeeding Banking Day, and such extension
of time shall in such case be included in the computation of interest on the
Advances or the fees hereunder, as the case may be.
Section 2.12 USE OF PROCEEDS. The Borrower shall use the proceeds of
Advances (i) to repay all outstanding indebtedness owed to First International
Bank, and (ii) for ordinary working capital purposes.
Section 2.13 LIABILITY RECORDS. The Lender may maintain from time to
time, at its discretion, liability records as to the Obligations. All entries
made on any such record shall be presumed correct until the Borrower establishes
the contrary. Upon the Lender's demand, the Borrower will admit and certify in
writing the exact principal balance of the Obligations that the Borrower then
asserts to be outstanding. Any billing statement or accounting rendered by the
Lender shall be conclusive and fully binding on the Borrower unless the Borrower
gives the Lender specific written notice of exception within 30 days after
receipt.
ARTICLE III
Security Interest; Occupancy; Setoff
Section 3.1 GRANT OF SECURITY INTEREST. The Borrower hereby pledges,
assigns and grants to the Lender a security interest (collectively referred to
as the "Security Interest") in the Collateral, as security for the payment and
performance of the Obligations.
Section 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS. The
Lender may at any time (whether or not a Default Period then exists) notify any
account debtor or other person obligated to pay the amount due that such right
to payment has been assigned or transferred to the Lender for security and shall
be paid directly to the Lender. The Borrower will
SKR:bss 287918.06 3/22/99 12
join in giving such notice if the Lender so requests. At any time after the
Borrower or the Lender gives such notice to an account debtor or other obligor,
the Lender may, but need not, in the Lender's name or in the Borrower's name,
(a) demand, sue for, collect or receive any money or property at any time
payable or receivable on account of, or securing, any such right to payment, or
grant any extension to, make any compromise or settlement with or otherwise
agree to waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose of the Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for the Borrower's account or
forwarding such mail to the Borrower's last known address.
Section 3.3 ASSIGNMENT OF INSURANCE. As additional security for the
payment and performance of the Obligations, the Borrower hereby assigns to the
Lender any and all monies (including, without limitation, proceeds of insurance
and refunds of unearned premiums) due or to become due under, and all other
rights of the Borrower with respect to, any and all policies of insurance now or
at any time hereafter covering the Collateral or any evidence thereof or any
business records or valuable papers pertaining thereto, and the Borrower hereby
directs the issuer of any such policy to pay all such monies directly to the
Lender. At any time, whether or not a Default Period then exists, the Lender may
(but need not), in the Lender's name or in the Borrower's name, execute and
deliver proof of claim, receive all such monies, endorse checks and other
instruments representing payment of such monies, and adjust, litigate,
compromise or release any claim against the issuer of any such policy.
Section 3.4 OCCUPANCY.
(a) The Borrower hereby irrevocably grants to the Lender the
right to take possession of the Premises at any time during a Default Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise dispose of
goods that are Collateral and for other purposes that the Lender may in good
faith deem to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Commitment, and (ii) final sale or
disposition of all goods constituting Collateral and delivery of all such goods
to purchasers.
(d) The Lender shall not be obligated to pay or account for
any rent or other compensation for the possession, occupancy or use of any of
the Premises; provided, however, that if the Lender does pay or account for any
rent or other compensation for the possession, occupancy or use of any of the
Premises, the Borrower shall reimburse the Lender promptly for the full amount
thereof. In addition, the Borrower will pay, or reimburse the Lender for, all
taxes, fees, duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery, existence,
recordation, performance or enforcement of this Agreement or the provisions of
this Section 3.4.
SKR:bss 287918.06 3/22/99 13
Section 3.5 LICENSE. The Borrower hereby grants to the Lender a
non-exclusive, worldwide and royalty-free license to use or otherwise exploit
all trademarks, franchises, trade names, copyrights and patents of the Borrower
for the purpose of selling, leasing or otherwise disposing of any or all
Collateral during any Default Period.
Section 3.6 FINANCING STATEMENT. A carbon, photographic or other
reproduction of this Agreement or of any financing statements signed by the
Borrower is sufficient as a financing statement and may be filed as a financing
statement in any state to perfect the security interests granted hereby. For
this purpose, the following information is set forth:
Name and address of Debtor:
Auto Network Group, Inc.
8135 East Butherus
Scottsdale, AZ 85260
Federal Tax Identification No. 86-0879572
Name and address of Secured Party:
Norwest Business Credit, Inc.
Norwest Tower, M.S. 9025
3300 North Central Avenue
Phoenix, AZ 85012-2501
Federal Tax Identification No. 41-1237652
Section 3.7 SETOFF. The Borrower agrees that the Lender may at any
time or from time to time, at its sole discretion and without demand and without
notice to anyone, setoff any liability owed to the Borrower by the Lender,
whether or not due, against any Obligation, whether or not due. In addition,
each other Person holding a participating interest in any Obligations shall have
the right to appropriate or setoff any deposit or other liability then owed by
such Person to the Borrower, whether or not due, and apply the same to the
payment of said participating interest, as fully as if such Person had lent
directly to the Borrower the amount of such participating interest.
ARTICLE IV
Conditions of Lending
Section 4.1 CONDITIONS PRECEDENT TO LENDER'S WILLINGNESS TO CONSIDER
MAKING THE INITIAL REVOLVING ADVANCE. The Lender's willingness to consider
making the initial Revolving Advance hereunder shall be subject to the condition
precedent that (i) after (1) giving effect to the initial Revolving Advance, (2)
paying in full all indebtedness owed to First International Bank, and (3)
reserving for trade payables older than 30 days from invoice date, book
overdrafts and closing costs, there is not less than $500,000.00 in excess
Availability, and (ii) the Lender shall have received all of the following, each
in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
SKR:bss 287918.06 3/22/99 14
(b) The Note, properly executed by the Borrower.
(c) A true and correct copy of any and all leases pursuant to
which the Borrower is leasing the Premises, together with a landlord's
disclaimer and consent with respect to each such lease.
(d) A true and correct copy of any and all mortgages pursuant
to which the Borrower has mortgaged the Premises, together with a mortgagee's
disclaimer and consent with respect to each such mortgage.
(e) A true and correct copy of any and all agreements pursuant
to which the Borrower's property is in the possession of any Person other than
the Borrower, together with, in the case of any goods held by such Person for
resale, (i) a consignee's acknowledgment and waiver of liens, (ii) UCC financing
statements sufficient to protect the Borrower's and the Lender's interests in
such goods, and (iii) UCC searches showing that no other secured party has filed
a financing statement against such Person and covering property similar to the
Borrower's other than the Borrower, or if there exists any such secured party,
evidence that each such secured party has received notice from the Borrower and
the Lender sufficient to protect the Borrower's and the Lender's interests in
the Borrower's goods from any claim by such secured party.
(f) An acknowledgment and waiver of liens from each warehouse
in which the Borrower is storing Inventory.
(g) A true and correct copy of any and all agreements pursuant
to which the Borrower's property is in the possession of any Person other than
the Borrower, together with, (i) an acknowledgment and waiver of liens from each
subcontractor who has possession of the Borrower's goods from time to time, (ii)
UCC financing statements sufficient to protect the Borrower's and the Lender's
interests in such goods, and (iii) UCC searches showing that no other secured
party has filed a financing statement covering such Person's property other than
the Borrower, or if there exists any such secured party, evidence that each such
secured party has received notice from the Borrower and the Lender sufficient to
protect the Borrower's and the Lender's interests in the Borrower's goods from
any claim by such secured party.
(h) An acknowledgment and agreement from each licensor in
favor of the Lender, together with a true, correct and complete copy of all
license agreements.
(i) Assignment of Broker Guarantees, properly executed by each
broker issuing a Broker Guarantee.
(j) The Collateral Account Agreement, properly executed by the
Borrower and Norwest Bank Arizona, NA.
(k) The Subordination Agreements, properly executed by Mark
Moldenhauer, Hope Moldenhauer, Pinnacle Financial Corporation, Mike Stuart and
Debbie Stuart, and acknowledged by the Borrower.
(l) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in effect
against the Borrower, (ii) no
SKR:bss 287918.06 3/22/99 15
financing statements or assignments of patents, trademarks or copyrights have
been filed and remain in effect against the Borrower except those financing
statements and assignments of patents, trademarks or copyrights relating to
Permitted Liens or to liens held by Persons who have agreed in writing that upon
receipt of proceeds of the Advances, they will deliver UCC releases and/or
terminations and releases of such assignments of patents, trademarks or
copyrights satisfactory to the Lender, and (iii) the Lender has duly filed all
financing statements necessary to perfect the Security Interest, to the extent
the Security Interest is capable of being perfected by filing.
(m) A certificate of the Borrower's Secretary or Assistant
Secretary certifying as to (i) the resolutions of the Borrower's directors and,
if required, shareholders, authorizing the execution, delivery and performance
of the Loan Documents, (ii) the Borrower's articles of incorporation and bylaws,
and (iii) the signatures of the Borrower's officers or agents authorized to
execute and deliver the Loan Documents and other instruments, agreements and
certificates, including Advance requests, on the Borrower's behalf.
(n) A current certificate issued by the Corporation Commission
of Arizona certifying that Borrower is in compliance with all applicable
organizational requirements of the State of Arizona.
(o) Evidence that the Borrower is duly licensed or qualified
to transact business in all jurisdictions where the character of the property
owned or leased or the nature of the business transacted by it makes such
licensing or qualification necessary.
(p) A certificate of an officer of Borrower confirming, in his
personal capacity, the representations and warranties set forth in Article V.
(q) An opinion of counsel to the Borrower, addressed to the
Lender.
(r) Evidence satisfactory to Lender that the maturity date of
the debt in the principal amount of $1,482,259.00 owed by Borrower to Eastlane
Trading Company (the "Eastlane Debt") has been extended to a date which is
beyond the Maturity Date.
(s) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in the Lender's
favor and with all liability insurance naming the Lender as an additional
insured.
(t) A separate guaranty, properly executed by each Guarantor,
pursuant to which each Guarantor unconditionally guarantees the full and prompt
payment of all Obligations.
(u) An opinion of counsel to each Guarantor, addressed to the
Lender.
(v) Payment of the fees and commissions due through the date
of the initial Advance under Section 2.3 and expenses incurred by the Lender
through such date and required to be paid by the Borrower under Section 9.6,
including all legal expenses incurred through the date of this Agreement.
SKR:bss 287918.06 3/22/99 16
(w) Such other documents as the Lender in its sole discretion
may require.
Section 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The Lender will
not consider any request for an Advance unless on such date:
(a) the representations and warranties contained in Article V
are correct on and as of the date of 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; and
(b) no event has occurred and is continuing, or would result
from such Advance which constitutes a Default or an Event of Default.
ARTICLE V
Representations and Warranties
The Borrower represents and warrants to the Lender as follows:
Section 5.1 CORPORATE EXISTENCE AND POWER; NAME; CHIEF EXECUTIVE
OFFICE; INVENTORY AND EQUIPMENT LOCATIONS; TAX IDENTIFICATION NUMBER. Borrower
is a corporation, duly organized, validly existing and in good standing under
the laws of the State of Arizona and is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing or
qualification necessary. The Borrower has all requisite power and authority,
corporate or otherwise, to conduct its business, to own its properties and to
execute and deliver, and to perform all of its obligations under, the Loan
Documents. During its existence, the Borrower has done business solely under the
names set forth in Schedule 5.1 hereto. The Borrower's chief executive office
and principal place of business is located at the address set forth in Schedule
5.1 hereto, and all of the Borrower's records relating to its business or the
Collateral are kept at that location. All Inventory and Equipment is located at
that location or at one of the other locations set forth in Schedule 5.1 hereto.
The Borrower's tax identification numbers are correctly set forth in Section 3.6
hereto.
Section 5.2 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by the Borrower of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the Borrower's stockholders; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including, without limitation,
Regulation X of the Board of Governors of the Federal Reserve System) or of any
order, writ, injunction or decree presently in effect having applicability to
the Borrower or of the Borrower's articles of incorporation or bylaws; (iv)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other material agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound or
affected; or (v) result in, or require, the creation or imposition of any
mortgage, deed of trust,
SKR:bss 287918.06 3/22/99 17
pledge, lien, security interest or other charge or encumbrance of any nature
(other than the Security Interest) upon or with respect to any of the properties
now owned or hereafter acquired by the Borrower.
Section 5.3 LEGAL AGREEMENTS. This Agreement constitutes and, upon
due execution by the Borrower, the other Loan Documents will constitute the
legal, valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms.
Section 5.4 SUBSIDIARIES. Except as set forth in Schedule 5.4, the
Borrower has no Subsidiaries.
Section 5.5 FINANCIAL CONDITION; NO ADVERSE CHANGE. The Borrower has
heretofore furnished to the Lender consolidated audited financial statements of
the Borrower for the fiscal year ended March 31, 1998 and consolidated unaudited
financial statements of the Borrower for the fiscal year-to-date period ended
January 31, 1999, and those statements fairly present the Borrower's financial
condition on the dates thereof and the results of its operations and cash flows
for the periods then ended and were prepared in accordance with generally
accepted accounting principles. Since the date of the most recent financial
statements, there has been no material adverse change in the Borrower's
business, properties or condition (financial or otherwise).
Section 5.6 LITIGATION. There are no actions, suits or proceedings
pending or, to the Borrower's knowledge, threatened against or affecting the
Borrower or any of its Affiliates or the properties of the Borrower or any of
its Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrower or any of its Affiliates, would have a material
adverse effect on the financial condition, properties or operations of the
Borrower or any of its Affiliates.
Section 5.7 REGULATION U. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Advance will be used
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
Section 5.8 TAXES. The Borrower and its Affiliates have paid or
caused to be paid to the proper authorities when due all federal, state and
local taxes required to be withheld by each of them. The Borrower and its
Affiliates have filed all federal, state and local tax returns which to the
knowledge of the officers of the Borrower or any Affiliate, as the case may be,
are required to be filed, and the Borrower and its Affiliates have paid or
caused to be paid to the respective taxing authorities all taxes as shown on
said returns or on any assessment received by any of them to the extent such
taxes have become due.
Section 5.9 TITLES AND LIENS. Borrower has good and absolute title
to all Collateral described in the collateral reports provided to the Lender and
all other Collateral, properties and assets reflected in the latest financial
statements referred to in Section 5.5 and all proceeds thereof, free and clear
of all mortgages, security interests, liens and encumbrances,
SKR:bss 287918.06 3/22/99 18
except for Permitted Liens. No financing statement naming the Borrower as debtor
is on file in any office except to perfect only Permitted Liens.
Section 5.10 PLANS. Except as disclosed to the Lender in writing
prior to the date hereof, neither the Borrower nor any of its Affiliates
maintains or has maintained any Plan. Neither the Borrower nor any Affiliate has
received any notice or has any knowledge to the effect that it is not in full
compliance with any of the requirements of ERISA. No Reportable Event or other
fact or circumstance which may have an adverse effect on the Plan's tax
qualified status exists in connection with any Plan. Neither the Borrower nor
any of its Affiliates has:
(a) Any accumulated funding deficiency within the meaning of
ERISA; or
(b) Any liability or knows of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty Corporation, the
Internal Revenue Service, the Department of Labor or any participant in
connection with any Plan (other than accrued benefits which or which may become
payable to participants or beneficiaries of any such Plan).
Section 5.11 DEFAULT. The Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could have a material adverse effect on the Borrower's financial
condition, properties or operations.
Section 5.12 ENVIRONMENTAL MATTERS.
(a) DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:
(i) "Environmental Law" means any federal, state, local
or other governmental statute, regulation, law or ordinance dealing with the
protection of human health and the environment.
(ii) "Hazardous Substances" means pollutants,
contaminants, hazardous substances, hazardous wastes, petroleum and fractions
thereof, and all other chemicals, wastes, substances and materials listed in,
regulated by or identified in any Environmental Law.
(b) To the Borrower's best knowledge, there are not present
in, on or under the Premises any Hazardous Substances in such form or quantity
as to create any liability or obligation for either the Borrower or the Lender
under common law of any jurisdiction or under any Environmental Law, and no
Hazardous Substances have ever been stored, buried, spilled, leaked, discharged,
emitted or released in, on or under the Premises in such a way as to create any
such liability.
(c) To the Borrower's best knowledge, the Borrower has not
disposed of Hazardous Substances in such a manner as to create any liability
under any Environmental Law.
SKR:bss 287918.06 3/22/99 19
(d) There are not and there never have been any requests,
claims, notices, investigations, demands, administrative proceedings, hearings
or litigation, relating in any way to the Premises or the Borrower, alleging
liability under, violation of, or noncompliance with any Environmental Law or
any license, permit or other authorization issued pursuant thereto. To the
Borrower's best knowledge, no such matter is threatened or impending.
(e) To the Borrower's best knowledge, the Borrower's
businesses are and have in the past always been conducted in accordance with all
Environmental Laws and all licenses, permits and other authorizations required
pursuant to any Environmental Law and necessary for the lawful and efficient
operation of such businesses are in the Borrower's possession and are in full
force and effect. No permit required under any Environmental Law is scheduled to
expire within 12 months and there is no threat that any such permit will be
withdrawn, terminated, limited or materially changed.
(f) To the Borrower's best knowledge, the Premises are not and
never have been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or any
similar federal, state or local list, schedule, log, inventory or database.
(g) The Borrower has delivered to Lender all environmental
assessments, audits, reports, permits, licenses and other documents describing
or relating in any way to the Premises or Borrower's businesses.
Section 5.13 SUBMISSIONS TO LENDER. All financial and other
information provided to the Lender by or on behalf of the Borrower in connection
with the Borrower's request for the credit facilities contemplated hereby is
true and correct in all material respects and, as to projections, valuations or
proforma financial statements, present a good faith opinion as to such
projections, valuations and proforma condition and results.
Section 5.14 FINANCING STATEMENTS. The Borrower has provided to the
Lender signed financing statements sufficient when filed to perfect the Security
Interest and the other security interests created by the Security Documents.
When such financing statements are filed in the offices noted therein, the
Lender will have a valid and perfected security interest in all Collateral and
all other collateral described in the Security Documents which is capable of
being perfected by filing financing statements. None of the Collateral or other
collateral covered by the Security Documents is or will become a fixture on real
estate, unless a sufficient fixture filing is in effect with respect thereto.
Section 5.15 RIGHTS TO PAYMENT. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in the Borrower's records pertaining thereto as being
obligated to pay such obligation.
SKR:bss 287918.06 3/22/99 20
Section 5.16 FINANCIAL SOLVENCY. Both before and after giving effect
to all of the transactions contemplated in the Loan Documents, none of the
Borrower or its Affiliates:
(a) was or will be insolvent, as that term is used and defined
in Section 101(32) of the United States Bankruptcy Code and Section 2 of the
Uniform Fraudulent Transfer Act;
(b) has unreasonably small capital or is engaged or about to
engage in a business or a transaction for which any remaining assets of the
Borrower or such Affiliate are unreasonably small;
(c) by executing, delivering or performing its obligations
under the Loan Documents or other documents to which it is a party or by taking
any action with respect thereto, intends to, nor believes that it will, incur
debts beyond its ability to pay them as they mature;
(d) by executing, delivering or performing its obligations
under the Loan Documents or other documents to which it is a party or by taking
any action with respect thereto, intends to hinder, delay or defraud either its
present or future creditors; and
(e) at this time contemplates filing a petition in bankruptcy
or for an arrangement or reorganization or similar proceeding under any law any
jurisdiction, nor, to the best knowledge of the Borrower, is the subject of any
actual, pending or threatened bankruptcy, insolvency or similar proceedings
under any law of any jurisdiction.
Section 5.17 FELICE REPAYMENT. On or before September 30, 1999,
Borrower shall repay in full all amounts owed by Borrower to Evelyn Felice,
which repayment shall be made using funds from additional equity infusions
and/or new Subordinated Debt.
ARTICLE VI
Borrower's Affirmative Covenants
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 REPORTING REQUIREMENTS. The Borrower will deliver, or
cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days
after the end of each fiscal year of the Borrower, the Borrower's consolidating
and consolidated audited financial statements with the unqualified opinion of
independent certified public accountants selected by the Borrower and acceptable
to the Lender, which annual financial statements shall include the Borrower's
balance sheet as of the end of such fiscal year and the related statements of
the Borrower's income, retained earnings and cash flows for the fiscal year then
ended, prepared, if the Lender so requests, on a consolidating and consolidated
basis to include any Affiliates, all in reasonable detail and prepared in
accordance with GAAP, together with
SKR:bss 287918.06 3/22/99 21
(i) copies of all management letters prepared by such accountants; (ii) a report
signed by such accountants stating that in making the investigations necessary
for said opinion they obtained no knowledge, except as specifically stated, of
any Default or Event of Default hereunder and all relevant facts in reasonable
detail to evidence, and the computations as to, whether or not the Borrower is
in compliance with the requirements set forth in Sections 6.12, 6.13, 6.14 and
7.10; and (iii) a certificate of Borrower's chief financial officer stating that
such financial statements have been prepared in accordance with GAAP and whether
or not such officer has knowledge of the occurrence of any Default or Event of
Default hereunder and, if so, stating in reasonable detail the facts with
respect thereto;
(b) as soon as available and in any event within 20 days after
the end of each month, a consolidating and consolidated unaudited/internal
balance sheet and statements of income and retained earnings of the Borrower as
at the end of and for such month and for the year to date period then ended,
prepared, on a consolidating and consolidated basis to include any Affiliates,
in reasonable detail and stating in comparative form the figures for the
corresponding date and periods in the previous year, all prepared in accordance
with GAAP, subject to year-end audit adjustments; and accompanied by a
certificate of Borrower's chief financial officer, substantially in the form of
Exhibit B hereto stating (i) that such financial statements have been prepared
in accordance with GAAP, subject to year-end audit adjustments, (ii) whether or
not such officer has knowledge of the occurrence of any Default or Event of
Default hereunder not theretofore reported and remedied and, if so, stating in
reasonable detail the facts with respect thereto, and (iii) all relevant facts
in reasonable detail to evidence, and the computations as to, whether or not the
Borrower is in compliance with the requirements set forth in Sections 6.12,
6.13, 6.14 and 7.10;
(c) within 15 days after the end of each month or more
frequently if the Lender so requires, agings of the Borrower's accounts
receivable and its accounts payable (each listed by Vehicle Identification
Number and vendor), an inventory certification report, and a calculation of the
Borrower's Accounts, Eligible Accounts and Inventory as at the end of such month
or shorter time period;
(d) at least 30 days before the beginning of each fiscal year
of the Borrower, the projected balance sheets and income statements for each
month of such year, each in reasonable detail, representing the Borrower's good
faith projections and certified by the Borrower's chief financial officer as
being the most accurate projections available and identical to the projections
used by the Borrower for internal planning purposes, together with such
supporting schedules and information as the Lender may in its discretion
require;
(e) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any governmental or
regulatory agency affecting the Borrower of the type described in Section 5.12
or which seek a monetary recovery against the Borrower in excess of $20,000.00;
(f) as promptly as practicable (but in any event not later
than five business days) after an officer of the Borrower obtains knowledge of
the occurrence of any breach, default or event of default under any Security
Document or any event which constitutes a Default or Event of Default hereunder,
notice of such occurrence, together with a detailed
SKR:bss 287918.06 3/22/99 22
statement by a responsible officer of the Borrower of the steps being taken by
the Borrower to cure the effect of such breach, default or event;
(g) as soon as possible and in any event within 30 days after
the Borrower knows or has reason to know that any Reportable Event with respect
to any Plan has occurred, the statement of the Borrower's chief financial
officer setting forth details as to such Reportable Event and the action which
the Borrower proposes to take with respect thereto, together with a copy of the
notice of such Reportable Event to the Pension Benefit Guaranty Corporation;
(h) as soon as possible, and in any event within 10 days after
the Borrower fails to make any quarterly contribution required with respect to
any Plan under Section 412(m) of the Internal Revenue Code of 1986, as amended,
the statement of the Borrower's chief financial officer setting forth details as
to such failure and the action which the Borrower proposes to take with respect
thereto, together with a copy of any notice of such failure required to be
provided to the Pension Benefit Guaranty Corporation;
(i) promptly upon knowledge thereof, notice of (i) any
disputes or claims by the Borrower's customers; (ii) credit memos; (iii) any
goods returned to or recovered by the Borrower; and (iv) any change in the
persons constituting the Borrower's officers and directors;
(j) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the Security
Documents or of any substantial adverse change in any Collateral or such other
collateral or the prospect of payment thereof;
(k) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have sent to
its stockholders;
(l) promptly after the sending or filing thereof, copies of
all regular and periodic reports which the Borrower shall file with the
Securities and Exchange Commission or any national securities exchange;
(m) as soon as possible, and in any event by not later than 30
days after the last non-delinquent filing date for such taxes, copies of the tax
returns and all schedules thereto for each Guarantor, and not later than 30 days
after each anniversary date of this Agreement an updated personal financial
statement of each Guarantor;
(n) promptly upon knowledge thereof, notice of the Borrower's
violation of any law, rule or regulation, the non-compliance with which could
materially and adversely affect the Borrower's business or its financial
condition; and
(o) from time to time, with reasonable promptness, any and all
purchase agreements entered into by Borrower (whether as buyer or seller), Motor
Vehicle certificates of title, Motor Vehicle lien releases, copies of checks or
drafts for Motor Vehicle purchases, receivables schedules, collection reports,
deposit records, equipment schedules,
SKR:bss 287918.06 3/22/99 23
copies of invoices to account debtors, shipment documents and delivery receipts
for goods sold, and such other material, reports, records or information as the
Lender may request.
Section 6.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION. The
Borrower will keep accurate books of record and account for itself pertaining to
the Collateral and pertaining to the Borrower's business and financial condition
and such other matters as the Lender may from time to time request in which true
and complete entries will be made in accordance with GAAP and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all corporate and
financial books and records of the Borrower at all times during ordinary
business hours, to send and discuss with account debtors and other obligors
requests for verification of amounts owed to the Borrower, and to discuss the
Borrower's affairs with any of its directors, officers, employees or agents. The
Borrower will permit the Lender, or its employees, accountants, attorneys or
agents, to examine and inspect any Collateral, other collateral covered by the
Security Documents or any other property of the Borrower at any time during
ordinary business hours.
Section 6.3 ACCOUNT VERIFICATION. The Lender may at any time and
from time to time send or require the Borrower to send requests for verification
of accounts or notices of assignment to account debtors and other obligors. The
Lender may also at any time and from time to time telephone account debtors and
other obligors to verify accounts.
Section 6.4 COMPLIANCE WITH LAWS.
(a) The Borrower will (i) comply with the requirements of
applicable laws and regulations, the non-compliance with which would materially
and adversely affect its business or its financial condition and (ii) use and
keep the Collateral, and require that others use and keep the Collateral, only
for lawful purposes, without violation of any federal, state or local law,
statute or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable Environmental Laws
and obtain and comply with all permits, licenses and similar approvals required
by any Environmental Laws, and will not generate, use, transport, treat, store
or dispose of any Hazardous Substances in such a manner as to create any
liability or obligation under the common law of any jurisdiction or any
Environmental Law.
Section 6.5 PAYMENT OF TAXES AND OTHER CLAIMS. The Borrower will pay
or discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including, without limitation, the Collateral) or upon or
against the creation, perfection or continuance of the Security Interest, prior
to the date on which penalties attach thereto, (b) all federal, state and local
taxes required to be withheld by it, and (c) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien or charge
upon any properties of the Borrower; provided, that the Borrower shall not be
required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which proper reserves have been made.
SKR:bss 287918.06 3/22/99 24
Section 6.6 MAINTENANCE OF PROPERTIES.
(a) The Borrower will keep and maintain the Collateral, the
other collateral covered by the Security Documents and all of its other
properties necessary or useful in its business in good condition, repair and
working order (normal wear and tear excepted) and will from time to time replace
or repair any worn, defective or broken parts; provided, however, that nothing
in this Section 6.6 shall prevent the Borrower from discontinuing the operation
and maintenance of any of its properties if such discontinuance is, in the
Lender's judgment, desirable in the conduct of the Borrower's business and not
disadvantageous in any material respect to the Lender.
(b) The Borrower will defend the Collateral against all claims
or demands of all persons (other than the Lender) claiming the Collateral or any
interest therein.
(c) The Borrower will keep all Collateral and other collateral
covered by the Security Documents free and clear of all security interests,
liens and encumbrances except Permitted Liens.
Section 6.7 INSURANCE. The Borrower will obtain and at all times
maintain insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such risks
as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which the Borrower operates.
Without limiting the generality of the foregoing, the Borrower will at all times
maintain business interruption insurance including coverage for force majeure
and keep all tangible Collateral insured against risks of fire (including
so-called extended coverage), theft, collision (for Collateral consisting of
motor vehicles) and such other risks and in such amounts as the Lender may
reasonably request, with any loss payable to the Lender to the extent of its
interest, and all policies of such insurance shall contain a lender's loss
payable endorsement for the Lender's benefit acceptable to the Lender. All
policies of liability insurance required hereunder shall name the Lender as an
additional insured.
Section 6.8 PRESERVATION OF EXISTENCE. The Borrower will preserve
and maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in an orderly, efficient and regular manner.
Section 6.9 DELIVERY OF INSTRUMENTS, ETC. Upon request by the
Lender, the Borrower will promptly deliver to the Lender in pledge all
instruments, documents and chattel papers constituting Collateral, duly endorsed
or assigned by the Borrower.
Section 6.10 COLLATERAL ACCOUNT.
(a) The Borrower shall deposit all payments on Receivables
into the Collateral Account. Until so deposited, the Borrower shall hold all
such payments in trust for and as the property of the Lender and shall not
commingle such payments with any of its other funds or property.
SKR:bss 287918.06 3/22/99 25
(b) Amounts deposited in the Collateral Account shall not bear
interest and shall not be subject to withdrawal by the Borrower, except after
full payment and discharge of all Obligations.
(c) All deposits in the Collateral Account shall constitute
proceeds of Collateral and shall not constitute payment of the Obligations. The
Lender from time to time at its discretion may, after allowing 2 Banking Days,
apply deposited funds in the Collateral Account to the payment of the
Obligations, in any order or manner of application satisfactory to the Lender,
by transferring such funds to the Lender's general account.
(d) All items deposited in the Collateral Account shall be
subject to final payment. If any such item is returned uncollected, the Borrower
will immediately pay the Lender, or, for items deposited in the Collateral
Account, the bank maintaining such account, the amount of that item, or such
bank at its discretion may charge any uncollected item to the Borrower's
commercial account or other account. The Borrower shall be liable as an endorser
on all items deposited in the Collateral Account, whether or not in fact
endorsed by the Borrower.
(e) If a Default or Default Period exists and upon demand of
the Lender, the Borrower shall establish one or more lockbox accounts as
directed by the Lender with such banks or depository institutions as shall be
satisfactory to the Lender and shall irrevocably direct all present and future
Account Debtors and other Persons obligated to make payments constituting
Collateral to make such payments directly to such lockbox account. All of the
Borrower's invoices, account statements and other written or oral communications
directing, instructing, demanding or requesting payment of any Account or any
other amount constituting Collateral shall conspicuously direct that all
payments be made to such lockbox and shall include such lockbox address or
addresses. All payments received in such lockbox accounts shall be processed to
the Collateral Accounts.
Section 6.11 PERFORMANCE BY THE LENDER. If the Borrower at any time
fails to perform or observe any of the foregoing covenants contained in this
Article VI or elsewhere herein, and if such failure shall continue for a period
of ten calendar days after the Lender gives the Borrower written notice thereof
(or in the case of the agreements contained in Sections 6.5, 6.7 and 6.10,
immediately upon the occurrence of such failure, without notice or lapse of
time), the Lender may, but need not, perform or observe such covenant on behalf
and in the name, place and stead of the Borrower (or, at the Lender's option, in
the Lender's name) and may, but need not, take any and all other actions which
the Lender may reasonably deem necessary to cure or correct such failure
(including, without limitation, the payment of taxes, the satisfaction of
security interests, liens or encumbrances, the performance of obligations owed
to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrower shall
thereupon pay to the Lender on demand the amount of all monies expended and all
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender,
together with interest thereon from the date expended or incurred at the
Floating Rate. To facilitate the Lender's performance or observance of such
covenants of the Borrower, the Borrower hereby irrevocably appoints the Lender,
or the Lender's delegate, acting alone, as the Borrower's attorney in fact
(which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute,
SKR:bss 287918.06 3/22/99 26
deliver, endorse or file in the name and on behalf of the Borrower any and all
instruments, documents, assignments, security agreements, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by the Borrower under this Section
6.11.
Section 6.12 NET WORTH. The Borrower covenants that, as of January
31, 1999, Borrower and all of its Subsidiaries had a consolidated aggregate Book
Net Worth plus Subordinated Debt of $2,863,723.00. The Borrower covenants that
said consolidated aggregate Book Net Worth plus Subordinated Debt as of the end
of each future fiscal quarter end shall increase by not less than the amounts
set forth below as measured from the immediately preceding fiscal quarter ending
consolidated aggregate Book Net Worth plus Subordinated Debt.
QUARTER ENDING NET WORTH PLUS
SUBORDINATED DEBT INCREASE
March 31, 1999 $25,000.00
June 30, 1999 $50,000.00
September 30, 1999 $75,000.00
December 31, 1999 $100,000.00
March 31, 2000 $125,000.00
Section 6.13 NET INCOME. The Borrower covenants that beginning with
the fiscal quarter ending March 31, 1999, and continuing each fiscal quarter
thereafter, Borrower and all of its Subsidiaries shall achieve a consolidated
aggregate Net Income of at least the amount set forth below for each fiscal
quarter as measured from the immediately preceding fiscal quarter end.
QUARTER ENDING NET INCOME
March 31, 1999 $25,000.00
June 30, 1999 $50,000.00
September 30, 1999 $75,000.00
December 31, 1999 $100,000.00
March 31, 2000 $125,000.00
Notwithstanding anything to the contrary, Borrower and all of its subsidiaries
shall achieve a consolidated aggregate Net Income of not less than (i)
$125,000.00 for the fiscal year ending March 31, 1999, and (ii) $200,000.00 for
each fiscal year thereafter.
Section 6.14 STOP LOSS. The Borrower covenants that beginning with
December, 1998 and continuing for each month thereafter, Borrower and all of its
subsidiaries shall not achieve a consolidated aggregate Net Loss in any month as
measured from the last day of the immediately preceding month.
SKR:bss 287918.06 3/22/99 27
ARTICLE VII
Negative Covenants
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, the Borrower agrees that, without the
Lender's prior written consent:
Section 7.1 LIENS. The Borrower will not create, incur or suffer to
exist any mortgage, deed of trust, pledge, lien, security interest, assignment
or transfer upon or of any of its assets, now owned or hereafter acquired, to
secure any indebtedness; EXCLUDING, HOWEVER, from the operation of the
foregoing, the following (collectively, "Permitted Liens"):
(a) in the case of any of the Borrower's property which is not
Collateral or other collateral described in the Security Documents, covenants,
restrictions, rights, easements and minor irregularities in title which do not
materially interfere with the Borrower's business or operations as presently
conducted;
(b) mortgages, deeds of trust, pledges, liens, security
interests and assignments in existence on the date hereof and listed in Schedule
7.1 hereto, securing indebtedness for borrowed money permitted under Section
7.2;
(c) the Security Interest and liens and security interests
created by the Security Documents; and
(d) purchase money security interests relating to the
acquisition of machinery and equipment of the Borrower not exceeding the cost or
fair market value thereof so long as no Default Period is then in existence and
none would exist immediately after such acquisition.
Section 7.2 INDEBTEDNESS. The Borrower will not incur, create,
assume or permit to exist any indebtedness or liability on account of deposits
or advances or any indebtedness for borrowed money or letters of credit issued
on the Borrower's behalf, or any other indebtedness or liability evidenced by
notes, bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of the Borrower in existence on the date
hereof and listed in Schedule 7.2 hereto; and
(c) indebtedness relating to liens permitted in accordance
with Section 7.1.
Section 7.3 GUARANTIES. The Borrower will not assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrower
for deposit or collection or similar transactions in the ordinary course of
business; and
SKR:bss 287918.06 3/22/99 28
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in existence on
the date hereof and listed in Schedule 7.2 hereto.
Section 7.4 INVESTMENTS AND SUBSIDIARIES.
(a) The Borrower will not purchase or hold beneficially any
stock or other securities or evidences of indebtedness of, make or permit to
exist any loans or advances to, or make any investment or acquire any interest
whatsoever in, any other Person, including specifically but without limitation
any partnership or joint venture, except:
(i) investments in direct obligations of the United
States of America or any agency or instrumentality thereof whose obligations
constitute full faith and credit obligations of the United States of America
having a maturity of one year or less, commercial paper issued by U.S.
corporations rated "A-1" or "A-2" by Standard & Poors Corporation or "P-1" or
"P-2" by Moody's Investors Service or certificates of deposit or bankers'
acceptances having a maturity of one year or less issued by members of the
Federal Reserve System having deposits in excess of $100,000,000 (which
certificates of deposit or bankers' acceptances are fully insured by the Federal
Deposit Insurance Corporation);
(ii) travel advances or loans to the Borrower's officers
and employees not exceeding at any one time an aggregate of $1,000.00; and
(iii) advances in the form of progress payments, prepaid
rent not exceeding one month or security deposits.
(b) The Borrower will not create or permit to exist any
Subsidiary.
Section 7.5 DIVIDENDS. Except as set forth below, the Borrower will
not declare or pay any dividends (other than dividends payable solely in stock
of the Borrower) on any class of its stock or make any payment on account of the
purchase, redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly.
Section 7.6 SALE OR TRANSFER OF ASSETS; SUSPENSION OF BUSINESS
OPERATIONS. The Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and will not liquidate,
dissolve or suspend business operations. The Borrower will not in any manner
transfer any property without prior or present receipt of full and adequate
consideration.
Section 7.7 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS. The
Borrower will not consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of any
other Person.
SKR:bss 287918.06 3/22/99 29
Section 7.8 SALE AND LEASEBACK. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
Section 7.9 RESTRICTIONS ON NATURE OF BUSINESS. The Borrower will
not engage in any line of business materially different from that presently
engaged in by the Borrower and will not purchase, lease or otherwise acquire
assets not related to its business.
Section 7.10 CAPITAL EXPENDITURES. The Borrower will not incur or
contract to incur Capital Expenditures of more than $100,000.00 in the aggregate
during any fiscal year.
Section 7.11 ACCOUNTING. The Borrower will not adopt any material
change in accounting principles other than as required by GAAP. The Borrower
will not adopt, permit or consent to any change in its fiscal year.
Section 7.12 DISCOUNTS, ETC. The Borrower will not, after notice
from the Lender, grant any discount, credit or allowance to any customer of the
Borrower or accept any return of goods sold, or at any time (whether before or
after notice from the Lender) modify, amend, subordinate, cancel or terminate
the obligation of any account debtor or other obligor of the Borrower.
Section 7.13 DEFINED BENEFIT PENSION PLANS. The Borrower will not
adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
Section 7.14 OTHER DEFAULTS. The Borrower will not permit any
breach, default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon the Borrower.
Section 7.15 PLACE OF BUSINESS; NAME. The Borrower will not transfer
its chief executive office or principal place of business, or move, relocate,
close or sell any business location. The Borrower will not permit any tangible
Collateral or any records pertaining to the Collateral to be located in any
state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. The Borrower will not change
its name.
Section 7.16 ORGANIZATIONAL DOCUMENTS. The Borrower will not amend
its certificate of incorporation, articles of incorporation or bylaws. The
Borrower will not become an S Corporation.
Section 7.17 SALARIES. The Borrower will not pay excessive or
unreasonable salaries, bonuses, commissions, consultant fees or other
compensation; or increase the salary, bonus, commissions, consultant fees or
other compensation of any director, officer or consultant, or any member of
their families, by more than 10% in any one year, either individually or for all
such persons in the aggregate, or pay any such increase from any source other
than profits earned
SKR:bss 287918.06 3/22/99 30
in the year of payment provided the monthly salaries of Mark Moldenhauer and
Mike Stuart may be increased to $10,000 per month provided such increase shall
cause no other Default.
Section 7.18 CHANGE IN OWNERSHIP. The Borrower will not issue or
sell any stock of the Borrower, and will not permit or suffer to occur the sale,
transfer, assignment, pledge or other disposition of any of the issued and
outstanding shares of stock of the Borrower if the result shall be to vest
majority ownership of Borrower or control of the majority of any class of voting
stock of Borrower in any Person or Persons other than those Persons who
constitute the majority of shareholders of Borrower as of the date of this
Agreement.
Section 7.19 PAYMENTS TO AFFILIATES. Borrower shall not, without the
express written consent of Lender, which consent may be granted or withheld in
Lender's sole discretion, make any transfer, conveyance, loan or payment of any
kind to any Affiliate.
Section 7.20 PAYMENT OF EASTLANE DEBT. Borrower shall not make any
payments other then accrued unpaid interest on the Eastlane Debt.
ARTICLE VIII
Events of Default, Rights and Remedies
Section 8.1 EVENTS OF DEFAULT. "Event of Default", wherever used
herein, means any one of the following events:
(a) Default in the payment of the Obligations when they become
due and payable;
(b) Default in the payment of any fees, commissions, costs or
expenses required to be paid by the Borrower under this Agreement;
(c) Default in the performance, or breach, of any covenant or
agreement of the Borrower contained in this Agreement;
(d) Either Borrower or any Guarantor shall be or become
insolvent, or admit in writing its or his inability to pay its or his debts as
they mature, or make an assignment for the benefit of creditors; or either
Borrower or any Guarantor shall apply for or consent to the appointment of any
receiver, trustee, or similar officer for it or him or for all or any
substantial part of its or his property; or such receiver, trustee or similar
officer shall be appointed without the application or consent of Borrower or
such Guarantors, as the case may be; or either Borrower or any Guarantor shall
institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it or him under the
laws of any jurisdiction; or any such proceeding shall be instituted (by
petition, application or otherwise) against either Borrower or any such
Guarantor; or any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the property of
Borrower or any Guarantor;
(e) A petition shall be filed by or against Borrower or any
Guarantor under the United States Bankruptcy Code naming Borrower or such
Guarantor as debtor;
SKR:bss 287918.06 3/22/99 31
(f) Any representation or warranty made by Borrower in this
Agreement, by any Guarantor in any guaranty delivered to the Lender, or by
Borrower (or any of its officers) or any Guarantor in any agreement,
certificate, instrument or financial statement or other statement contemplated
by or made or delivered pursuant to or in connection with this Agreement or any
such guaranty shall prove to have been incorrect in any material respect when
deemed to be effective;
(g) The rendering against Borrower of a final judgment, decree
or order for the payment of money in excess of $20,000.00 and the continuance of
such judgment, decree or order unsatisfied and in effect for any period of 30
consecutive days without a stay of execution;
(h) A default under any bond, debenture, note or other
evidence of indebtedness of Borrower owed to any Person other than the Lender,
or under any indenture or other instrument under which any such evidence of
indebtedness has been issued or by which it is governed, or under any lease of
any of the Premises, and the expiration of the applicable period of grace, if
any, specified in such evidence of indebtedness, indenture, other instrument or
lease;
(i) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Plan or for the
appointment by the appropriate United States District Court of a trustee to
administer any Plan, shall have occurred and be continuing 30 days after written
notice to such effect shall have been given to Borrower by the Lender; or a
trustee shall have been appointed by an appropriate United States District Court
to administer any Plan; or the Pension Benefit Guaranty Corporation shall have
instituted proceedings to terminate any Plan or to appoint a trustee to
administer any Plan; or Borrower shall have filed for a distress termination of
any Plan under Title IV of ERISA; or Borrower shall have failed to make any
quarterly contribution required with respect to any Plan under Section 412(m) of
the Internal Revenue Code of 1986, as amended, which the Lender determines in
good faith may by itself, or in combination with any such failures that the
Lender may determine are likely to occur in the future, result in the imposition
of a lien on Borrower's assets in favor of the Plan;
(j) An event of default shall occur under any Security
Document or under any other security agreement, mortgage, deed of trust,
assignment or other instrument or agreement securing any obligations of the
Borrower hereunder or under any note;
(k) Borrower shall liquidate, dissolve, terminate or suspend
its business operations or otherwise fail to operate its business in the
ordinary course, or sell all or substantially all of its assets, without the
Lender's prior written consent;
(l) Borrower shall fail to pay, withhold, collect or remit any
tax or tax deficiency when assessed or due (other than any tax deficiency which
is being contested in good faith and by proper proceedings and for which it
shall have set aside on its books adequate reserves therefor) or notice of any
state or federal tax liens shall be filed or issued;
(m) Default in the payment of any amount owed by the Borrower
to the Lender other than any indebtedness arising hereunder;
SKR:bss 287918.06 3/22/99 32
(n) Any Guarantor shall repudiate, purport to revoke or fail
to perform any such Guarantor's obligations under such Guarantor's guaranty in
favor of the Lender, any individual Guarantor shall die or any other Guarantor
shall cease to exist;
(o) Borrower shall take or participate in any action which
would be prohibited under the provisions of any Subordination Agreement or make
any payment on the Subordinated Indebtedness (as defined in the Subordination
Agreements) that any Person was not entitled to receive under the provisions of
the Subordination Agreements;
(p) Any breach, default or event of default by or attributable
to any Affiliate under any agreement between such Affiliate and the Lender.
Section 8.2 RIGHTS AND REMEDIES. During any Default Period, the
Lender may exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the
Commitment to be terminated, whereupon the same shall forthwith terminate;
(b) the Lender may, by notice to the Borrower, declare the
Obligations to be forthwith due and payable, whereupon all Obligations shall
become and be forthwith due and payable, without presentment, notice of
dishonor, protest or further notice of any kind, all of which the Borrower
hereby expressly waives;
(c) the Lender may, without notice to the Borrower and without
further action, apply any and all money owing by the Lender to the Borrower to
the payment of the Obligations;
(d) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC, including,
without limitation, the right to take possession of Collateral, or any evidence
thereof, proceeding without judicial process or by judicial process (without a
prior hearing or notice thereof, which Borrower hereby expressly waives) and the
right to sell, lease or otherwise dispose of any or all of the Collateral, and,
in connection therewith, Borrower will on demand assemble the Collateral and
make it available to the Lender at a place to be designated by the Lender which
is reasonably convenient to the parties;
(e) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(f) the Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
Section 8.3 CERTAIN NOTICES. If notice to the Borrower of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance,
SKR:bss 287918.06 3/22/99 33
such notice shall be deemed commercially reasonable if given (in the manner
specified in Section 9.3) at least ten calendar days before the date of intended
disposition or other action.
ARTICLE IX
Miscellaneous
Section 9.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay by
the Lender in exercising any right, power or remedy under the Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy under the Loan Documents.
The remedies provided in the Loan Documents are cumulative and not exclusive of
any remedies provided by law.
Section 9.2 AMENDMENTS, ETC. No amendment, modification, termination
or waiver of any provision of any Loan Document or consent to any departure by
the Borrower therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
Section 9.3 ADDRESSES FOR NOTICES, ETC. Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below:
If to Borrower:
Auto Network Group, Inc.
8135 East Butherus, Suite 3
Scottsdale, AZ 85260
Telecopier: 602-951-8375
Attention: Mark Moldenhauer
If to the Lender:
Norwest Business Credit, Inc.
Norwest Tower, M.S. 9025
3300 North Central Avenue
Phoenix, AZ 85012-2501
Telecopier: 602-263-6215
Attention: Darcy Della Flora
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have
SKR:bss 287918.06 3/22/99 34
been given on (a) the date received if personally delivered, (b) when deposited
in the mail if delivered by mail, (c) the date sent if sent by overnight
courier, or (d) the date of transmission if delivered by telecopy, except that
notices or requests to the Lender pursuant to any of the provisions of Article
II shall not be effective until received by the Lender.
Section 9.4 FURTHER DOCUMENTS. The Borrower will from time to time
execute and deliver or endorse any and all instruments, documents, conveyances,
assignments, security agreements, financing statements and other agreements and
writings that the Lender may reasonably request in order to secure, protect,
perfect or enforce the Security Interest or the Lender's rights under the Loan
Documents (but any failure to request or assure that the Borrower executes,
delivers or endorses any such item shall not affect or impair the validity,
sufficiency or enforceability of the Loan Documents and the Security Interest,
regardless of whether any such item was or was not executed, delivered or
endorsed in a similar context or on a prior occasion).
Section 9.5 COLLATERAL. This Agreement does not contemplate a sale
of accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application.
Section 9.6 COSTS AND EXPENSES. The Borrower agrees to pay on demand
all costs and expenses, including (without limitation) attorneys' fees, incurred
by the Lender in connection with the Obligations, this Agreement, the Loan
Documents, and any other document or agreement related hereto or thereto, and
the transactions contemplated hereby, including without limitation all such
costs, expenses and fees incurred in connection with the negotiation,
preparation, execution, amendment, administration, performance, collection and
enforcement of the Obligations and all such documents and agreements and the
creation, perfection, protection, satisfaction, foreclosure or enforcement of
the Security Interest.
Section 9.7 INDEMNITY. In addition to the payment of expenses
pursuant to Section 9.6, Borrower agrees to indemnify, defend and hold harmless
the Lender, and any of its participants, parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the "Indemnitees") from and against any of the following (collectively,
"Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by reason of the
execution and delivery of the Loan Documents or the making of the Advances;
(ii) any claims, loss or damage to which any Indemnitee
may be subjected if any representation or warranty contained in Section 5.12
proves to be incorrect in any respect or as a result of any violation of the
covenant contained in Section 6.4(b); and
SKR:bss 287918.06 3/22/99 35
(iii) any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any kind or nature
whatsoever (including, without limitation, the reasonable fees and disbursements
of counsel) in connection with the foregoing and any other investigative,
administrative or judicial proceedings, whether or not such Indemnitee shall be
designated a party thereto, which may be imposed on, incurred by or asserted
against any such Indemnitee, in any manner related to or arising out of or in
connection with the making of the Advances and the Loan Documents or the use or
intended use of the proceeds of the Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 9.7 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.
Section 9.8 PARTICIPANTS. The Lender and its participants, if any,
are not partners or joint venturers, and the Lender shall not have any liability
or responsibility for any obligation, act or omission of any of its
participants. All rights and powers specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns.
Section 9.9 EXECUTION IN COUNTERPARTS. This Agreement and other Loan
Documents may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
Section 9.10 BINDING EFFECT; ASSIGNMENT; COMPLETE AGREEMENT;
EXCHANGING INFORMATION. The Loan Documents shall be binding upon and inure to
the benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement, together with the 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. Without
limiting the Lender's right to share information regarding the Borrower and its
Affiliates with the Lender's participants, accountants, lawyers and other
advisors, the Lender, Norwest Corporation, and all direct and indirect
subsidiaries of Norwest Corporation, may exchange any and all information they
may have in their possession regarding the Borrower and its Affiliates, and the
Borrower waives any right of confidentiality it may have with respect to such
exchange of such information.
SKR:bss 287918.06 3/22/99 36
Section 9.11 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.12 HEADINGS. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 9.13 GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF JURY
TRIAL. The Loan Documents shall be governed by and construed in accordance with
the substantive laws (other than conflict laws) of the State of Arizona. The
parties hereto hereby (i) consents to the personal jurisdiction of the state and
federal courts located in the State of Arizona in connection with any
controversy related to this Agreement; (ii) waives any argument that venue in
any such forum is not convenient, (iii) agrees that any litigation initiated by
the Lender or the Borrower in connection with this Agreement or the other Loan
Documents shall be venued in either the Superior Court of Maricopa County,
Arizona or the United States District Court, District of Arizona; and (iv)
agrees that a final judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
date first above written.
NORWEST BUSINESS CREDIT, INC.
By /S/TIMOTHY R. CARSTENS
Its V.P.
AUTO NETWORK GROUP, INC., an Arizona
corporation
By /S/MIKE STUART
Its PRES
SKR:bss 287918.06 3/22/99 37
Table of Exhibits and Schedules
Exhibit A Form of Revolving Note
Exhibit B Compliance Certificate
Exhibit C Premises
- ------------------------------------------------------------------------------
Schedule 5.1 Trade Names, Chief Executive Office,
Principal Place of Business, and
Locations of Collateral
Schedule 5.4 Subsidiaries
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
SKR:bss 287918.06 3/22/99 38
REVOLVING NOTE
$3,000,000.00 Phoenix, Arizona
MARCH 26, 1999
For value received, the undersigned, AUTO NETWORK GROUP, INC., an
Arizona corporation ("Borrower"), hereby promises to pay on the Termination Date
under the Credit Agreement (defined below), to the order of NORWEST BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender"), at its main office in
Phoenix, Arizona, or at any other place designated at any time by the holder
hereof, in lawful money of the United States of America and in immediately
available funds, the principal sum of THREE MILLION AND NO/100 DOLLARS
($3,000,000.00) or, if less, the aggregate unpaid principal amount of all
Revolving Advances made by the Lender to the Borrower under the Credit Agreement
(defined below) together with interest on the principal amount hereunder
remaining unpaid from time to time, computed on the basis of the actual number
of days elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Credit and Security
Agreement of even date herewith (as the same may hereafter be amended,
supplemented or restated from time to time, the "Credit Agreement") by and
between the Lender and the Borrower. The principal hereof and interest accruing
thereon shall be due and payable as provided in the Credit Agreement. This Note
may be prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is the Revolving Note referred to in the Credit Agreement. This Note is
secured, among other things, pursuant to the Credit Agreement and the Security
Documents as therein defined, and may now or hereafter be secured by one or more
other security agreements, mortgages, deeds of trust, assignments or other
instruments or agreements.
The Borrower hereby agrees to pay all costs of collection, including
attorneys' fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and
protest are expressly waived.
AUTO NETWORK GROUP, INC., an Arizona
corporation
By /S/MIKE STUART
Its PRESIDENT
SKR:mep 288877.01 3/25/99
COLLATERAL ACCOUNT AGREEMENT
MARCH 26, 1999
TO: Norwest Business Credit, Inc.
Norwest Tower, M.S. 9025
3300 North Central Avenue
Phoenix, AZ 85012-2501
Re: Account No. 944-010-5977 opened under the name "Norwest
Business Credit, Inc. - Collateral Account for Auto Network
Group, Inc. maintained by Norwest Bank Arizona, National
Association (the "Bank")
Ladies and Gentlemen:
Auto Network Group, Inc., an Arizona corporation, (the "Client"),
and the Bank are writing to confirm that they have agreed as follows:
1. The Client will deposit in the referenced Account (the
"Collateral Account") all collections of receivables and other cash proceeds of
the collateral security granted to Norwest Business Credit, Inc., a Minnesota
corporation (the "Lender").
2. The Collateral Account will be operated and maintained
exclusively for the Lender's benefit. Amounts deposited in the Collateral
Account shall not bear interest and shall not be subject to withdrawal by the
Client, except after full payment and discharge of all the Client's obligations
to the Lender and termination of all related credit facilities. The Client shall
have no right to make or countermand withdrawals from the Collateral Account.
3. The Client hereby pledges to and grants the Lender a
security interest in all funds on deposit in the Collateral Account from time to
time and all proceeds thereof, to secure payment of all of the Client's
obligations to the Lender whether now existing or hereafter arising.
4. After allowing 2 days for collection of items deposited
in the Collateral Account, the Bank is authorized and agrees to transmit
deposited funds in the amount of the deposit to Norwest Bank Minnesota, National
Association for the Lender's account, account No. 635-501-0053.
5. If any item deposited in the Collateral Account is
returned unpaid, the Bank will so notify the Lender and the Client.
6. The Client hereby grants the Bank the right to charge
the general checking account maintained by the Client with the Bank for any item
deposited in the Collateral Account which is returned unpaid. The Bank, however,
shall have no right to charge or offset amounts in the Collateral Account for
items returned unpaid. Without limiting the
TEH:bss 288180.03 3/22/99 1
generality of the foregoing, the Bank hereby waives any right of setoff it may
have with respect to the Collateral Account.
7. By accepting this Agreement, the Lender agrees to
indemnify and reimburse the Bank, within ten (10) days after demand, for any
item deposited in the Collateral Account which is returned unpaid and for which
the Borrower does not indemnify the Bank provided that the Bank shall notify the
Lender within five business days of the day the Bank learns that any item shall
be or has been returned unpaid (whichever occurs first).
8. The Client may not terminate this Agreement without
obtaining the Lender's prior written consent. The Bank may not terminate this
Agreement without 60 days' prior written notice to the Lender. The Lender may
terminate this Agreement at any time, with or without cause.
9. This Agreement shall be enforceable against the Client
and the Bank by the Lender and the Lender's participants, successors and
assigns. The Client and the Bank waive notice of the Lender's acceptance hereof.
10. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument This Agreement shall be governed by and construed in
accordance with the substantive laws (other than conflict laws) of the State of
Arizona. Each party consents to the personal jurisdiction of the state and
federal courts located in the State of Arizona in connection with any
controversy related to this Agreement waives any argument that venue in any such
forum is not convenient, and agrees that any litigation initiated by any of them
in connection with this Agreement shall be venued in either the Superior Court
of Maricopa County, Arizona, or the United States District Court, District of
Arizona. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.
NORWEST BANK ARIZONA,
NATIONAL ASSOCIATION
By /S/JACKLYN KNOLL
Its V.P.
TEH:bss 288180.03 3/22/99 2
AUTO NETWORK GROUP, INC., an Arizona
corporation
By /S/MIKE STUART
Its PRESIDENT
ACCEPTED:
NORWEST BUSINESS CREDIT, INC.
By /S/TIMOTHY R. CARSTENS
Its V.P.
TEH:bss 288180.03 3/22/99 3
CERTIFICATE OF AUTHORITY
I, Mark Moldenhauer, do hereby certify that I am Secretary of Auto
Network Group, Inc., a corporation organized under the laws of the State of
Arizona; that the following is a true, complete and correct copy of resolutions
duly adopted (check one):
_
|_| at a meeting of the board of directors of said corporation duly and
properly called and held on the 26TH day of MARCH, 1999, at which
a quorum was present and acting throughout;
_
|_| by unanimous written action duly and lawfully taken, subscribed
by all the directors of said corporation;
and I further certify that said resolutions are now in full force and effect:
First Resolution
RESOLVED that the President, each Vice President, the Secretary, the
Treasurer and each other officer and agent of this corporation, acting
alone or acting with others, be and each of them hereby is authorized:
(i) To borrow money and obtain other credit or financial
accommodations, in any amount, from Norwest Business Credit, Inc.
(herein, with its participants, successors and assigns called the
"Lender") for and on behalf of and in the name of this corporation;
(ii) To sign, execute and deliver loan or credit agreements,
promissory notes, acceptances or other evidences of indebtedness
therefor, or in renewal or amendment thereof, in such amounts and
for such time, at such rates of interest and upon such terms as such
officer or agent may approve, such approval to be conclusively
evidenced by such officer or agent's signature thereon;
(iii) To discount, sell, assign, transfer, mortgage, or pledge to
the Lender, or create security interests in, the real property,
goods, instruments, documents of title, securities, chattel paper,
accounts, contract rights or other intangibles or any other property
now or hereafter owned by this corporation, either absolutely, with
or without recourse, for such consideration as such officer or agent
may deem to be appropriate or as security for the payment or
performance of any debts, liabilities or obligations owed to the
Lender;
(iv) To do such other acts and things, make such other agreements
and execute and deliver such other contracts or writings as such
officer or agent may deem to be appropriate in connection with any
of the foregoing.
TEH:sic 288211.02 2/23/99 1
Second Resolution
RESOLVED FURTHER that (without limiting the generality of the foregoing
resolution) each officer and agent referred to in the foregoing
resolution, acting alone or acting with others, be and is hereby
authorized and directed to execute, deliver and perform the following
instruments and agreements:
(a) Credit and Security Agreement, by and between this corporation
and the Lender, in the form finally approved and executed by any of the
officers authorized above.
(b) All other Loan Documents (as defined in said Credit and Security
Agreement), in the form finally approved and executed by any of the
officers authorized above.
Third Resolution
RESOLVED FURTHER that the Secretary or an Assistant Secretary shall
certify to the Lender the names and signatures of the persons who
presently are duly elected, qualified and acting as the officers or agents
referred to in the foregoing resolutions, and the Secretary or an
Assistant Secretary shall from time to time hereafter, upon a change in
the facts so certified, immediately certify to the Lender the names and
signatures of the persons then authorized to sign or to act; the Lender
shall be fully protected in relying on such certificates and on the
obligation of the Secretary or an Assistant Secretary (set forth above)
immediately to certify to the Lender any change in any facts so certified;
and the Lender shall be indemnified and saved harmless by this corporation
from any claims, demands, expenses, loss or damage resulting from or
growing out of honoring or relying on the signature or other authority
(whether or not properly used) of any officer or person whose name and
signature was so certified, or refusing to honor any signature or
authority not so certified.
Fourth Resolution
RESOLVED FURTHER that the foregoing resolutions are in addition to, and do
not limit and shall not be limited by, any resolutions heretofore or
hereafter adopted by this corporation for the conduct of business with the
Lender; and the foregoing resolutions shall continue in force until
express written notice of their prospective rescission or modification, as
to future transactions not then undertaken or committed for, has been
received by the Lender.
Fifth Resolution
RESOLVED FURTHER that any and all transactions by or on behalf of this
corporation with the Lender prior to the adoption of these resolutions be
and the same hereby are in all respects ratified, approved and confirmed.
TEH:sic 288211.02 2/23/99 2
I further certify that the board of directors of said corporation
has, and at the time of adoption of the foregoing resolutions had, full power
and lawful authority to adopt the foregoing resolutions and to confer the powers
therein granted to the persons named and that such persons have full power and
authority to exercise same. I further certify that the signatures appearing
below are the authentic and official signatures of the officers and agents
referred to in the foregoing resolutions, that the persons named below as
officers have been duly elected to and now hold the offices in said corporation
set forth opposite their respective names, and that the persons named as agents
below have been duly authorized to sign and to act on behalf of said corporation
pursuant to the foregoing resolutions:
Name Title Sample Signature
Mike Stuart President ____________________
Mark Moldenhauer Secretary ____________________
_________________ ____________________ ____________________
I further certify (check one):
_
|_| that the foregoing resolutions were duly approved by the
shareholders of said corporation at a meeting duly and properly
called and held on the _____ day of _____________, 1999, at which a
quorum was present and acting throughout, or otherwise as permitted
by law;
_
|_| that the foregoing resolutions are effective and binding on said
corporation without approval by its shareholders.
I further certify that the forms of Credit and Security Agreement
and the other Loan Documents, and any other writings identified in the Second
Resolution set forth above, executed on behalf of said corporation by its
President and delivered to the Lender are the agreements and writings referred
to in and approved by the Second Resolution set forth above.
I further certify that attached hereto as Exhibits A and B,
respectively, are true, correct and complete copies of the articles of
incorporation and bylaws of said corporation, which articles and bylaws are in
full force and effect and have not been altered, amended or revised. I further
certify that attached hereto as Exhibit C is a Certificate of Good Standing of
the Company not more than ten days old.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 26TH day
of MARCH, 1999.
/S/MARK MOLDENHAUER
-------------------------------------
Secretary, Auto Network Group, Inc.,
an Arizona corporation
Attest by One Other Officer
/S/MIKE STUART
TEH:sic 288211.02 2/23/99 3
GUARANTY
Phoenix, Arizona
APRIL 2, 1999
This Guaranty, dated as of APRIL 2, 1999 is made by Roger
Butterwick and Sherry Butterwick (collectively, the "Guarantor") for the benefit
of Norwest Business Credit, Inc., a Minnesota corporation (with its
participants, successors and assigns, the "Lender").
The Lender and Auto Network Group, Inc., an Arizona corporation,
formerly known as Auto Network USA, Inc. (the "Borrower"), are parties to a
Credit and Security Agreement of even date herewith (the "Credit Agreement")
pursuant to which the Lender may make advances and extend other financial
accommodations to the Borrower. From time to time additional subsidiaries of
Borrower may be added to the Credit Agreement as borrowers upon the agreement of
Lender and Borrower and shall thereafter be included in the definition of
Borrower for all purposes hereunder.
As a condition to extending such credit to the Borrower, the Lender
has required the execution and delivery of this Guaranty.
ACCORDINGLY, the Guarantor, in consideration of the premises and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, hereby agrees as follows:
1. DEFINITIONS. All terms defined in the Credit Agreement that are not otherwise
defined herein shall have the meanings given them in the Credit Agreement.
2. INDEBTEDNESS GUARANTEED. The Guarantor hereby absolutely and unconditionally
guarantees to the Lender the full and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of (i) the
Obligations and (ii) each and every other sum now or hereafter owing to the
Lender by the Borrower, including but not limited to, debts, liabilities and
obligations arising out of loans, credit transactions, financial accommodations,
discounts, purchases of property or other transactions with the Borrower or for
the Borrower's account or out of any other transaction or event, owed to the
Lender or owed to others by reason of participations granted to or interests
acquired or created for or sold to them by the Lender, in each case whether now
existing or hereafter arising, whether arising directly in a transaction or
event involving the Lender or acquired by the Lender from another by purchase or
assignment or as collateral security, whether owed by the Borrower as drawer,
maker, endorser, accommodation party, guarantor, principal, surety or as a
member of any partnership, syndicate, association or group or in any other
capacity, whether absolute or contingent, direct or indirect, primary or
secondary, sole, joint, several or joint and several, secured or unsecured, due
or not due, contractual, tortious or statutory, liquidated or unliquidated,
arising by agreement or imposed by law or otherwise (all of said sums being
hereinafter called the "Indebtedness").
3. UNCONDITIONAL GUARANTY. No act or thing need occur to establish the liability
of the Guarantor hereunder, and no act or thing, except full payment and
discharge of all of the Indebtedness, shall in any way exonerate the Guarantor
hereunder or
SKR:bss 296389.02 3/22/99 1
modify, reduce, limit or release the Guarantor's liability hereunder. This is an
absolute, unconditional and continuing guaranty of payment of the Indebtedness
and shall continue to be in force and be binding upon the Guarantor, whether or
not all of the Indebtedness is paid in full, until this Guaranty is revoked
prospectively as to future transactions, by written notice actually received by
the Lender, and such revocation shall not be effective as to the amount of
Indebtedness existing or committed for at the time of actual receipt of such
notice by the Lender, or as to any renewals, extensions, refinancings or
refundings thereof. The death or incompetence of the Guarantor shall not revoke
this Guaranty, except upon actual receipt of written notice thereof by the
Lender and only prospectively, as to future transactions, as herein set forth.
4. DEATH OR INSOLVENCY OF GUARANTOR. If the Guarantor shall die or shall be or
become insolvent (however defined), then the Lender shall have the right to
declare immediately due and payable, and the Guarantor will forthwith pay to the
Lender, the full amount of all of the Indebtedness whether due and payable or
unmatured. If the Guarantor voluntarily commences or there is commenced
involuntarily against the Guarantor a case under the United States Bankruptcy
Code, the full amount of all of the Indebtedness, whether due and payable or
unmatured, shall be immediately due and payable without demand or notice
thereof.
5. LIMITED GUARANTY. Notwithstanding the aggregate amount of the Indebtedness
which may from time to time be outstanding, the liability of the Guarantor
hereunder shall be limited to a principal amount of $250,000.00, plus accrued
interest thereon and all attorneys' fees, collection costs and enforcement
expenses referable thereto. The Indebtedness may be created and continued in any
amount, whether or not in excess of such principal amount, without affecting or
impairing the Guarantor's liability hereunder, and the Lender may pay (or allow
for the payment of) the excess out of any sums received by or available to the
Lender on account of the Indebtedness from the Borrower or any other person
(except the Guarantor), from their properties, out of any collateral security or
from any other source, and such payment (or allowance) shall not reduce, affect
or impair the Guarantor's liability hereunder. Any payment made by the Guarantor
under this Guaranty shall be effective to reduce or discharge such liability
only if accompanied by a written transmittal document, received by the Lender,
advising the Lender that such payment is made under this Guaranty for such
purpose.
6. SUBROGATION, ETC. The Guarantor hereby waives all rights that the Guarantor
may now have or hereafter acquire, whether by subrogation, contribution,
reimbursement, recourse, exoneration, contract or otherwise, to recover from the
Borrower or from any property of the Borrower any sums paid under this Guaranty.
The Guarantor will not exercise or enforce any right of contribution to recover
any such sums from any person who is a co-obligor with the Borrower or a
guarantor or surety of the Indebtedness or from any property of any such person
until all of the Indebtedness shall have been fully paid and discharged.
7. ENFORCEMENT EXPENSES. The Guarantor will pay or reimburse the Lender for all
costs, expenses and attorneys' fees paid or incurred by the Lender in
endeavoring to collect and enforce the Indebtedness and in enforcing this
Guaranty.
8. LENDER'S RIGHTS. The Lender shall not be obligated by reason of its
acceptance of this Guaranty to engage in any transactions with or for the
Borrower. Whether or not any existing relationship between the Guarantor and the
Borrower has been changed or
SKR:bss 296389.02 3/22/99 2
ended and whether or not this Guaranty has been revoked, the Lender may enter
into transactions resulting in the creation or continuance of the Indebtedness
and may otherwise agree, consent to or suffer the creation or continuance of any
of the Indebtedness, without any consent or approval by the Guarantor and
without any prior or subsequent notice to the Guarantor. The Guarantor's
liability shall not be affected or impaired by any of the following acts or
things (which the Lender is expressly authorized to do, omit or suffer from time
to time, both before and after revocation of this Guaranty, without consent or
approval by or notice to the Guarantor): (i) any acceptance of collateral
security, guarantors, accommodation parties or sureties for any or all of the
Indebtedness; (ii) one or more extensions or renewals of the Indebtedness
(whether or not for longer than the original period) or any modification of the
interest rates, maturities, if any, or other contractual terms applicable to any
of the Indebtedness or any amendment or modification of any of the terms or
provisions of any loan agreement or other agreement under which the Indebtedness
or any part thereof arose; (iii) any waiver or indulgence granted to the
Borrower, any delay or lack of diligence in the enforcement of the Indebtedness
or any failure to institute proceedings, file a claim, give any required notices
or otherwise protect any of the Indebtedness; (iv) any full or partial release
of, compromise or settlement with, or agreement not to sue, the Borrower or any
guarantor or other person liable in respect of any of the Indebtedness; (v) any
release, surrender, cancellation or other discharge of any evidence of the
Indebtedness or the acceptance of any instrument in renewal or substitution
therefor; (vi) any failure to obtain collateral security (including rights of
setoff) for the Indebtedness, or to see to the proper or sufficient creation and
perfection thereof, or to establish the priority thereof, or to preserve,
protect, insure, care for, exercise or enforce any collateral security; or any
modification, alteration, substitution, exchange, surrender, cancellation,
termination, release or other change, impairment, limitation, loss or discharge
of any collateral security; (vii) any collection, sale, lease or disposition of,
or any other foreclosure or enforcement of or realization on, any collateral
security; (viii) any assignment, pledge or other transfer of any of the
Indebtedness or any evidence thereof; (ix) any manner, order or method of
application of any payments or credits upon the Indebtedness; and (x) any
election by the Lender under Section 1111(b) of the United States Bankruptcy
Code. The Guarantor waives any and all defenses and discharges available to a
surety, guarantor or accommodation co-obligor.
9. WAIVERS BY GUARANTOR. The Guarantor waives any and all defenses, claims,
setoffs and discharges of the Borrower, or any other obligor, pertaining to the
Indebtedness, except the defense of discharge by payment in full. Without
limiting the generality of the foregoing, the Guarantor will not assert, plead
or enforce against the Lender any defense of waiver, release, discharge or
disallowance in bankruptcy, statute of limitations, res judicata, statute of
frauds, anti-deficiency statute, fraud, incapacity, minority, usury, illegality
or unenforceability which may be available to the Borrower or any other person
liable in respect of any of the Indebtedness, or any setoff available against
the Lender to the Borrower or any other such person, whether or not on account
of a related transaction. The Guarantor expressly agrees that the Guarantor
shall be and remain liable for any deficiency remaining after foreclosure of any
mortgage or security interest securing the Indebtedness, whether or not the
liability of the Borrower or any other obligor for such deficiency is discharged
pursuant to statute or judicial decision. The liability of the Guarantor shall
not be affected or impaired by any voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially all the assets,
marshalling of assets and liabilities, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of, or other similar
SKR:bss 296389.02 3/22/99 3
event or proceeding affecting, the Borrower or any of its assets. The Guarantor
will not assert, plead or enforce against the Lender any claim, defense or
setoff available to the Guarantor against the Borrower. The Guarantor waives
presentment, demand for payment, notice of dishonor or nonpayment and protest of
any instrument evidencing the Indebtedness. The Lender shall not be required
first to resort for payment of the Indebtedness to the Borrower or other
persons, or their properties, or first to enforce, realize upon or exhaust any
collateral security for the Indebtedness, before enforcing this Guaranty.
Guarantor waives the benefits of Arizona Revised Statutes Sections 12-1641,
12-1642, 33-814 and 12-1566.
10. IF PAYMENTS SET ASIDE, ETC. If any payment applied by the Lender to the
Indebtedness is thereafter set aside, recovered, rescinded or required to be
returned for any reason (including, without limitation, the bankruptcy,
insolvency or reorganization of the Borrower or any other obligor), the
Indebtedness to which such payment was applied shall for the purpose of this
Guaranty be deemed to have continued in existence, notwithstanding such
application, and this Guaranty shall be enforceable as to such Indebtedness as
fully as if such application had never been made.
11. ADDITIONAL OBLIGATION OF GUARANTOR. The Guarantor's liability under this
Guaranty is in addition to and shall be cumulative with all other liabilities of
the Guarantor to the Lender as guarantor, surety, endorser, accommodation
co-obligor or otherwise of any of the Indebtedness or obligation of the
Borrower, without any limitation as to amount, unless the instrument or
agreement evidencing or creating such other liability specifically provides to
the contrary.
12. FINANCIAL INFORMATION. The Guarantor will provide to the Lender annually a
personal financial statement prepared as of the anniversary date of this
Guaranty listing all assets, liabilities and net worth of the Guarantor and
shall forward the same to Lender not later than 30 days after each anniversary
date of this Guaranty. The Guarantor will also provide to the Lender copies of
his federal and state tax returns and all schedules thereto and will forward the
tax returns to the Lender each year not later than 30 days after the last
non-delinquent filing date for such taxes. The Guarantor acknowledges and agrees
that the Lender may at any time and from time to time without notice to the
Guarantor, investigate the Guarantor's background, personal and credit history
and perform other due diligence concerning the Guarantor and his
creditworthiness.
13. NO DUTIES OWED BY LENDER. The Guarantor acknowledges and agrees that the
Lender (i) has not made any representations or warranties with respect to, (ii)
does not assume any responsibility to the Guarantor for, and (iii) has no duty
to provide information to the Guarantor regarding, the enforceability of any of
the Indebtedness or the financial condition of the Borrower or any guarantor.
The Guarantor has independently determined the creditworthiness of the Borrower
and the enforceability of the Indebtedness and until the Indebtedness is paid in
full will independently and without reliance on the Lender continue to make such
determinations.
14. MISCELLANEOUS. This Guaranty shall be effective upon delivery to the Lender,
without further act, condition or acceptance by the Lender, shall be binding
upon the Guarantor and the heirs, representatives, successors and assigns of the
Guarantor and shall
SKR:bss 296389.02 3/22/99 4
inure to the benefit of the Lender and its participants, successors and assigns.
Any invalidity or unenforceability of any provision or application of this
Guaranty shall not affect other lawful provisions and application thereof, and
to this end the provisions of this Guaranty are declared to be severable. This
Guaranty may not be waived, modified, amended, terminated, released or otherwise
changed except by a writing signed by the Guarantor and the Lender. This
Guaranty shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of Arizona. The Guarantor hereby
(i) consents to the personal jurisdiction of the state and federal courts
located in the State of Arizona in connection with any controversy related to
this Guaranty; (ii) waives any argument that venue in any such forum is not
convenient, (iii) agrees that any litigation initiated by the Lender or the
Guarantor in connection with this Guaranty shall be venued in either the
Superior Court of Maricopa County, Arizona, or the United States District Court,
District of Arizona; and (iv) agrees that a final judgment in any such suit,
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
15. WAIVER OF JURY TRIAL. THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ALL RIGHTS
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF, BASED
ON OR PERTAINING TO THIS GUARANTY.
IN WITNESS WHEREOF, this Guaranty has been duly executed by the
Guarantor as of the date first written above.
/S/ROGER BUTTERWICK
------------------------------------------
Roger Butterwick
/S/SHERRY BUTTERWICK
------------------------------------------
Sherry Butterwick
Address:
SKR:bss 296389.02 3/22/99 5
STATE OF ARIZONA
COUNTY OF MARICOPA
The foregoing instrument was acknowledged before me the 2 day of
APRIL, 1999, by Roger Butterwick and Sherry Butterwick, husband and wife.
(Seal and Expiration Date)
[SEAL] /S/SUSAN B. BLUNDEN
------------------------------
Notary Public
GUARANTY
Phoenix, Arizona
MARCH 26, 1999
This Guaranty, dated as of MARCH 26, 1999 is made by Mark
Moldenhauer and Hope Moldenhauer (collectively, the "Guarantor") for the benefit
of Norwest Business Credit, Inc., a Minnesota corporation (with its
participants, successors and assigns, the "Lender").
The Lender and Auto Network Group, Inc., an Arizona corporation,
formerly known as Auto Network USA, Inc. (the "Borrower"), are parties to a
Credit and Security Agreement of even date herewith (the "Credit Agreement")
pursuant to which the Lender may make advances and extend other financial
accommodations to the Borrower. From time to time additional subsidiaries of
Borrower may be added to the Credit Agreement as borrowers upon the agreement of
Lender and Borrower and shall thereafter be included in the definition of
Borrower for all purposes hereunder.
As a condition to extending such credit to the Borrower, the Lender
has required the execution and delivery of this Guaranty.
ACCORDINGLY, the Guarantor, in consideration of the premises and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, hereby agrees as follows:
1. DEFINITIONS. All terms defined in the Credit Agreement that are not otherwise
defined herein shall have the meanings given them in the Credit Agreement.
2. INDEBTEDNESS GUARANTEED. The Guarantor hereby absolutely and unconditionally
guarantees to the Lender the full and prompt payment when due, whether at
maturity or earlier by reason of acceleration or otherwise, of (i) the
Obligations and (ii) each and every other sum now or hereafter owing to the
Lender by the Borrower, including but not limited to, debts, liabilities and
obligations arising out of loans, credit transactions, financial accommodations,
discounts, purchases of property or other transactions with the Borrower or for
the Borrower's account or out of any other transaction or event, owed to the
Lender or owed to others by reason of participations granted to or interests
acquired or created for or sold to them by the Lender, in each case whether now
existing or hereafter arising, whether arising directly in a transaction or
event involving the Lender or acquired by the Lender from another by purchase or
assignment or as collateral security, whether owed by the Borrower as drawer,
maker, endorser, accommodation party, guarantor, principal, surety or as a
member of any partnership, syndicate, association or group or in any other
capacity, whether absolute or contingent, direct or indirect, primary or
secondary, sole, joint, several or joint and several, secured or unsecured, due
or not due, contractual, tortious or statutory, liquidated or unliquidated,
arising by agreement or imposed by law or otherwise (all of said sums being
hereinafter called the "Indebtedness").
3. UNCONDITIONAL GUARANTY. No act or thing need occur to establish the liability
of the Guarantor hereunder, and no act or thing, except full payment and
discharge of all of the Indebtedness, shall in any way exonerate the Guarantor
hereunder
SKR:sic 288056.02 2/23/99 1
or modify, reduce, limit or release the Guarantor's liability hereunder. This is
an absolute, unconditional and continuing guaranty of payment of the
Indebtedness and shall continue to be in force and be binding upon the
Guarantor, whether or not all of the Indebtedness is paid in full, until this
Guaranty is revoked prospectively as to future transactions, by written notice
actually received by the Lender, and such revocation shall not be effective as
to the amount of Indebtedness existing or committed for at the time of actual
receipt of such notice by the Lender, or as to any renewals, extensions,
refinancings or refundings thereof. The death or incompetence of the Guarantor
shall not revoke this Guaranty, except upon actual receipt of written notice
thereof by the Lender and only prospectively, as to future transactions, as
herein set forth.
4. DEATH OR INSOLVENCY OF GUARANTOR. If the Guarantor shall die or shall be or
become insolvent (however defined), then the Lender shall have the right to
declare immediately due and payable, and the Guarantor will forthwith pay to the
Lender, the full amount of all of the Indebtedness whether due and payable or
unmatured. If the Guarantor voluntarily commences or there is commenced
involuntarily against the Guarantor a case under the United States Bankruptcy
Code, the full amount of all of the Indebtedness, whether due and payable or
unmatured, shall be immediately due and payable without demand or notice
thereof.
5. LIMITED GUARANTY. Notwithstanding the aggregate amount of the Indebtedness
which may from time to time be outstanding, the liability of the Guarantor
hereunder shall be limited to a principal amount of $250,000.00, plus accrued
interest thereon and all attorneys' fees, collection costs and enforcement
expenses referable thereto. The Indebtedness may be created and continued in any
amount, whether or not in excess of such principal amount, without affecting or
impairing the Guarantor's liability hereunder, and the Lender may pay (or allow
for the payment of) the excess out of any sums received by or available to the
Lender on account of the Indebtedness from the Borrower or any other person
(except the Guarantor), from their properties, out of any collateral security or
from any other source, and such payment (or allowance) shall not reduce, affect
or impair the Guarantor's liability hereunder. Any payment made by the Guarantor
under this Guaranty shall be effective to reduce or discharge such liability
only if accompanied by a written transmittal document, received by the Lender,
advising the Lender that such payment is made under this Guaranty for such
purpose.
6. SUBROGATION, ETC. The Guarantor hereby waives all rights that the Guarantor
may now have or hereafter acquire, whether by subrogation, contribution,
reimbursement, recourse, exoneration, contract or otherwise, to recover from the
Borrower or from any property of the Borrower any sums paid under this Guaranty.
The Guarantor will not exercise or enforce any right of contribution to recover
any such sums from any person who is a co-obligor with the Borrower or a
guarantor or surety of the Indebtedness or from any property of any such person
until all of the Indebtedness shall have been fully paid and discharged.
7. ENFORCEMENT EXPENSES. The Guarantor will pay or reimburse the Lender for all
costs, expenses and attorneys' fees paid or incurred by the Lender in
endeavoring to collect and enforce the Indebtedness and in enforcing this
Guaranty.
8. LENDER'S RIGHTS. The Lender shall not be obligated by reason of its
acceptance of this Guaranty to engage in any transactions with or for the
Borrower. Whether or not any existing relationship between the Guarantor and the
Borrower has been changed
SKR:sic 288056.02 2/23/99 2
or ended and whether or not this Guaranty has been revoked, the Lender may enter
into transactions resulting in the creation or continuance of the Indebtedness
and may otherwise agree, consent to or suffer the creation or continuance of any
of the Indebtedness, without any consent or approval by the Guarantor and
without any prior or subsequent notice to the Guarantor. The Guarantor's
liability shall not be affected or impaired by any of the following acts or
things (which the Lender is expressly authorized to do, omit or suffer from time
to time, both before and after revocation of this Guaranty, without consent or
approval by or notice to the Guarantor): (i) any acceptance of collateral
security, guarantors, accommodation parties or sureties for any or all of the
Indebtedness; (ii) one or more extensions or renewals of the Indebtedness
(whether or not for longer than the original period) or any modification of the
interest rates, maturities, if any, or other contractual terms applicable to any
of the Indebtedness or any amendment or modification of any of the terms or
provisions of any loan agreement or other agreement under which the Indebtedness
or any part thereof arose; (iii) any waiver or indulgence granted to the
Borrower, any delay or lack of diligence in the enforcement of the Indebtedness
or any failure to institute proceedings, file a claim, give any required notices
or otherwise protect any of the Indebtedness; (iv) any full or partial release
of, compromise or settlement with, or agreement not to sue, the Borrower or any
guarantor or other person liable in respect of any of the Indebtedness; (v) any
release, surrender, cancellation or other discharge of any evidence of the
Indebtedness or the acceptance of any instrument in renewal or substitution
therefor; (vi) any failure to obtain collateral security (including rights of
setoff) for the Indebtedness, or to see to the proper or sufficient creation and
perfection thereof, or to establish the priority thereof, or to preserve,
protect, insure, care for, exercise or enforce any collateral security; or any
modification, alteration, substitution, exchange, surrender, cancellation,
termination, release or other change, impairment, limitation, loss or discharge
of any collateral security; (vii) any collection, sale, lease or disposition of,
or any other foreclosure or enforcement of or realization on, any collateral
security; (viii) any assignment, pledge or other transfer of any of the
Indebtedness or any evidence thereof; (ix) any manner, order or method of
application of any payments or credits upon the Indebtedness; and (x) any
election by the Lender under Section 1111(b) of the United States Bankruptcy
Code. The Guarantor waives any and all defenses and discharges available to a
surety, guarantor or accommodation co-obligor.
9. WAIVERS BY GUARANTOR. The Guarantor waives any and all defenses, claims,
setoffs and discharges of the Borrower, or any other obligor, pertaining to the
Indebtedness, except the defense of discharge by payment in full. Without
limiting the generality of the foregoing, the Guarantor will not assert, plead
or enforce against the Lender any defense of waiver, release, discharge or
disallowance in bankruptcy, statute of limitations, res judicata, statute of
frauds, anti-deficiency statute, fraud, incapacity, minority, usury, illegality
or unenforceability which may be available to the Borrower or any other person
liable in respect of any of the Indebtedness, or any setoff available against
the Lender to the Borrower or any other such person, whether or not on account
of a related transaction. The Guarantor expressly agrees that the Guarantor
shall be and remain liable for any deficiency remaining after foreclosure of any
mortgage or security interest securing the Indebtedness, whether or not the
liability of the Borrower or any other obligor for such deficiency is discharged
pursuant to statute or judicial decision. The liability of the Guarantor shall
not be affected or impaired by any voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially all the assets,
marshalling of assets and liabilities, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of, or other similar
SKR:sic 288056.02 2/23/99 3
event or proceeding affecting, the Borrower or any of its assets. The Guarantor
will not assert, plead or enforce against the Lender any claim, defense or
setoff available to the Guarantor against the Borrower. The Guarantor waives
presentment, demand for payment, notice of dishonor or nonpayment and protest of
any instrument evidencing the Indebtedness. The Lender shall not be required
first to resort for payment of the Indebtedness to the Borrower or other
persons, or their properties, or first to enforce, realize upon or exhaust any
collateral security for the Indebtedness, before enforcing this Guaranty.
Guarantor waives the benefits of Arizona Revised Statutes Sections 12-1641,
12-1642, 33-814 and 12-1566.
10. IF PAYMENTS SET ASIDE, ETC. If any payment applied by the Lender to the
Indebtedness is thereafter set aside, recovered, rescinded or required to be
returned for any reason (including, without limitation, the bankruptcy,
insolvency or reorganization of the Borrower or any other obligor), the
Indebtedness to which such payment was applied shall for the purpose of this
Guaranty be deemed to have continued in existence, notwithstanding such
application, and this Guaranty shall be enforceable as to such Indebtedness as
fully as if such application had never been made.
11. ADDITIONAL OBLIGATION OF GUARANTOR. The Guarantor's liability under this
Guaranty is in addition to and shall be cumulative with all other liabilities of
the Guarantor to the Lender as guarantor, surety, endorser, accommodation
co-obligor or otherwise of any of the Indebtedness or obligation of the
Borrower, without any limitation as to amount, unless the instrument or
agreement evidencing or creating such other liability specifically provides to
the contrary.
12. FINANCIAL INFORMATION. The Guarantor will provide to the Lender annually a
personal financial statement prepared as of the anniversary date of this
Guaranty listing all assets, liabilities and net worth of the Guarantor and
shall forward the same to Lender not later than 30 days after each anniversary
date of this Guaranty. The Guarantor will also provide to the Lender copies of
his federal and state tax returns and all schedules thereto and will forward the
tax returns to the Lender each year not later than 30 days after the last
non-delinquent filing date for such taxes. The Guarantor acknowledges and agrees
that the Lender may at any time and from time to time without notice to the
Guarantor, investigate the Guarantor's background, personal and credit history
and perform other due diligence concerning the Guarantor and his
creditworthiness.
13. NO DUTIES OWED BY LENDER. The Guarantor acknowledges and agrees that the
Lender (i) has not made any representations or warranties with respect to, (ii)
does not assume any responsibility to the Guarantor for, and (iii) has no duty
to provide information to the Guarantor regarding, the enforceability of any of
the Indebtedness or the financial condition of the Borrower or any guarantor.
The Guarantor has independently determined the creditworthiness of the Borrower
and the enforceability of the Indebtedness and until the Indebtedness is paid in
full will independently and without reliance on the Lender continue to make such
determinations.
14. MISCELLANEOUS. This Guaranty shall be effective upon delivery to the Lender,
without further act, condition or acceptance by the Lender, shall be binding
upon the Guarantor and the heirs, representatives, successors and assigns of the
Guarantor and shall
SKR:sic 288056.02 2/23/99 4
inure to the benefit of the Lender and its participants, successors and assigns.
Any invalidity or unenforceability of any provision or application of this
Guaranty shall not affect other lawful provisions and application thereof, and
to this end the provisions of this Guaranty are declared to be severable. This
Guaranty may not be waived, modified, amended, terminated, released or otherwise
changed except by a writing signed by the Guarantor and the Lender. This
Guaranty shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of Arizona. The Guarantor hereby
(i) consents to the personal jurisdiction of the state and federal courts
located in the State of Arizona in connection with any controversy related to
this Guaranty; (ii) waives any argument that venue in any such forum is not
convenient, (iii) agrees that any litigation initiated by the Lender or the
Guarantor in connection with this Guaranty shall be venued in either the
Superior Court of Maricopa County, Arizona, or the United States District Court,
District of Arizona; and (iv) agrees that a final judgment in any such suit,
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
15. WAIVER OF JURY TRIAL. THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ALL RIGHTS
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF, BASED
ON OR PERTAINING TO THIS GUARANTY.
IN WITNESS WHEREOF, this Guaranty has been duly executed by the
Guarantor as of the date first written above.
/S/MARK MOLDENHAUER
------------------------------------------
Mark Moldenhauer
/S/HOPE MOLDENHAUER
------------------------------------------
Hope Moldenhauer
Address:
5925 East Restin Road
Cave Creek, AZ 85331
SKR:sic 288056.02 2/23/99 5
STATE OF ARIZONA
COUNTY OF MARICOPA
The foregoing instrument was acknowledged before me the 26 day of
MARCH, 1999, by Mark Moldenhauer and Hope Moldenhauer, husband and wife.
(Seal and Expiration Date)
[SEAL] SUSAN B. BLUNDEN
------------------------------
Notary Public
GUARANTY
Phoenix, Arizona
MARCH 26, 1999
This Guaranty, dated as of MARCH 26, 1999 is made by Mike Stuart
and Debbie Stuart (collectively, the "Guarantor") for the benefit of Norwest
Business Credit, Inc., a Minnesota corporation (with its participants,
successors and assigns, the "Lender").
The Lender and Auto Network Group, Inc., an Arizona corporation,
formerly known as Auto Network USA, Inc. (the "Borrower"), are parties to a
Credit and Security Agreement of even date herewith (the "Credit Agreement")
pursuant to which the Lender may make advances and extend other financial
accommodations to the Borrower. From time to time additional subsidiaries of
Borrower may be added to the Credit Agreement as borrowers upon the agreement of
Lender and Borrower and shall thereafter be included in the definition of
Borrower for all purposes hereunder.
As a condition to extending such credit to the Borrower, the Lender
has required the execution and delivery of this Guaranty.
ACCORDINGLY, the Guarantor, in consideration of the premises and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, hereby agrees as follows:
1. DEFINITIONS. All terms defined in the Credit Agreement that are
not otherwise defined herein shall have the meanings given them in the Credit
Agreement.
2. INDEBTEDNESS GUARANTEED. The Guarantor hereby absolutely and
unconditionally guarantees to the Lender the full and prompt payment when due,
whether at maturity or earlier by reason of acceleration or otherwise, of (i)
the Obligations and (ii) each and every other sum now or hereafter owing to the
Lender by the Borrower, including but not limited to, debts, liabilities and
obligations arising out of loans, credit transactions, financial accommodations,
discounts, purchases of property or other transactions with the Borrower or for
the Borrower's account or out of any other transaction or event, owed to the
Lender or owed to others by reason of participations granted to or interests
acquired or created for or sold to them by the Lender, in each case whether now
existing or hereafter arising, whether arising directly in a transaction or
event involving the Lender or acquired by the Lender from another by purchase or
assignment or as collateral security, whether owed by the Borrower as drawer,
maker, endorser, accommodation party, guarantor, principal, surety or as a
member of any partnership, syndicate, association or group or in any other
capacity, whether absolute or contingent, direct or indirect, primary or
secondary, sole, joint, several or joint and several, secured or unsecured, due
or not due, contractual, tortious or statutory, liquidated or unliquidated,
arising by agreement or imposed by law or otherwise (all of said sums being
hereinafter called the "Indebtedness").
3. UNCONDITIONAL GUARANTY. No act or thing need occur to establish
the liability of the Guarantor hereunder, and no act or thing, except full
payment and discharge of all of the Indebtedness, shall in any way exonerate the
Guarantor hereunder or
SKR:sic 288055.02 2/23/99 1
modify, reduce, limit or release the Guarantor's liability hereunder. This is an
absolute, unconditional and continuing guaranty of payment of the Indebtedness
and shall continue to be in force and be binding upon the Guarantor, whether or
not all of the Indebtedness is paid in full, until this Guaranty is revoked
prospectively as to future transactions, by written notice actually received by
the Lender, and such revocation shall not be effective as to the amount of
Indebtedness existing or committed for at the time of actual receipt of such
notice by the Lender, or as to any renewals, extensions, refinancings or
refundings thereof. The death or incompetence of the Guarantor shall not revoke
this Guaranty, except upon actual receipt of written notice thereof by the
Lender and only prospectively, as to future transactions, as herein set forth.
4. DEATH OR INSOLVENCY OF GUARANTOR. If the Guarantor shall die or
shall be or become insolvent (however defined), then the Lender shall have the
right to declare immediately due and payable, and the Guarantor will forthwith
pay to the Lender, the full amount of all of the Indebtedness whether due and
payable or unmatured. If the Guarantor voluntarily commences or there is
commenced involuntarily against the Guarantor a case under the United States
Bankruptcy Code, the full amount of all of the Indebtedness, whether due and
payable or unmatured, shall be immediately due and payable without demand or
notice thereof.
5. LIMITED GUARANTY. Notwithstanding the aggregate amount of the
Indebtedness which may from time to time be outstanding, the liability of the
Guarantor hereunder shall be limited to a principal amount of $250,000.00, plus
accrued interest thereon and all attorneys' fees, collection costs and
enforcement expenses referable thereto. The Indebtedness may be created and
continued in any amount, whether or not in excess of such principal amount,
without affecting or impairing the Guarantor's liability hereunder, and the
Lender may pay (or allow for the payment of) the excess out of any sums received
by or available to the Lender on account of the Indebtedness from the Borrower
or any other person (except the Guarantor), from their properties, out of any
collateral security or from any other source, and such payment (or allowance)
shall not reduce, affect or impair the Guarantor's liability hereunder. Any
payment made by the Guarantor under this Guaranty shall be effective to reduce
or discharge such liability only if accompanied by a written transmittal
document, received by the Lender, advising the Lender that such payment is made
under this Guaranty for such purpose.
6. SUBROGATION, ETC. The Guarantor hereby waives all rights that the
Guarantor may now have or hereafter acquire, whether by subrogation,
contribution, reimbursement, recourse, exoneration, contract or otherwise, to
recover from the Borrower or from any property of the Borrower any sums paid
under this Guaranty. The Guarantor will not exercise or enforce any right of
contribution to recover any such sums from any person who is a co-obligor with
the Borrower or a guarantor or surety of the Indebtedness or from any property
of any such person until all of the Indebtedness shall have been fully paid and
discharged.
7. ENFORCEMENT EXPENSES. The Guarantor will pay or reimburse the
Lender for all costs, expenses and attorneys' fees paid or incurred by the
Lender in endeavoring to collect and enforce the Indebtedness and in enforcing
this Guaranty.
8. LENDER'S RIGHTS. The Lender shall not be obligated by reason of
its acceptance of this Guaranty to engage in any transactions with or for the
Borrower. Whether or not any existing relationship between the Guarantor and the
Borrower has been changed
SKR:sic 288055.02 2/23/99 2
or ended and whether or not this Guaranty has been revoked, the Lender may enter
into transactions resulting in the creation or continuance of the Indebtedness
and may otherwise agree, consent to or suffer the creation or continuance of any
of the Indebtedness, without any consent or approval by the Guarantor and
without any prior or subsequent notice to the Guarantor. The Guarantor's
liability shall not be affected or impaired by any of the following acts or
things (which the Lender is expressly authorized to do, omit or suffer from time
to time, both before and after revocation of this Guaranty, without consent or
approval by or notice to the Guarantor): (i) any acceptance of collateral
security, guarantors, accommodation parties or sureties for any or all of the
Indebtedness; (ii) one or more extensions or renewals of the Indebtedness
(whether or not for longer than the original period) or any modification of the
interest rates, maturities, if any, or other contractual terms applicable to any
of the Indebtedness or any amendment or modification of any of the terms or
provisions of any loan agreement or other agreement under which the Indebtedness
or any part thereof arose; (iii) any waiver or indulgence granted to the
Borrower, any delay or lack of diligence in the enforcement of the Indebtedness
or any failure to institute proceedings, file a claim, give any required notices
or otherwise protect any of the Indebtedness; (iv) any full or partial release
of, compromise or settlement with, or agreement not to sue, the Borrower or any
guarantor or other person liable in respect of any of the Indebtedness; (v) any
release, surrender, cancellation or other discharge of any evidence of the
Indebtedness or the acceptance of any instrument in renewal or substitution
therefor; (vi) any failure to obtain collateral security (including rights of
setoff) for the Indebtedness, or to see to the proper or sufficient creation and
perfection thereof, or to establish the priority thereof, or to preserve,
protect, insure, care for, exercise or enforce any collateral security; or any
modification, alteration, substitution, exchange, surrender, cancellation,
termination, release or other change, impairment, limitation, loss or discharge
of any collateral security; (vii) any collection, sale, lease or disposition of,
or any other foreclosure or enforcement of or realization on, any collateral
security; (viii) any assignment, pledge or other transfer of any of the
Indebtedness or any evidence thereof; (ix) any manner, order or method of
application of any payments or credits upon the Indebtedness; and (x) any
election by the Lender under Section 1111(b) of the United States Bankruptcy
Code. The Guarantor waives any and all defenses and discharges available to a
surety, guarantor or accommodation co-obligor.
9. WAIVERS BY GUARANTOR. The Guarantor waives any and all defenses,
claims, setoffs and discharges of the Borrower, or any other obligor, pertaining
to the Indebtedness, except the defense of discharge by payment in full. Without
limiting the generality of the foregoing, the Guarantor will not assert, plead
or enforce against the Lender any defense of waiver, release, discharge or
disallowance in bankruptcy, statute of limitations, res judicata, statute of
frauds, anti-deficiency statute, fraud, incapacity, minority, usury, illegality
or unenforceability which may be available to the Borrower or any other person
liable in respect of any of the Indebtedness, or any setoff available against
the Lender to the Borrower or any other such person, whether or not on account
of a related transaction. The Guarantor expressly agrees that the Guarantor
shall be and remain liable for any deficiency remaining after foreclosure of any
mortgage or security interest securing the Indebtedness, whether or not the
liability of the Borrower or any other obligor for such deficiency is discharged
pursuant to statute or judicial decision. The liability of the Guarantor shall
not be affected or impaired by any voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially all the assets,
marshalling of assets and liabilities, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of, or other similar
SKR:sic 288055.02 2/23/99 3
event or proceeding affecting, the Borrower or any of its assets. The Guarantor
will not assert, plead or enforce against the Lender any claim, defense or
setoff available to the Guarantor against the Borrower. The Guarantor waives
presentment, demand for payment, notice of dishonor or nonpayment and protest of
any instrument evidencing the Indebtedness. The Lender shall not be required
first to resort for payment of the Indebtedness to the Borrower or other
persons, or their properties, or first to enforce, realize upon or exhaust any
collateral security for the Indebtedness, before enforcing this Guaranty.
Guarantor waives the benefits of Arizona Revised Statutes Sections 12-1641,
12-1642, 33-814 and 12-1566.
10. IF PAYMENTS SET ASIDE, ETC. If any payment applied by the Lender
to the Indebtedness is thereafter set aside, recovered, rescinded or required to
be returned for any reason (including, without limitation, the bankruptcy,
insolvency or reorganization of the Borrower or any other obligor), the
Indebtedness to which such payment was applied shall for the purpose of this
Guaranty be deemed to have continued in existence, notwithstanding such
application, and this Guaranty shall be enforceable as to such Indebtedness as
fully as if such application had never been made.
11. ADDITIONAL OBLIGATION OF GUARANTOR. The Guarantor's liability
under this Guaranty is in addition to and shall be cumulative with all other
liabilities of the Guarantor to the Lender as guarantor, surety, endorser,
accommodation co-obligor or otherwise of any of the Indebtedness or obligation
of the Borrower, without any limitation as to amount, unless the instrument or
agreement evidencing or creating such other liability specifically provides to
the contrary.
12. FINANCIAL INFORMATION. The Guarantor will provide to the Lender
annually a personal financial statement prepared as of the anniversary date of
this Guaranty listing all assets, liabilities and net worth of the Guarantor and
shall forward the same to Lender not later than 30 days after each anniversary
date of this Guaranty. The Guarantor will also provide to the Lender copies of
his federal and state tax returns and all schedules thereto and will forward the
tax returns to the Lender each year not later than 30 days after the last
non-delinquent filing date for such taxes. The Guarantor acknowledges and agrees
that the Lender may at any time and from time to time without notice to the
Guarantor, investigate the Guarantor's background, personal and credit history
and perform other due diligence concerning the Guarantor and his
creditworthiness.
13. NO DUTIES OWED BY LENDER. The Guarantor acknowledges and agrees
that the Lender (i) has not made any representations or warranties with respect
to, (ii) does not assume any responsibility to the Guarantor for, and (iii) has
no duty to provide information to the Guarantor regarding, the enforceability of
any of the Indebtedness or the financial condition of the Borrower or any
guarantor. The Guarantor has independently determined the creditworthiness of
the Borrower and the enforceability of the Indebtedness and until the
Indebtedness is paid in full will independently and without reliance on the
Lender continue to make such determinations.
14. MISCELLANEOUS. This Guaranty shall be effective upon delivery to
the Lender, without further act, condition or acceptance by the Lender, shall be
binding upon the Guarantor and the heirs, representatives, successors and
assigns of the Guarantor and shall
SKR:sic 288055.02 2/23/99 4
inure to the benefit of the Lender and its participants, successors and assigns.
Any invalidity or unenforceability of any provision or application of this
Guaranty shall not affect other lawful provisions and application thereof, and
to this end the provisions of this Guaranty are declared to be severable. This
Guaranty may not be waived, modified, amended, terminated, released or otherwise
changed except by a writing signed by the Guarantor and the Lender. This
Guaranty shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of Arizona. The Guarantor hereby
(i) consents to the personal jurisdiction of the state and federal courts
located in the State of Arizona in connection with any controversy related to
this Guaranty; (ii) waives any argument that venue in any such forum is not
convenient, (iii) agrees that any litigation initiated by the Lender or the
Guarantor in connection with this Guaranty shall be venued in either the
Superior Court of Maricopa County, Arizona, or the United States District Court,
District of Arizona; and (iv) agrees that a final judgment in any such suit,
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
15. WAIVER OF JURY TRIAL. THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES
ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF, BASED ON OR PERTAINING TO THIS GUARANTY.
IN WITNESS WHEREOF, this Guaranty has been duly executed by the
Guarantor as of the date first written above.
/S/MIKE STUART
------------------------------------------
Mike Stuart
/S/DEBBIE STUART
------------------------------------------
Debbie Stuart
Address:
9118 East Topeka
Scottsdale, AZ 85255
SKR:sic 288055.02 2/23/99 5
STATE OF ARIZONA
COUNTY OF MARICOPA
The foregoing instrument was acknowledged before me the 26 day of
MARCH, 1999, by Mike Stuart and Debbie Stuart, husband and wife.
(Seal and Expiration Date)
[SEAL] /S/CHRISTINE M. OLACH
------------------------------
Notary Public
SKR:sic 288055.02 2/23/99 6
SUBORDINATION AGREEMENT
This Agreement, dated as of MARCH 26, 1999, is made by Mark
Moldenhauer and Hope Moldenhauer (collectively, the "Subordinated Creditor"),
for the benefit of Norwest Business Credit, Inc., a Minnesota corporation (the
"Lender").
Auto Network Group, Inc., an Arizona corporation, formerly known as
Auto Network U.S.A., Inc. (the "Borrower"), and any future subsidiaries of
Borrower are now or hereafter may be indebted to the Lender on account of loans
or other extensions of credit or financial accommodations from the Lender to the
Borrower, or any Subsidiary, or to any other person under the guaranty or
endorsement of the Borrower, or any Subsidiary.
The Subordinated Creditor has made or may make loans or grant other
financial accommodations to the Borrower.
As a condition to making any loan or extension of credit to the
Borrower, the Lender has required that the Subordinated Creditor subordinate the
payment of the Subordinated Creditor's loans and other financial accommodations
to the payment of any and all indebtedness of the Borrower, and the Subsidiaries
to the Lender. Assisting the Borrower in obtaining credit accommodations from
the Lender and subordinating his interests pursuant to the terms of this
Agreement are in the Subordinated Creditor's best interest.
ACCORDINGLY, in consideration of the loans and other financial
accommodations that have been made and may hereafter be made by the Lender for
the benefit of the Borrower, and the Subsidiaries, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Subordinated Creditor hereby agrees as follows:
1. DEFINITIONS. As used herein, the following terms have the
meanings set forth below:
"Borrower Default" means a Default or Event of Default as defined in
any agreement or instrument evidencing, governing, or issued in connection
with Lender Indebtedness, including, but not limited to, the Credit and
Security Agreement dated as of __________, 1999, by and between the
Borrower, and the Lender as the same may hereafter be amended,
supplemented or restated from time to time, or any default under or breach
of any such agreement or instrument.
"Lender Indebtedness" means each and every debt, liability and
obligation of every type and description which the Borrower, or any
Subsidiary may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or to become
due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several, all interest
thereon, all renewals, extensions and modifications thereof and any notes
issued in whole or partial substitution therefor.
SKR:maw 288005.03 2/25/99 1
"Subordinated Indebtedness" means all obligations arising under the
Subordinated Note and each and every other debt, liability and obligation
of every type and description which the Borrower, or any Subsidiary may
now or at any time hereafter owe to the Subordinated Creditor, whether
such debt, liability or obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or to become
due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several.
"Subordinated Note" means collectively the following notes, together
with all renewals, extensions and modifications thereof and any note or
notes issued in substitution therefor: (a) Promissory Note made by the
Borrower, Jeff Erskine, Mike Stuart and John Carrante to the order of
Creditor, dated as of October 17, 1997 in the original principal amount of
$150,000.00; (b) Promissory Note made by the Borrower to the order of
Creditor, dated as of April 7, 1998, in the original principal amount of
$300,000.00; (c) Promissory Note made by the Borrower to the order of
Creditor, dated as of January 15, 1998 in the original principal amount of
$300,000.00; (d) Promissory Note made by the Borrower to the order of
Creditor, dated as of March 31, 1998, in the original principal amount of
$102,000.00.
2. SUBORDINATION. The payment of all of the Subordinated
Indebtedness is hereby expressly subordinated to the extent and in the manner
hereinafter set forth to the payment in full of the Lender Indebtedness; and
regardless of any priority otherwise available to the Subordinated Creditor by
law or by agreement, the Lender shall hold a first security interest in all
collateral securing payment of the Lender Indebtedness (the "Collateral"), and
any security interest claimed therein (including any proceeds thereof) by the
Subordinated Creditor shall be and remain fully subordinate for all purposes to
the security interest of the Lender therein for all purposes whatsoever.
3. PAYMENTS. Until all of the Lender Indebtedness has been paid in
full, the Subordinated Creditor shall not, without the Lender's prior written
consent, demand, receive or accept any principal payment from the Borrower in
respect of the Subordinated Indebtedness, or exercise any right of or permit any
setoff in respect of the Subordinated Indebtedness, except that the Subordinated
Creditor may accept scheduled payments (but not prepayments) of interest
required to be paid under the Subordinated Note, so long as no Borrower Default
has occurred and is continuing or will occur as a result of or immediately
following any such payment. Without the Lender's prior written consent, the
Subordinated Creditor shall not demand, receive or accept any interest payment
from the Borrower in respect of the Subordinated Indebtedness so long as any
Borrower Default exists or if a Borrower Default will occur as a result of or
immediately following such interest payment.
4. RECEIPT OF PROHIBITED PAYMENTS. If the Subordinated Creditor
receives any payment on the Subordinated Indebtedness that the Subordinated
Creditor is not entitled to receive under the provisions of this Agreement, the
Subordinated Creditor will hold the amount so received in trust for the Lender
and will forthwith turn over such payment to the Lender in the form received
(except for the endorsement of the Subordinated Creditor where necessary) for
application to then-existing Lender Indebtedness (whether or not due), in such
manner of application as the Lender may deem appropriate. If the Subordinated
Creditor exercises any right
SKR:maw 288005.03 2/25/99 2
of setoff which the Subordinated Creditor is not permitted to exercise under the
provisions of this Agreement, the Subordinated Creditor will promptly pay over
to the Lender, in immediately available funds, an amount equal to the amount of
the claims or obligations offset. If the Subordinated Creditor fails to make any
endorsement required under this Agreement, the Lender, or any of its officers or
employees or agents on behalf of the Lender, is hereby irrevocably appointed as
the attorney-in-fact (which appointment is coupled with an interest) for the
Subordinated Creditor to make such endorsement in the Subordinated Creditor's
name.
5. ACTION ON SUBORDINATED DEBT. The Subordinated Creditor will not
commence any action or proceeding against the Borrower, or any Subsidiary to
recover all or any part of the Subordinated Indebtedness, or join with any
creditor (unless the Lender shall so join) in bringing any proceeding against
the Borrower, or any Subsidiary under any bankruptcy, reorganization,
readjustment of debt, arrangement of debt receivership, liquidation or
insolvency law or statute of the federal or any state government, or take
possession of, sell, or dispose of any Collateral, or exercise or enforce any
right or remedy available to the Subordinated Creditor with respect to any such
Collateral, unless and until the Lender Indebtedness has been paid in full.
6. ACTION CONCERNING COLLATERAL.
(a) Notwithstanding any security interest now held or hereafter
acquired by the Subordinated Creditor, the Lender may take possession of,
sell, dispose of, and otherwise deal with all or any part of the
Collateral, and may enforce any right or remedy available to it with
respect to the Collateral, all without notice to or consent of the
Subordinated Creditor except as specifically required by applicable law.
(b) In addition, and without limiting the generality of the
foregoing, if a Borrower Default has occurred and is continuing and the
Borrower, or any Subsidiary intends to sell any Collateral to an unrelated
third party outside the ordinary course of business, the Subordinated
Creditor shall, upon the Lender's request, execute and deliver to such
purchaser such instruments as may reasonably be necessary to terminate and
release any security interest or lien the Subordinated Creditor has in the
Collateral to be sold.
(c) The Lender shall have no duty to preserve, protect, care for,
insure, take possession of, collect, dispose of, or otherwise realize upon
any of the Collateral, and in no event shall the Lender be deemed the
Subordinated Creditor's agent with respect to the Collateral. All proceeds
received by the Lender with respect to any Collateral may be applied,
first, to pay or reimburse the Lender for all costs and expenses
(including reasonable attorneys' fees) incurred by the Lender in
connection with the collection of such proceeds, and, second, to any
indebtedness secured by the Lender's security interest in that Collateral
in any order that it may choose.
7. BANKRUPTCY AND INSOLVENCY. In the event of any receivership,
insolvency, bankruptcy, assignment for the benefit of creditors, reorganization
or arrangement with creditors, whether or not pursuant to bankruptcy law, the
sale of all or substantially all of the assets of the Borrower, or any
Subsidiary dissolution, liquidation or any other marshalling of the assets or
liabilities of the Borrower, or any Subsidiary the Subordinated Creditor will
file all claims, proofs of claim or other instruments of similar character
necessary to enforce the obligations of the Borrower, and the Subsidiaries in
respect of the Subordinated Indebtedness and will hold in
SKR:maw 288005.03 2/25/99 3
trust for the Lender and promptly pay over to the Lender in the form received
(except for the endorsement of the Subordinated Creditor where necessary) for
application to the then-existing Lender Indebtedness, any and all moneys,
dividends or other assets received in any such proceedings on account of the
Subordinated Indebtedness, unless and until the Lender Indebtedness has been
paid in full. If the Subordinated Creditor shall fail to take any such action,
the Lender, as attorney-in-fact for the Subordinated Creditor, may take such
action on the Subordinated Creditor's behalf. The Subordinated Creditor hereby
irrevocably appoints the Lender, or any of its officers or employees on behalf
of the Lender, as the attorney-in-fact for the Subordinated Creditor (which
appointment is coupled with an interest) with the power but not the duty to
demand, sue for, collect and receive any and all such moneys, dividends or other
assets and give acquittance therefor and to file any claim, proof of claim or
other instrument of similar character, to vote claims comprising Subordinated
Indebtedness to accept or reject any plan of partial or complete liquidation,
reorganization, arrangement, composition or extension and to take such other
action in the Lender's own name or in the name of the Subordinated Creditor as
the Lender may deem necessary or advisable for the enforcement of the agreements
contained herein; and the Subordinated Creditor will execute and deliver to the
Lender such other and further powers-of-attorney or instruments as the Lender
may request in order to accomplish the foregoing.
8. RESTRICTIVE LEGEND; TRANSFER OF SUBORDINATED INDEBTEDNESS. The
Subordinated Creditor will cause the Subordinated Note and all other notes,
bonds, debentures or other instruments evidencing the Subordinated Indebtedness
or any part thereof to contain a specific statement thereon to the effect that
the indebtedness thereby evidenced is subject to the provisions of this
Agreement, and the Subordinated Creditor will mark its books conspicuously to
evidence the subordination effected hereby. Attached hereto is a true and
correct copy of the Subordinated Note bearing such legend. At the request of the
Lender, the Subordinated Creditor shall deposit with the Lender the Subordinated
Note and all of the other notes, bonds, debentures or other instruments
evidencing the Subordinated Indebtedness, which notes, bonds, debentures or
other instruments may be held by the Lender so long as any Lender Indebtedness
remains outstanding. The Subordinated Creditor is the lawful holder of the
Subordinated Note and has not transferred any interest therein to any other
person. Without the prior written consent of the Lender, the Subordinated
Creditor will not assign, transfer or pledge to any other person any of the
Subordinated Indebtedness or agree to a discharge or forgiveness of the same so
long as there remains outstanding any of the Lender Indebtedness.
9. CONTINUING EFFECT. This Agreement shall constitute a continuing
agreement of subordination, and the Lender may, without notice to or consent by
the Subordinated Creditor, modify any term of the Lender Indebtedness in
reliance upon this Agreement. Without limiting the generality of the foregoing,
the Lender may, at any time and from time to time, either before or after
receipt of any such notice of revocation, without the consent of or notice to
the Subordinated Creditor and without incurring responsibility to the
Subordinated Creditor or impairing or releasing any of the Lender's rights or
any of the Subordinated Creditor's obligations hereunder:
(a) change the interest rate or change the amount of payment or
extend the time for payment or renew or otherwise alter the terms of any
Lender Indebtedness or any instrument evidencing the same in any manner;
SKR:maw 288005.03 2/25/99 4
(b) sell, exchange, release or otherwise deal with any property at
any time securing payment of the Lender Indebtedness or any part thereof;
(c) release anyone liable in any manner for the payment or
collection of the Lender Indebtedness or any part thereof;
(d) exercise or refrain from exercising any right against the
Borrower, the Subsidiaries or any other person (including the Subordinated
Creditor); and
(e) apply any sums received by the Lender, by whomsoever paid and
however realized, to the Lender Indebtedness in such manner as the Lender
shall deem appropriate.
10. NO COMMITMENT. None of the provisions of this Agreement shall be
deemed or construed to constitute or imply any commitment or obligation on the
part of the Lender to make any future loans or other extensions of credit or
financial accommodations to the Borrower, or any of the Subsidiaries.
11. NOTICE. All notices and other communications hereunder shall be
in writing and shall be (i) personally delivered, (ii) transmitted by registered
mail, postage prepaid, or (iii) transmitted by telecopy, in each case addressed
to the party to whom notice is being given at its address as set forth below:
If to the Lender:
Norwest Business Credit, Inc
Norwest Tower, M.S. 9025
3300 North Central Avenue
Phoenix, AZ 85012-2501
Telecopier: 602-263-6215
Attention: Darcy Della Flora
If to the Subordinated Creditor:
Mark Moldenhauer
5925 East Restin Road
Cave Creek, AZ 85331
Telecopier: 602-951-8375
or at such other address as may hereafter be designated in writing by that
party. All such notices or other communications shall be deemed to have been
given on (i) the date received if delivered personally, (ii) the date of posting
if delivered by mail, or (iii) the date of transmission if delivered by
telecopy.
SKR:maw 288005.03 2/25/99 5
12. CONFLICT IN AGREEMENTS. If the subordination provisions of any
instrument evidencing Subordinated Indebtedness conflict with the terms of this
Agreement, the terms of this Agreement shall govern the relationship between the
Lender and the Subordinated Creditor.
13. NO WAIVER. No waiver shall be deemed to be made by the Lender of
any of its rights hereunder unless the same shall be in writing signed on behalf
of the Lender, and each such waiver, if any, shall be a waiver only with respect
to the specific matter or matters to which the waiver relates and shall in no
way impair the rights of the Lender or the obligations of the Subordinated
Creditor to the Lender in any other respect at any time.
14. BINDING EFFECT; ACCEPTANCE. This Agreement shall be binding upon
the Subordinated Creditor and the Subordinated Creditor's heirs, legal
representatives, successors and assigns and shall inure to the benefit of the
Lender and its participants, successors and assigns irrespective of whether this
or any similar agreement is executed by any other Subordinated Creditor of the
Borrower, or the Subsidiaries. Notice of acceptance by the Lender of this
Agreement or of reliance by the Lender upon this Agreement is hereby waived by
the Subordinated Creditor.
15. MISCELLANEOUS. The paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
16. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE; WAIVER OF JURY
Trial. This Agreement shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Arizona. Each party
consents to the personal jurisdiction of the state and federal courts located in
the State of Arizona in connection with any controversy related to this
Agreement, waives any argument that venue in any such forum is not convenient,
and agrees that any litigation initiated by any of them in connection with this
Agreement shall be venued in either the Superior Court of Maricopa County,
Arizona or the United States District Court, District of Arizona. THE PARTIES
WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR
PERTAINING TO THIS ACKNOWLEDGMENT.
IN WITNESS WHEREOF, the Subordinated Creditor has executed this
Agreement as of the date and year first above-written.
Witness: /S/ROGER BUTTERWICK /S/MARK MOLDENHAUER
Mark Moldenhauer
Witness: /S/ROGER BUTTERWICK /S/HOPE MOLDENHAUER
Hope Moldenhauer
SKR:maw 288005.03 2/25/99 6
ACKNOWLEDGMENT BY BORROWER
The undersigned, being the Borrower referred to in the foregoing
Agreement, hereby (i) acknowledges receipt of a copy thereof, (ii) agrees to all
of the terms and provisions thereof, (iii) agrees to and with the Lender that it
shall make no payment on the Subordinated Indebtedness that the Subordinated
Creditor would not be entitled to receive under the provisions of the Agreement,
(iv) agrees that any such payment will constitute a default under the Lender
Indebtedness, and (v) agrees to mark its books conspicuously to evidence the
subordination of the Subordinated Indebtedness effected hereby.
AUTO NETWORK GROUP, INC., an Arizona
corporation
By /S/MIKE STUART
Its President
SKR:maw 288005.03 2/25/99 7
SUBORDINATION AGREEMENT
This Agreement, dated as of MARCH 26, 1999, is made by Mike Stuart
and Debbie Stuart (collectively, the "Subordinated Creditor"), for the benefit
of Norwest Business Credit, Inc., a Minnesota corporation (the "Lender").
Auto Network Group, Inc., an Arizona corporation, formerly known as
Auto Network U.S.A., Inc. (the "Borrower"), and any future subsidiaries of
Borrower are now or hereafter may be indebted to the Lender on account of loans
or other extensions of credit or financial accommodations from the Lender to the
Borrower, or any Subsidiary, or to any other person under the guaranty or
endorsement of the Borrower, or any Subsidiary.
The Subordinated Creditor has made or may make loans or grant other
financial accommodations to the Borrower.
As a condition to making any loan or extension of credit to the
Borrower, the Lender has required that the Subordinated Creditor subordinate the
payment of the Subordinated Creditor's loans and other financial accommodations
to the payment of any and all indebtedness of the Borrower, and the Subsidiaries
to the Lender. Assisting the Borrower in obtaining credit accommodations from
the Lender and subordinating his interests pursuant to the terms of this
Agreement are in the Subordinated Creditor's best interest.
ACCORDINGLY, in consideration of the loans and other financial
accommodations that have been made and may hereafter be made by the Lender for
the benefit of the Borrower, and the Subsidiaries, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Subordinated Creditor hereby agrees as follows:
1. DEFINITIONS. As used herein, the following terms have the
meanings set forth below:
"Borrower Default" means a Default or Event of Default as defined in
any agreement or instrument evidencing, governing, or issued in connection
with Lender Indebtedness, including, but not limited to, the Credit and
Security Agreement dated as of __________, 1999, by and between the
Borrower, and the Lender as the same may hereafter be amended,
supplemented or restated from time to time, or any default under or breach
of any such agreement or instrument.
"Lender Indebtedness" means each and every debt, liability and
obligation of every type and description which the Borrower, or any
Subsidiary may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or to become
due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several, all interest
thereon, all renewals, extensions and modifications thereof and any notes
issued in whole or partial substitution therefor.
SKR:maw 287995.03 2/25/99 1
"Subordinated Indebtedness" means all obligations arising under the
Subordinated Note and each and every other debt, liability and obligation
of every type and description which the Borrower, or any Subsidiary may
now or at any time hereafter owe to the Subordinated Creditor, whether
such debt, liability or obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or to become
due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several.
"Subordinated Note" means the Borrower's Promissory Note, dated as
of September 1, 1998, payable to the order of the Creditor in the original
principal amount of $50,000.00, together with all renewals, extensions and
modifications thereof and any note or notes issued in substitution
therefor.
2. SUBORDINATION. The payment of all of the Subordinated
Indebtedness is hereby expressly subordinated to the extent and in the manner
hereinafter set forth to the payment in full of the Lender Indebtedness; and
regardless of any priority otherwise available to the Subordinated Creditor by
law or by agreement, the Lender shall hold a first security interest in all
collateral securing payment of the Lender Indebtedness (the "Collateral"), and
any security interest claimed therein (including any proceeds thereof) by the
Subordinated Creditor shall be and remain fully subordinate for all purposes to
the security interest of the Lender therein for all purposes whatsoever.
3. PAYMENTS. Until all of the Lender Indebtedness has been paid in
full, the Subordinated Creditor shall not, without the Lender's prior written
consent, demand, receive or accept any principal payment from the Borrower in
respect of the Subordinated Indebtedness, or exercise any right of or permit any
setoff in respect of the Subordinated Indebtedness, except that the Subordinated
Creditor may accept scheduled payments (but not prepayments) of interest
required to be paid under the Subordinated Note, so long as no Borrower Default
has occurred and is continuing or will occur as a result of or immediately
following any such payment. Without the Lender's prior written consent, the
Subordinated Creditor shall not demand, receive or accept any interest payment
from the Borrower in respect of the Subordinated Indebtedness so long as any
Borrower Default exists or if a Borrower Default will occur as a result of or
immediately following such interest payment.
4. RECEIPT OF PROHIBITED PAYMENTS. If the Subordinated Creditor
receives any payment on the Subordinated Indebtedness that the Subordinated
Creditor is not entitled to receive under the provisions of this Agreement, the
Subordinated Creditor will hold the amount so received in trust for the Lender
and will forthwith turn over such payment to the Lender in the form received
(except for the endorsement of the Subordinated Creditor where necessary) for
application to then-existing Lender Indebtedness (whether or not due), in such
manner of application as the Lender may deem appropriate. If the Subordinated
Creditor exercises any right of setoff which the Subordinated Creditor is not
permitted to exercise under the provisions of this Agreement, the Subordinated
Creditor will promptly pay over to the Lender, in immediately available funds,
an amount equal to the amount of the claims or obligations offset. If the
Subordinated Creditor fails to make any endorsement required under this
Agreement, the Lender, or any of its officers or employees or agents on behalf
of the Lender, is hereby irrevocably
SKR:maw 287995.03 2/25/99 2
appointed as the attorney-in-fact (which appointment is coupled with an
interest) for the Subordinated Creditor to make such endorsement in the
Subordinated Creditor's name.
5. ACTION ON SUBORDINATED DEBT. The Subordinated Creditor will not
commence any action or proceeding against the Borrower, or any Subsidiary to
recover all or any part of the Subordinated Indebtedness, or join with any
creditor (unless the Lender shall so join) in bringing any proceeding against
the Borrower, or any Subsidiary under any bankruptcy, reorganization,
readjustment of debt, arrangement of debt receivership, liquidation or
insolvency law or statute of the federal or any state government, or take
possession of, sell, or dispose of any Collateral, or exercise or enforce any
right or remedy available to the Subordinated Creditor with respect to any such
Collateral, unless and until the Lender Indebtedness has been paid in full.
6. ACTION CONCERNING COLLATERAL.
(a) Notwithstanding any security interest now held or hereafter
acquired by the Subordinated Creditor, the Lender may take possession of,
sell, dispose of, and otherwise deal with all or any part of the
Collateral, and may enforce any right or remedy available to it with
respect to the Collateral, all without notice to or consent of the
Subordinated Creditor except as specifically required by applicable law.
(b) In addition, and without limiting the generality of the
foregoing, if a Borrower Default has occurred and is continuing and the
Borrower, or any Subsidiary intends to sell any Collateral to an unrelated
third party outside the ordinary course of business, the Subordinated
Creditor shall, upon the Lender's request, execute and deliver to such
purchaser such instruments as may reasonably be necessary to terminate and
release any security interest or lien the Subordinated Creditor has in the
Collateral to be sold.
(c) The Lender shall have no duty to preserve, protect, care for,
insure, take possession of, collect, dispose of, or otherwise realize upon
any of the Collateral, and in no event shall the Lender be deemed the
Subordinated Creditor's agent with respect to the Collateral. All proceeds
received by the Lender with respect to any Collateral may be applied,
first, to pay or reimburse the Lender for all costs and expenses
(including reasonable attorneys' fees) incurred by the Lender in
connection with the collection of such proceeds, and, second, to any
indebtedness secured by the Lender's security interest in that Collateral
in any order that it may choose.
7. BANKRUPTCY AND INSOLVENCY. In the event of any receivership,
insolvency, bankruptcy, assignment for the benefit of creditors, reorganization
or arrangement with creditors, whether or not pursuant to bankruptcy law, the
sale of all or substantially all of the assets of the Borrower, or any
Subsidiary dissolution, liquidation or any other marshalling of the assets or
liabilities of the Borrower, or any Subsidiary the Subordinated Creditor will
file all claims, proofs of claim or other instruments of similar character
necessary to enforce the obligations of the Borrower, and the Subsidiaries in
respect of the Subordinated Indebtedness and will hold in trust for the Lender
and promptly pay over to the Lender in the form received (except for the
endorsement of the Subordinated Creditor where necessary) for application to the
then-existing Lender Indebtedness, any and all moneys, dividends or other assets
received in any such proceedings on account of the Subordinated Indebtedness,
unless and until the Lender Indebtedness has been paid in full. If the
Subordinated Creditor shall fail to take any such action,
SKR:maw 287995.03 2/25/99 3
the Lender, as attorney-in-fact for the Subordinated Creditor, may take such
action on the Subordinated Creditor's behalf. The Subordinated Creditor hereby
irrevocably appoints the Lender, or any of its officers or employees on behalf
of the Lender, as the attorney-in-fact for the Subordinated Creditor (which
appointment is coupled with an interest) with the power but not the duty to
demand, sue for, collect and receive any and all such moneys, dividends or other
assets and give acquittance therefor and to file any claim, proof of claim or
other instrument of similar character, to vote claims comprising Subordinated
Indebtedness to accept or reject any plan of partial or complete liquidation,
reorganization, arrangement, composition or extension and to take such other
action in the Lender's own name or in the name of the Subordinated Creditor as
the Lender may deem necessary or advisable for the enforcement of the agreements
contained herein; and the Subordinated Creditor will execute and deliver to the
Lender such other and further powers-of-attorney or instruments as the Lender
may request in order to accomplish the foregoing.
8. RESTRICTIVE LEGEND; TRANSFER OF SUBORDINATED INDEBTEDNESS. The
Subordinated Creditor will cause the Subordinated Note and all other notes,
bonds, debentures or other instruments evidencing the Subordinated Indebtedness
or any part thereof to contain a specific statement thereon to the effect that
the indebtedness thereby evidenced is subject to the provisions of this
Agreement, and the Subordinated Creditor will mark its books conspicuously to
evidence the subordination effected hereby. Attached hereto is a true and
correct copy of the Subordinated Note bearing such legend. At the request of the
Lender, the Subordinated Creditor shall deposit with the Lender the Subordinated
Note and all of the other notes, bonds, debentures or other instruments
evidencing the Subordinated Indebtedness, which notes, bonds, debentures or
other instruments may be held by the Lender so long as any Lender Indebtedness
remains outstanding. The Subordinated Creditor is the lawful holder of the
Subordinated Note and has not transferred any interest therein to any other
person. Without the prior written consent of the Lender, the Subordinated
Creditor will not assign, transfer or pledge to any other person any of the
Subordinated Indebtedness or agree to a discharge or forgiveness of the same so
long as there remains outstanding any of the Lender Indebtedness.
9. CONTINUING EFFECT. This Agreement shall constitute a continuing
agreement of subordination, and the Lender may, without notice to or consent by
the Subordinated Creditor, modify any term of the Lender Indebtedness in
reliance upon this Agreement. Without limiting the generality of the foregoing,
the Lender may, at any time and from time to time, either before or after
receipt of any such notice of revocation, without the consent of or notice to
the Subordinated Creditor and without incurring responsibility to the
Subordinated Creditor or impairing or releasing any of the Lender's rights or
any of the Subordinated Creditor's obligations hereunder:
(a) change the interest rate or change the amount of payment or
extend the time for payment or renew or otherwise alter the terms of any
Lender Indebtedness or any instrument evidencing the same in any manner;
(b) sell, exchange, release or otherwise deal with any property at
any time securing payment of the Lender Indebtedness or any part thereof;
SKR:maw 287995.03 2/25/99 4
(c) release anyone liable in any manner for the payment or
collection of the Lender Indebtedness or any part thereof;
(d) exercise or refrain from exercising any right against the
Borrower, the Subsidiaries or any other person (including the Subordinated
Creditor); and
(e) apply any sums received by the Lender, by whomsoever paid and
however realized, to the Lender Indebtedness in such manner as the Lender
shall deem appropriate.
10. NO COMMITMENT. None of the provisions of this Agreement shall be
deemed or construed to constitute or imply any commitment or obligation on the
part of the Lender to make any future loans or other extensions of credit or
financial accommodations to the Borrower, or any of the Subsidiaries.
11. NOTICE. All notices and other communications hereunder shall be
in writing and shall be (i) personally delivered, (ii) transmitted by registered
mail, postage prepaid, or (iii) transmitted by telecopy, in each case addressed
to the party to whom notice is being given at its address as set forth below:
If to the Lender:
Norwest Business Credit, Inc
Norwest Tower, M.S. 9025
3300 North Central Avenue
Phoenix, AZ 85012-2501
Telecopier: 602-263-6215
Attention: Darcy Della Flora
If to the Subordinated Creditor:
Mike Stuart and Debbie Stuart
9118 East Topeka Drive
Scottsdale, AZ 85255
Telecopier: 602-951-8375
or at such other address as may hereafter be designated in writing by that
party. All such notices or other communications shall be deemed to have been
given on (i) the date received if delivered personally, (ii) the date of posting
if delivered by mail, or (iii) the date of transmission if delivered by
telecopy.
12. CONFLICT IN AGREEMENTS. If the subordination provisions of any
instrument evidencing Subordinated Indebtedness conflict with the terms of this
Agreement, the terms of this Agreement shall govern the relationship between the
Lender and the Subordinated Creditor.
13. NO WAIVER. No waiver shall be deemed to be made by the Lender of
any of its rights hereunder unless the same shall be in writing signed on behalf
of the Lender, and
SKR:maw 287995.03 2/25/99 5
each such waiver, if any, shall be a waiver only with respect to the specific
matter or matters to which the waiver relates and shall in no way impair the
rights of the Lender or the obligations of the Subordinated Creditor to the
Lender in any other respect at any time.
14. BINDING EFFECT; ACCEPTANCE. This Agreement shall be binding upon
the Subordinated Creditor and the Subordinated Creditor's heirs, legal
representatives, successors and assigns and shall inure to the benefit of the
Lender and its participants, successors and assigns irrespective of whether this
or any similar agreement is executed by any other Subordinated Creditor of the
Borrower, or the Subsidiaries. Notice of acceptance by the Lender of this
Agreement or of reliance by the Lender upon this Agreement is hereby waived by
the Subordinated Creditor.
15. MISCELLANEOUS. The paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
16. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE; WAIVER OF JURY
Trial. This Agreement shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Arizona. Each party
consents to the personal jurisdiction of the state and federal courts located in
the State of Arizona in connection with any controversy related to this
Agreement, waives any argument that venue in any such forum is not convenient,
and agrees that any litigation initiated by any of them in connection with this
Agreement shall be venued in either the Superior Court of Maricopa County,
Arizona or the United States District Court, District of Arizona. THE PARTIES
WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR
PERTAINING TO THIS ACKNOWLEDGMENT.
IN WITNESS WHEREOF, the Subordinated Creditor has executed this
Agreement as of the date and year first above-written.
Witness: /S/CHRISTINE M. OLACH /S/MIKE STUART
Mike Stuart
Witness: /S/CHRISTINE M. OLACH /S/DEBBIE STUART
Debbie Stuart
SKR:maw 287995.03 2/25/99 6
ACKNOWLEDGMENT BY BORROWER
The undersigned, being the Borrower referred to in the foregoing
Agreement, hereby (i) acknowledges receipt of a copy thereof, (ii) agrees to all
of the terms and provisions thereof, (iii) agrees to and with the Lender that it
shall make no payment on the Subordinated Indebtedness that the Subordinated
Creditor would not be entitled to receive under the provisions of the Agreement,
(iv) agrees that any such payment will constitute a default under the Lender
Indebtedness, and (v) agrees to mark its books conspicuously to evidence the
subordination of the Subordinated Indebtedness effected hereby.
AUTO NETWORK GROUP, INC., an Arizona
corporation
By /S/MIKE STUART
Its President
SKR:maw 287995.03 2/25/99 7
SUBORDINATION AGREEMENT
This Agreement, dated as of MARCH 26, 1999, is made by Pinnacle
Financial Corporation, an Arizona corporation (the "Subordinated Creditor"), for
the benefit of Norwest Business Credit, Inc., a Minnesota corporation (the
"Lender").
Auto Network Group, Inc., an Arizona corporation, formerly known as
Auto Network U.S.A., Inc. (the "Borrower"), and any future subsidiaries of
Borrower are now or hereafter may be indebted to the Lender on account of loans
or other extensions of credit or financial accommodations from the Lender to the
Borrower, or any Subsidiary, or to any other person under the guaranty or
endorsement of the Borrower, or any Subsidiary.
The Subordinated Creditor has made or may make loans or grant other
financial accommodations to the Borrower.
As a condition to making any loan or extension of credit to the
Borrower, the Lender has required that the Subordinated Creditor subordinate the
payment of the Subordinated Creditor's loans and other financial accommodations
to the payment of any and all indebtedness of the Borrower, and the Subsidiaries
to the Lender. Assisting the Borrower in obtaining credit accommodations from
the Lender and subordinating its interests pursuant to the terms of this
Agreement are in the Subordinated Creditor's best interest.
ACCORDINGLY, in consideration of the loans and other financial
accommodations that have been made and may hereafter be made by the Lender for
the benefit of the Borrower, and the Subsidiaries, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Subordinated Creditor hereby agrees as follows:
1. Definitions. As used herein, the following terms have the
meanings set forth below:
"Borrower Default" means a Default or Event of Default as defined in
any agreement or instrument evidencing, governing, or issued in connection
with Lender Indebtedness, including, but not limited to, the Credit and
Security Agreement dated as of __________, 1999, by and between the
Borrower, and the Lender as the same may hereafter be amended,
supplemented or restated from time to time, or any default under or breach
of any such agreement or instrument.
"Lender Indebtedness" means each and every debt, liability and
obligation of every type and description which the Borrower, or any
Subsidiary may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or to become
due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several, all interest
thereon, all renewals, extensions and modifications thereof and any notes
issued in whole or partial substitution therefor.
SKR:maw 287997.03 2/25/99 1
"Subordinated Indebtedness" means all obligations arising under the
Subordinated Note and each and every other debt, liability and obligation
of every type and description which the Borrower, or any Subsidiary may
now or at any time hereafter owe to the Subordinated Creditor, whether
such debt, liability or obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or to become
due, absolute or contingent, primary or secondary, liquidated or
unliquidated, or joint, several or joint and several.
"Subordinated Note" means collectively the following notes, together
with all renewals, extensions and modifications thereof and any note or
notes issued in substitution therefor: (a) Promissory Note made by the
Borrower to the order of Creditor, dated as of December 15, 1997, in the
original principal amount of $200,000.00; (b) Promissory Note made by the
Borrower to the order of Creditor, dated as of September 18, 1998, in the
original principal amount of $400,000.00; (c) Promissory Note made by the
Borrower to the order of Creditor, dated as of September 11, 1998, in the
original principal amount of $117,500.00.
2. Subordination. The payment of all of the Subordinated
Indebtedness is hereby expressly subordinated to the extent and in the manner
hereinafter set forth to the payment in full of the Lender Indebtedness; and
regardless of any priority otherwise available to the Subordinated Creditor by
law or by agreement, the Lender shall hold a first security interest in all
collateral securing payment of the Lender Indebtedness (the "Collateral"), and
any security interest claimed therein (including any proceeds thereof) by the
Subordinated Creditor shall be and remain fully subordinate for all purposes to
the security interest of the Lender therein for all purposes whatsoever.
3. Payments. Until all of the Lender Indebtedness has been paid in
full, the Subordinated Creditor shall not, without the Lender's prior written
consent, demand, receive or accept any principal payment from the Borrower in
respect of the Subordinated Indebtedness, or exercise any right of or permit any
setoff in respect of the Subordinated Indebtedness, except that the Subordinated
Creditor may accept scheduled payments (but not prepayments) of interest
required to be paid under the Subordinated Note, so long as no Borrower Default
has occurred and is continuing or will occur as a result of or immediately
following any such payment. Without the Lender's prior written consent, the
Subordinated Creditor shall not demand, receive or accept any interest payment
from the Borrower in respect of the Subordinated Indebtedness so long as any
Borrower Default exists or if a Borrower Default will occur as a result of or
immediately following such interest payment.
4. Receipt of Prohibited Payments. If the Subordinated Creditor
receives any payment on the Subordinated Indebtedness that the Subordinated
Creditor is not entitled to receive under the provisions of this Agreement, the
Subordinated Creditor will hold the amount so received in trust for the Lender
and will forthwith turn over such payment to the Lender in the form received
(except for the endorsement of the Subordinated Creditor where necessary) for
application to then-existing Lender Indebtedness (whether or not due), in such
manner of application as the Lender may deem appropriate. If the Subordinated
Creditor exercises any right of setoff which the Subordinated Creditor is not
permitted to exercise under the provisions of this Agreement, the Subordinated
Creditor will promptly pay over to the Lender, in immediately
SKR:maw 287997.03 2/25/99 2
available funds, an amount equal to the amount of the claims or obligations
offset. If the Subordinated Creditor fails to make any endorsement required
under this Agreement, the Lender, or any of its officers or employees or agents
on behalf of the Lender, is hereby irrevocably appointed as the attorney-in-fact
(which appointment is coupled with an interest) for the Subordinated Creditor to
make such endorsement in the Subordinated Creditor's name.
5. Action on Subordinated Debt. The Subordinated Creditor will not
commence any action or proceeding against the Borrower, or any Subsidiary to
recover all or any part of the Subordinated Indebtedness, or join with any
creditor (unless the Lender shall so join) in bringing any proceeding against
the Borrower, or any Subsidiary under any bankruptcy, reorganization,
readjustment of debt, arrangement of debt receivership, liquidation or
insolvency law or statute of the federal or any state government, or take
possession of, sell, or dispose of any Collateral, or exercise or enforce any
right or remedy available to the Subordinated Creditor with respect to any such
Collateral, unless and until the Lender Indebtedness has been paid in full.
6. Action Concerning Collateral.
(a) Notwithstanding any security interest now held or hereafter
acquired by the Subordinated Creditor, the Lender may take possession of,
sell, dispose of, and otherwise deal with all or any part of the
Collateral, and may enforce any right or remedy available to it with
respect to the Collateral, all without notice to or consent of the
Subordinated Creditor except as specifically required by applicable law.
(b) In addition, and without limiting the generality of the
foregoing, if a Borrower Default has occurred and is continuing and the
Borrower, or any Subsidiary intends to sell any Collateral to an unrelated
third party outside the ordinary course of business, the Subordinated
Creditor shall, upon the Lender's request, execute and deliver to such
purchaser such instruments as may reasonably be necessary to terminate and
release any security interest or lien the Subordinated Creditor has in the
Collateral to be sold.
(c) The Lender shall have no duty to preserve, protect, care for,
insure, take possession of, collect, dispose of, or otherwise realize upon
any of the Collateral, and in no event shall the Lender be deemed the
Subordinated Creditor's agent with respect to the Collateral. All proceeds
received by the Lender with respect to any Collateral may be applied,
first, to pay or reimburse the Lender for all costs and expenses
(including reasonable attorneys' fees) incurred by the Lender in
connection with the collection of such proceeds, and, second, to any
indebtedness secured by the Lender's security interest in that Collateral
in any order that it may choose.
7. Bankruptcy and Insolvency. In the event of any receivership,
insolvency, bankruptcy, assignment for the benefit of creditors, reorganization
or arrangement with creditors, whether or not pursuant to bankruptcy law, the
sale of all or substantially all of the assets of the Borrower, or any
Subsidiary dissolution, liquidation or any other marshalling of the assets or
liabilities of the Borrower, or any Subsidiary the Subordinated Creditor will
file all claims, proofs of claim or other instruments of similar character
necessary to enforce the obligations of the Borrower, and the Subsidiaries in
respect of the Subordinated Indebtedness and will hold in trust for the Lender
and promptly pay over to the Lender in the form received (except for the
endorsement of the Subordinated Creditor where necessary) for application to the
then-existing
SKR:maw 287997.03 2/25/99 3
Lender Indebtedness, any and all moneys, dividends or other assets received in
any such proceedings on account of the Subordinated Indebtedness, unless and
until the Lender Indebtedness has been paid in full. If the Subordinated
Creditor shall fail to take any such action, the Lender, as attorney-in-fact for
the Subordinated Creditor, may take such action on the Subordinated Creditor's
behalf. The Subordinated Creditor hereby irrevocably appoints the Lender, or any
of its officers or employees on behalf of the Lender, as the attorney-in-fact
for the Subordinated Creditor (which appointment is coupled with an interest)
with the power but not the duty to demand, sue for, collect and receive any and
all such moneys, dividends or other assets and give acquittance therefor and to
file any claim, proof of claim or other instrument of similar character, to vote
claims comprising Subordinated Indebtedness to accept or reject any plan of
partial or complete liquidation, reorganization, arrangement, composition or
extension and to take such other action in the Lender's own name or in the name
of the Subordinated Creditor as the Lender may deem necessary or advisable for
the enforcement of the agreements contained herein; and the Subordinated
Creditor will execute and deliver to the Lender such other and further
powers-of-attorney or instruments as the Lender may request in order to
accomplish the foregoing.
8. Restrictive Legend; Transfer of Subordinated Indebtedness. The
Subordinated Creditor will cause the Subordinated Note and all other notes,
bonds, debentures or other instruments evidencing the Subordinated Indebtedness
or any part thereof to contain a specific statement thereon to the effect that
the indebtedness thereby evidenced is subject to the provisions of this
Agreement, and the Subordinated Creditor will mark its books conspicuously to
evidence the subordination effected hereby. Attached hereto is a true and
correct copy of the Subordinated Note bearing such legend. At the request of the
Lender, the Subordinated Creditor shall deposit with the Lender the Subordinated
Note and all of the other notes, bonds, debentures or other instruments
evidencing the Subordinated Indebtedness, which notes, bonds, debentures or
other instruments may be held by the Lender so long as any Lender Indebtedness
remains outstanding. The Subordinated Creditor is the lawful holder of the
Subordinated Note and has not transferred any interest therein to any other
person. Without the prior written consent of the Lender, the Subordinated
Creditor will not assign, transfer or pledge to any other person any of the
Subordinated Indebtedness or agree to a discharge or forgiveness of the same so
long as there remains outstanding any of the Lender Indebtedness.
9. Continuing Effect. This Agreement shall constitute a continuing
agreement of subordination, and the Lender may, without notice to or consent by
the Subordinated Creditor, modify any term of the Lender Indebtedness in
reliance upon this Agreement. Without limiting the generality of the foregoing,
the Lender may, at any time and from time to time, either before or after
receipt of any such notice of revocation, without the consent of or notice to
the Subordinated Creditor and without incurring responsibility to the
Subordinated Creditor or impairing or releasing any of the Lender's rights or
any of the Subordinated Creditor's obligations hereunder:
(a) change the interest rate or change the amount of payment or
extend the time for payment or renew or otherwise alter the terms of any
Lender Indebtedness or any instrument evidencing the same in any manner;
SKR:maw 287997.03 2/25/99 4
(b) sell, exchange, release or otherwise deal with any property at
any time securing payment of the Lender Indebtedness or any part thereof;
(c) release anyone liable in any manner for the payment or
collection of the Lender Indebtedness or any part thereof;
(d) exercise or refrain from exercising any right against the
Borrower, the Subsidiaries or any other person (including the Subordinated
Creditor); and
(e) apply any sums received by the Lender, by whomsoever paid and
however realized, to the Lender Indebtedness in such manner as the Lender
shall deem appropriate.
10. No Commitment. None of the provisions of this Agreement shall be
deemed or construed to constitute or imply any commitment or obligation on the
part of the Lender to make any future loans or other extensions of credit or
financial accommodations to the Borrower, or any of the Subsidiaries.
11. Notice. All notices and other communications hereunder shall be
in writing and shall be (i) personally delivered, (ii) transmitted by registered
mail, postage prepaid, or (iii) transmitted by telecopy, in each case addressed
to the party to whom notice is being given at its address as set forth below:
If to the Lender:
Norwest Business Credit, Inc
Norwest Tower, M.S. 9025
3300 North Central Avenue
Phoenix, AZ 85012-2501
Telecopier: 602-263-6215
Attention: Darcy Della Flora
If to the Subordinated Creditor:
Pinnacle Financial Corporation
8135 East Butherus, Suite 3
Scottsdale, AZ 85260
Telecopier: 602-951-8375
Attention: Mike Stuart
or at such other address as may hereafter be designated in writing by that
party. All such notices or other communications shall be deemed to have been
given on (i) the date received if delivered personally, (ii) the date of posting
if delivered by mail, or (iii) the date of transmission if delivered by
telecopy.
SKR:maw 287997.03 2/25/99 5
12. Conflict in Agreements. If the subordination provisions of any
instrument evidencing Subordinated Indebtedness conflict with the terms of this
Agreement, the terms of this Agreement shall govern the relationship between the
Lender and the Subordinated Creditor.
13. No Waiver. No waiver shall be deemed to be made by the Lender of
any of its rights hereunder unless the same shall be in writing signed on behalf
of the Lender, and each such waiver, if any, shall be a waiver only with respect
to the specific matter or matters to which the waiver relates and shall in no
way impair the rights of the Lender or the obligations of the Subordinated
Creditor to the Lender in any other respect at any time.
14. Binding Effect; Acceptance. This Agreement shall be binding upon
the Subordinated Creditor and the Subordinated Creditor's heirs, legal
representatives, successors and assigns and shall inure to the benefit of the
Lender and its participants, successors and assigns irrespective of whether this
or any similar agreement is executed by any other Subordinated Creditor of the
Borrower, or the Subsidiaries. Notice of acceptance by the Lender of this
Agreement or of reliance by the Lender upon this Agreement is hereby waived by
the Subordinated Creditor.
15. Miscellaneous. The paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
16. Governing Law; Consent to Jurisdiction and Venue; Waiver of Jury
Trial. This Agreement shall be governed by and construed in accordance with the
substantive laws (other than conflict laws) of the State of Arizona. Each party
consents to the personal jurisdiction of the state and federal courts located in
the State of Arizona in connection with any controversy related to this
Agreement, waives any argument that venue in any such forum is not convenient,
and agrees that any litigation initiated by any of them in connection with this
Agreement shall be venued in either the Superior Court of Maricopa County,
Arizona or the United States District Court, District of Arizona. THE PARTIES
WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR
PERTAINING TO THIS ACKNOWLEDGMENT.
IN WITNESS WHEREOF, the Subordinated Creditor has executed this
Agreement as of the date and year first above-written.
PINNACLE FINANCIAL CORPORATION, an
Arizona corporation
Witness: /S/MARY PISCHNER
By /S/MARK MOLDENHAUER
Its SECRETARY
SKR:maw 287997.03 2/25/99 6
Acknowledgment by Borrower
The undersigned, being the Borrower referred to in the foregoing
Agreement, hereby (i) acknowledges receipt of a copy thereof, (ii) agrees to all
of the terms and provisions thereof, (iii) agrees to and with the Lender that it
shall make no payment on the Subordinated Indebtedness that the Subordinated
Creditor would not be entitled to receive under the provisions of the Agreement,
(iv) agrees that any such payment will constitute a default under the Lender
Indebtedness, and (v) agrees to mark its books conspicuously to evidence the
subordination of the Subordinated Indebtedness effected hereby.
AUTO NETWORK GROUP, INC., an Arizona
corporation
By /S/MIKE STUART
Its President
SKR:maw 287997.03 2/25/99 7
OFFICER'S CERTIFICATE
TO: Norwest Business Credit, Inc.
Norwest Tower, M.S. 9025
3300 North Central Avenue
Phoenix, Arizona 85012-2501
To induce you to make one or more loans from time to time to Auto
Network Group, Inc., an Arizona corporation, (the "Borrower"), in accordance
with the Credit and Security Agreement dated MARCH 26, 1999, between it and you
(the "Credit and Security Agreement") and all other Loan Documents (as defined
in the Credit and Security Agreement), I hereby represent and warrant to you, in
my individual capacity, that each and every representation and warranty set
forth in Article V of the Credit and Security Agreement is true and correct as
of the date hereof.
Dated: MARCH 26, 1999
Very truly yours,
/S/MIKE STUART
TEH:sic 288185.02 2/23/99