EXHIBIT 10.43
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is made as of this 3rd day of June, 1999
by and between KARTS INTERNATIONAL INCORPORATED, a Nevada corporation
("Borrower") and THE SCHLINGER FOUNDATION ("Schlinger"). In connection with the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. Definitions. All terms and phrases used herein which are defined in the
Uniform Commercial Code in the State of Texas, as amended from time to
time (the "UCC"), shall have the meanings given them in the UCC unless
otherwise defined herein. The following definitions shall apply
throughout this Agreement:
"Affiliate" means with respect to any Person in question, any other
Person owned or controlled by, or which owns or controls or is under
common control or is otherwise affiliated with such Person in question.
A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such other Person, whether
through the ownership of voting securities, by contract or otherwise.
"BTK" means Brister's Thunder Karts, Inc., a Louisiana corporation.
"Business Day" means any day other than Saturday, Sunday or any other
day on which financial institutions doing business in Dallas, Texas are
closed.
"Collateral" has the meaning given it in Section 4.
"Common Stock" shall mean the common stock, $.001 par value, of the
Borrower.
"Environmental Laws" means any and all federal, state and local laws,
regulations, rules, orders, licenses, agreements or other governmental
restrictions relating to the protection of human health or the
environment or to emissions, discharges or releases of pollutants or
industrial, toxic or hazardous substances into the environment, or
otherwise relating to the manufacture, processing, treatment, transport
or handling of pollutants or industrial, toxic or hazardous substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations
promulgated with respect thereto.
"ERISA Affiliate" means with respect to any Person in question, any
Person that would be treated as a single, employer with Borrower.
"ERISA Plan" means any pension benefit plan subject to Title IV of
ERISA maintained by Borrower or any ERISA Affiliate thereof with
respect to which Borrower or any ERISA Affiliate has a fixed or
contingent liability.
"Event of Default" has the meaning given it in Section 12.
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"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting
Standards Board (or any generally recognized successor), consistently
applied throughout the period involved.
"Guarantors" means USA, BTK, KINT and Straight Line (whether one or
more).
"Indemnified Claims" means any and all claims, demands, actions, causes
of action, judgments, suits, liabilities, obligations, losses, damages
and consequential damages, penalties, fines, costs, fees, expenses and
disbursements (including without limitation, fees and expenses of
attorneys and other professional consultants and experts in connection
with any investigation or defense) of every kind or nature, known or
unknown, existing or hereafter arising, foreseeable or unforeseeable,
which may be imposed upon, threatened or asserted against or incurred
or paid by any Indemnified Person at any time and from time to time,
because of or resulting from, in connection with or in any way relating
to or arising out of the Loan, the Collateral or any other transaction,
act, omission, event or circumstance in any way connected with or
contemplated by this Agreement or the other Loan Documents or any
action taken or omitted by any such Indemnified Person under or in
connection with any of the foregoing (including but not limited to any
investigation, litigation, proceeding, enforcement of Schlinger's
rights or defense of Schlinger's actions related to or arising out of
this Agreement or the other Loan Documents), whether or not any
Indemnified Person is a party hereto.
"Indemnified Person" shall collectively mean Schlinger and its
officers, directors, shareholders, employees, attorneys,
representatives, agents, Affiliates, successors and assigns.
"KBK" means KBK Financial, Inc., a Delaware corporation.
"KBK Debt" means the indebtedness, liabilities and obligations of
Borrower and the other Obligors to KBK pursuant to the KBK Loan
Agreement and the other KBK Loan Documents.
"KBK Loan Agreement" means that certain Loan Agreement dated as of
September 28, 1998 between KBK and Borrower as the same may have been
amended, modified, supplemented, renewed, extended or restated from
time to time.
"KBK Loan Documents" means the Loan Documents as defined in the KBK
Loan Agreement that were heretofore or are hereafter entered into in
connection the KBK Loan Agreement.
"KINT" means KINT, L.L.C., a Louisiana limited liability company.
"Lien" means any mortgage, lien, pledge, assignment, adverse claim,
charge, security interest or other encumbrance.
"Loan" has the meaning given it in Section 2.
"Loan Documents" means this Agreement, the Note and all other
documents, agreements and instruments now or hereafter required by
Schlinger to be executed and delivered in connection herewith
(including, without limitation, all documents, agreements and
instruments evidencing, securing, governing, guaranteeing and/or
pertaining to the Note and the Loan).
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"Maximum Rate" means, with respect to Schlinger, the maximum
non-usurious interest rate, if any, that any time or from time to time
may be contracted for, taken, reserved, charged or received with
respect to the Loan or other amount as to which such rate is to be
determined, payable to Schlinger pursuant to this Agreement or any
other Loan Document, under laws applicable to Schlinger which are
presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a
higher maximum non-usurious interest rate than applicable laws now
allow. The Maximum Rate shall be calculated in a manner that takes into
account any and all fees, payments and other charges in respect of the
Loan Documents that constitute interest under applicable law. Each
change in any interest rate provided for herein based upon the Maximum
Rate resulting from a change in the Maximum Rate shall take effect
without notice to the Borrower at the time of such change in the
Maximum Rate. For purposes of determining the Maximum Rate under Texas
law, the applicable rate ceiling shall be the weekly rate ceiling
described in, and computed in accordance with the Texas Finance Code or
any successor or replacement statute; provided, however, that, to the
extent permitted by applicable law, Schlinger shall have the right to
change the applicable rate ceiling from time to time in accordance with
applicable law.
"Net Profit" means net income after taxes (including extraordinary
losses and excluding extraordinary gains) as of the end of time period
being measured.
"Note" has the meaning given it in Section 3.
"Obligors" means Borrower and Guarantors.
"Person" means a corporation, association, partnership, limited
liability company, organization, business, individual, governmental or
political subdivision thereof or governmental agency.
"Subordinated Debt" means indebtedness owing by Borrower to a creditor
other than Schlinger or KBK which has been subordinated and subject in
right of payment to the prior payment of all indebtedness and
obligations now or hereafter owing by Borrower to Schlinger, such
subordination to be evidenced by a written agreement between Schlinger
and the subordinated creditor which is in form and substance
satisfactory to Schlinger.
"Straight Line" means Straight Line Manufacturing, Inc., a Michigan
corporation.
"Tangible Net Worth" means, as of any date, the amount by which
Borrower's total assets exceeds its total liabilities plus Subordinated
Debt, less any intangible assets (as defined by GAAP), less deferred
charges.
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) of
ERISA or (ii) any other reportable event described in Section 4043 of
ERISA other than a reportable event not subject to the provision for
30-day notice to the Pension Benefit Guaranty Corporation pursuant to a
waiver by such corporation under Section 4043(a) of ERISA, (b) the
withdrawal of Borrower or any Affiliate of Borrower from any ERISA Plan
during a plan year in which it was a "substantial employer" as defined
in Section 4001(a)(2) of ERISA, or (c) any event or condition which
might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any
ERISA Plan. "USA" means USA Industries Incorporated, an Alabama
corporation.
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2. Loan.
(a) Loan and Repayment. Subject to the terms of this Agreement, on the
date of this Agreement or at such time that all applicable conditions
have been satisfied, whichever is later, Schlinger will make a loan to
the Borrower (the "Loan"), to the extent requested by the Borrower as
of such date, in the original principal amount of One Million Five
Hundred Thousand and No/100 Dollars ($1,500,000). Principal of the Loan
shall be due and payable in one installment of all unpaid principal and
accrued unpaid interest on May 31, 2004.
(b) Prepayment. On or after the second anniversary of the date hereof,
Borrower may prepay the Loan in full or in part at any time prior to
May 31, 2004, provided, that the Borrower shall (i) give Schlinger
thirty (30) days' written notice of the Borrower's intention to do so
and (ii) pay to Schlinger, as liquidated damages and not as a penalty,
an amount equal to the twelve percent (12%) multiplied by the principal
amount of the Loan being prepaid at such time.
3. Promissory Note.
(a) Note. Borrower agrees to execute, contemporaneously herewith,
a promissory note payable to the order of Schlinger, in form
and substance acceptable to Schlinger in Schlinger's sole and
absolute discretion, for the Loan provided hereunder to
evidence the indebtedness owing by Borrower to Schlinger under
the Loan (whether one or more, together with any renewals,
extensions and increases thereof, the "Note").
(b) Rate and Payments. The principal of and interest on the Note
shall be due and payable and may be prepaid in accordance with
the terms and conditions set forth in the Note and in this
Agreement. Interest on the Note shall accrue at the rate set
forth therein.
(c) Conversion. The Note and the outstanding amount of the Loan
shall be convertible into common stock of the Borrower and
shall have certain registration rights in favor of the holder
thereof, in accordance with the terms and conditions set forth
therein.
4. Collateral. As security for the indebtedness evidenced by the Note and
any and all other indebtedness or obligations owing from time to time
by Borrower to Schlinger under this Agreement, Schlinger shall receive
a Lien in and to the collateral described in the other Loan Documents
(the "Collateral").
5. Guarantors. As a condition precedent to Schlinger's obligation to
provide the Loan to Borrower, Borrower agrees to cause the Guarantors
to each execute and deliver to Schlinger contemporaneously herewith a
guaranty agreement, in form and substance acceptable to Schlinger in
Schlinger's sole and absolute discretion.
6. Representations and Warranties. Borrower hereby represents and warrants
to Schlinger as follows:
(a) Existence. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the state of
its incorporation and is duly licensed, qualified to do
business and is in good standing in all other states in which
such licensing, qualification and good standing are necessary.
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Borrower has all requisite power and authority (i) to own and
operate its properties, (ii) to carry on its business as now
conducted and as proposed to be conducted, and (iii) to
execute and deliver this Agreement and the other Loan
Documents to which Borrower is a party.
(b) Binding Obligations. The execution, delivery, and performance
of this Agreement and all of the other Loan Documents by
Borrower have been duly authorized by all necessary action by
Borrower, have been duly executed and delivered by Borrower
and constitute legal, valid and binding obligations of
Borrower, enforceable in accordance with their respective
terms, except as limited by bankruptcy, insolvency or similar
laws of general application relating to the enforcement of
creditors' rights and except to the extent specific remedies
may generally be limited by equitable principles.
(c) No Consent. The execution, delivery and performance of this
Agreement and the other Loan Documents, and the consummation
of the transactions contemplated hereby and thereby, do not
(i) conflict with, result in a violation of, or constitute a
default under (A) any provision of Borrower's articles or
certificate of incorporation or bylaws, (B) any law,
governmental regulation, court decree or order applicable to
Borrower, or (C) any other document or agreement to which
Borrower is a party, or (ii) require the consent, approval or
authorization of any third party other than KBK.
(d) Financial Condition. Each financial statement of Borrower
supplied to Schlinger is true, correct and complete in all
material respects and fairly presents Borrower's financial
condition in all material respects as of the date of each such
statement. There has been no material adverse change in such
financial condition or results of operations of Borrower
subsequent to the date of the most recent financial statement
supplied to Schlinger.
(e) Litigation. There are no actions, suits or proceedings,
pending or, to the knowledge of Borrower, threatened against
or affecting Borrower or the properties of Borrower, before
any court or governmental department, commission or board,
which, if determined adversely to Borrower, would have a
material adverse effect on the business, financial condition,
properties, operations or prospects of Borrower.
(f) Taxes. Governmental Charges. Borrower has filed all federal,
state and local tax reports and returns required by any law or
regulation to be filed by it and has either duly paid all
taxes, duties and charges indicated due on the basis of such
returns and reports, or made adequate provision for the
payment thereof, and the assessment of any material amount of
additional taxes in excess of those paid and reported is not
reasonably expected. There is no tax Lien notice against
Borrower or its properties presently on file.
(g) ERISA Compliance. Borrower is in compliance with ERISA
concerning Borrower's ERISA Plan, if any, or is not required
to contribute to any "multi-employer plan" as defined in
Section 401 of ERISA.
(h) Compliance with Laws. Borrower is conducting its business in
material compliance with all statutes, rules, regulations
and/or ordinances imposed by any governmental unit upon
Borrower or upon its businesses, operations and property
(including, without limitation, all Environmental Laws).
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Borrower has all permits and licenses necessary for the
operations of its business as presently conducted and as
proposed to be conducted.
(i) Tradenames. Borrower and Guarantors conduct business under no
trade or assumed name except KINT conducts business under the
tradename Bird Promotions.
7. Conditions Precedent to Loan. Schlinger's obligation to make the Loan
under this Agreement and the other Loan Documents shall be subject to
the conditions precedent that, as of the date of such Loan and after
giving effect thereto (i) all representations and warranties made to
Schlinger in this Agreement and the other Loan Documents shall be true
and correct, as of and as if made on such date, (ii) no material
adverse change in the financial condition of Borrower or its business
since the effective date of the most recent financial statements
furnished to Schlinger by Borrower shall have occurred, (iii) no Event
of Default shall have occurred and no event has occurred and is
continuing, or would result from the requested Loan, which with notice
or lapse of time, or both, would constitute an Event of Default (as
hereinafter defined), (iv) Schlinger shall have received all Loan
Documents appropriately executed by Borrower and all other proper
parties and all such Loan Documents are in full force and effect,
(v) the KBK Loan Agreement shall have been amended to modify the
financial covenants contained therein, in form and substance
satisfactory to Schlinger, and (vi) Schlinger shall have received all
fees and expenses owing to Schlinger under this Agreement and the
other Loan Documents.
8. Affirmative Covenants. Until the Note and all other obligations and
liabilities of Borrower under this Agreement and the other Loan
Documents are fully paid and satisfied, and Borrower agrees and
covenants that it will, unless Schlinger shall otherwise consent in
writing (which consent may be withheld by Schlinger in Schlinger's sole
and absolute discretion):
(a) Accounts and Records. Maintain its books and records in
accordance with GAAP.
(b) Right of Inspection. Permit Schlinger to visit its properties
and installations and to examine, audit and make and take away
copies or reproductions of Borrower's books and records, at
all reasonable times. Borrower agrees to pay all costs
associated with any such audits, at a rate equal to $500.00
per day, per person, plus out-of-pocket expenses; provided,
however, as long as no Event of Default has occurred,
Borrower's obligation for Schlinger's audits shall not exceed
$15,000.00 per calendar year.
(c) Right to Additional Information. Furnish Schlinger with such
additional information and statements, lists of assets and
liabilities, tax returns, and other reports with respect to
Borrower's financial condition and business operations as
Schlinger may request from time to time.
(d) Compliance with Laws. Conduct its business in an orderly and
efficient manner consistent with good business practices, and
perform and comply with all statutes, rules, regulations
and/or ordinances imposed by any governmental unit upon
Borrower, its businesses, operations and properties (including
without limitation, all Environmental Laws).
(e) Taxes. Pay and discharge when due all assessments, taxes,
governmental charges and levies, of every kind and nature,
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imposed upon Borrower or its properties, income or profits,
prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a Lien upon any
of Borrower's property, income or profits; provided,
however, Borrower will not be required to pay and discharge
any such assessment, tax, charge, levy or claim so long as
(i) same shall be contested in good faith by appropriate
judicial, administrative or other legal proceedings timely
instituted, (ii) Borrower shall have established adequate
reserves with respect to such contested assessment, tax,
charge, levy or claim in accordance with GAAP, and (iii) the
perfection and priority of Schlinger's security interest in
the Collateral, or the value of the Collateral, is not
impaired.
(f) Insurance. Maintain, with financially sound and reputable
insurers, such insurance as deemed necessary or otherwise
reasonably required by Schlinger, including but not limited
to, fire insurance, comprehensive property damage, public
liability, worker's compensation and business interruption
insurance.
(g) Notice of Material Change/Litigation. Borrower shall promptly
notify Schlinger in writing (i) of any material adverse change
in Borrower's financial condition or its businesses, and (ii)
of any litigation or claims against Borrower which could
materially affect Borrower or its business operations,
financial condition or prospects.
(h) Corporate Existence. Maintain its corporate existence and good
standing in the state of its incorporation and its
qualification and good standing in all other states where
required by applicable law.
(i) ERISA. Borrower shall promptly notify Schlinger in writing of
the adoption or amendment of any plan that results in the
representations in Subsection 7(g) no longer being true and
correct.
(j) Additional Documentation. Execute and deliver, or cause to be
executed and delivered, any and all other agreements,
instruments or documents which Schlinger may reasonably
request in order to give effect to the transactions
contemplated under this Agreement and the other Loan
Documents.
(k) Authorization and Reservation of Sufficient Common Stock.
(i) The Borrower shall, within one hundred twenty (120) after
the date hereof:
(A) take such corporate action as may be
necessary to amend its articles of
incorporation to increase the number of
authorized but unissued shares of common
stock of the Borrower as shall be sufficient
to effect the conversion of the Note into
Common Stock of the Borrower pursuant to the
terms thereof; and
(B) reserve and keep available such shares of
Common Stock out if its authorized but
unissued shares of Common Stock, solely for
the purpose of effecting the conversion of
the Note into Common Stock of the Borrower,
such number of its shares of Common Stock as
shall be sufficient to effect the conversion
of the entire outstanding principal amount
of the Note in accordance the with
provisions thereof.
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The failure of the Borrower to amend its
Articles of Incorporation and to reserve
such number of shares of Common Stock as
required by this Section 8 (k)(i) shall
constitute an Event of Default under this
Agreement.
(ii) From and after the effective date of the amendment to the
articles required in Section 8(k)(i) above, the Borrower
shall at all times reserve and keep available, out of its
authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of the Note,
such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of
the Note pursuant to the terms thereof; and if at any
time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the
conversion of the entire outstanding principal amount
of the Note, in addition to such other remedies as shall
be available to the holder of the Note, the Borrower
will use its best efforts to take such corporate action
as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient
for such purposes.
(l) On or before thirty (30) days from the date hereof (i) Charles
Brister shall have entered into an employment agreement with
Borrower that is for a term of at least three (3) years and
is otherwise in form and substance satisfactory to Schlinger
and (ii) in connection with such employment agreement Borrower
shall execute an agreement to and in favor of Schlinger
whereby Borrower agrees to provide adequate anti-dilution
protection that Schlinger deems necessary for the shares of
Common Stock that may be issued to Schlinger pursuant to the
conversion of the Note as a result of any Common Stock that
may be issued to Charles Brister in connection with such
employment agreement.
9. Negative Covenants. Until the Note and all other obligations and
liabilities of Borrower under this Agreement and the other Loan
Documents are fully paid and satisfied, Borrower will not and will
cause Guarantors to not, without the prior written consent of Schlinger
(which consent, withhold in Schlinger's sole and absolute discretion):
(a) Nature of Business. Make any material change in the nature of
its business as carried on as of the date hereof.
(b) Liquidations, Mergers, Consolidations; Acquisitions; Name
Change. Liquidate, merge or consolidate with or into any other
Person, convert from one type of legal entity to another type
of legal entity, form or acquire any new subsidiary or acquire
by purchase or otherwise all or substantially all of the
assets of any other Person, or change its name or operate
under any new trade or assumed names.
(c) Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange
of property or the rendering of any service, with any
Affiliate of any Obligor, except in the ordinary course of and
pursuant to the reasonable requirements of an Obligor's
business, upon fair and reasonable terms no less favorable to
Obligor than would be obtained in a comparable arm's-length
transaction with a person or entity not an Affiliate of any
Obligor and in accordance with the terms and provisions of the
Loan Documents.
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(d) Sale of Assets. Sell, lease, transfer or otherwise dispose of
all or substantially all of its assets or properties, other
than inventory sold in the ordinary course of business and as
necessary to replace obsolete equipment.
(e) Liens. Create or incur any Lien on any of its assets, other
than (i) Liens securing indebtedness owing to Schlinger,
(ii) Liens securing the KBK Debt, (iii) pledges or deposits
to secure the payment of obligations under any worker's
compensation laws or similar laws, (iv) deposits to secure
the payment of public or statutory obligations, (v)
mechanic's, carriers', workman's, repairman's or other Liens
arising by operation of law in the ordinary course of
business which secure obligations that are not overdue or
are being contested in good faith and for which such entity
has established adequate reserves in accordance with
generally accepted accounting principles, (and for which
Schlinger's security interest in the Collateral is not
impaired) and (vi) Liens existing as of the date hereof
which have been disclosed to and approved by Schlinger in
writing.
(f) Change in Management. Permit a change in the senior management
of Borrower.
(g) Loans. Make any loans to any person or entity.
10. Financial Covenants. Until the Note and all other obligations and
liabilities of Borrower under this Agreement and the other Loan
Documents are fully paid and satisfied, Obligors, on a consolidated
basis, will maintain the following financial covenants:
(a) Current Ratio. At the end of each fiscal month, a ratio of (i)
current assets (excluding prepaid expenses), to (ii) current
liabilities of not less than 1.5 to 1.0.
(b) Debt/Tangible Net Worth Ratio. At the end of each fiscal
month, a ratio of total liabilities to Tangible Net Worth of
less than 2.5 to 1.0.
(c) Tangible Net Worth. At the end of each fiscal month, its
Tangible Net Worth of not less than $2,500,000.00.
Unless otherwise specified, all accounting and financial terms and
covenants set forth above are to be determined according to GAAP.
11. Reporting Requirements. Until the Note and all other obligations and
liabilities of Borrower under this Agreement and the other Loan
Documents are fully paid and satisfied, Borrower will and will cause
the Guarantors to, unless Schlinger shall otherwise consent in writing,
furnish to Schlinger:
(a) Financial Statements. The following financial statements: (i)
within 120 days after the last day of each fiscal year of
Borrower a consolidated statement of income and a
consolidated statement of cash flows of Obligors for such
fiscal year, and a consolidated balance sheet of Obligors as
of the last day of such fiscal year in each case audited by
an independent certified public accounting firm acceptable
to Schlinger, together with a copy of any report to
management delivered to Borrower by such accountants in
connection therewith; and (ii) within 30 days after the last
day of each fiscal month of Borrower, an unaudited
consolidated statement of income and statement of cash flows
of Obligors for such fiscal month, and an unaudited
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consolidated balance sheet of Obligors as of the last day of
such fiscal month. Borrower represents and warrants that
each such statement of income and statement of cash flows
will fairly represent, in all material respects, the results
of operations and cash flows of Borrower for the period set
forth therein, and that each such balance sheet will fairly
represent, in all material respects, the financial condition
of Borrower as of the date set forth therein, all in
accordance with GAAP, (or, with respect to unaudited
financial statements, in the notes thereto and subject to
year-end review adjustments).
(b) Inventory Listing. A list of inventory for USA and BTK by
location and type (to include the following: raw materials,
work in process and finished goods) within ten (10) Business
Days after the end of each month, in form and detail
satisfactory to Schlinger.
12. Events of Default. Each of the following shall constitute an "Event of
Default" under this Agreement and the other Loan Documents:
(a) Failure to Pay Indebtedness. Borrower shall fail to pay as and
when due any part of the principal of, or interest on, the
Note or any other indebtedness or obligations now or hereafter
owing to Schlinger by Borrower.
(b) Event of Default Under KBK Loan Documents. A default or event
of default shall occur under the KBK Loan Agreement or any of
the other KBK Loan Documents.
(c) Non-Performance of Covenants. Any of the Obligors shall breach
any covenant or agreement made herein in any of the other Loan
Documents or in any other agreement now or hereafter entered
into between any of the Obligors and Schlinger.
(d) False Representation. Any warranty or representation made
herein, or in any of the other Loan Documents shall be false
or misleading in any material respect when made.
(e) Default Under Other Loan Documents. The occurrence of an event
of default under any of the other Loan Documents or any other
agreement now or hereafter entered into between any of the
Obligors and Schlinger.
(f) Untrue Financial Report. Any report, certificate, schedule,
financial statement, profit and loss statement or other
statement furnished by any Obligor, or by any other person on
behalf of any Obligor, to Schlinger is not true and correct in
any material respect.
(g) Default to Third Party. The occurrence of any event which
permits the acceleration of the maturity of any indebtedness
owing by any of the Obligors to any third party, including,
without limitation, KBK, under any agreement or undertaking.
(h) Bankruptcy. The filing of a voluntary or involuntary case by
or against any of the Obligors under the United States
Bankruptcy Code or other present or future federal or state
insolvency, bankruptcy or similar laws, or the appointment of
a receiver, trustee, conservator or custodian for a
substantial portion of the assets of any of the Obligors.
(i) Insolvency. Any of the Obligors shall become insolvent, make a
transfer in fraud of creditors or make an assignment for the
benefit of creditors.
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(j) Involuntary Lien. The filing or commencement of any
involuntary Lien, garnishment, attachment or the like shall be
issued against or with respect to the Collateral.
(k) Material Adverse Change. A material adverse change shall have
occurred in the financial condition, business prospects or
operations of any of the Obligors.
(l) Tax Lien. Any of the Obligors shall have a federal or state
tax Lien filed against any of its properties.
(m) Execution on Collateral. The Collateral or any portion thereof
is taken on execution or other process of law.
(n) ERISA Plan. Either (i) any "accumulated funding deficiency"
(as defined in Section 412(a) of the Internal Revenue Code of
1986, as amended) in excess of $25,000 exists with respect to
any ERISA Plan of Borrower or its ERISA Affiliate, or (ii) any
Termination Event occurs with respect to any ERISA Plan of
Borrower or its ERISA Affiliate and the then current value of
such ERISA Plan's benefit liabilities exceeds the then current
value of such ERISA Plan's assets available for the payment of
such benefit liabilities by more than $25,000.
(o) Guarantor's Obligations. If any of the obligations of any
Guarantor is limited or terminated by operation of law or by
such Guarantor, or any such Guarantor becomes the subject of
an insolvency proceeding.
(p) Judgment. The entry against any of the Obligors of a final and
nonappealable judgment for the payment of money in excess of
$25,000 (not covered by insurance satisfactory to Schlinger in
Schlinger's sole discretion).
Nothing contained in this Loan Agreement shall be construed to limit
the events of default enumerated in any of the other Loan Documents and
all such events of default shall be cumulative.
13. Remedies. Upon the occurrence of any one or more of the foregoing
Events of Default, the entire unpaid balance of principal of the Note,
together with all accrued but unpaid interest thereon, and all other
indebtedness owing to Schlinger by Borrower at such time shall, at the
option of Schlinger, become immediately due and payable without
further notice, demand, presentation, notice of dishonor, notice of
intent to accelerate, notice of acceleration, protest or notice of
protest of any kind, all of which are expressly waived by Borrower;
provided, however, concurrently and automatically with the occurrence
of an Event of Default under Subsections (h) or (i) in the Section
entitled "Event of Default" the Note and all other indebtedness owing
to Schlinger by Borrower at such time shall, without any action by
Schlinger, become immediately due and payable, without further notice,
demand, presentation, notice of dishonor, notice of acceleration,
notice of intent to accelerate, protest or notice of protest of any
kind, all of which are expressly waived by Borrower. All rights and
remedies of Schlinger set forth in this Agreement and in any of the
other Loan Documents are cumulative and may also be exercised by
Schlinger, at its option and in its sole discretion, upon the
occurrence of an Event of Default.
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14. Indemnification. Borrower hereby indemnifies and agrees to hold
harmless and defend all Indemnified Persons from and against any and
all Indemnified Claims. THE FOREGOING INDEMNIFICATION SHALL APPLY
WHETHER OR NOT SUCH INDEMNIFIED CLAIMS ARE IN ANY WAY OR TO ANY EXTENT
OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT
LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY INDEMNIFIED PERSON, but shall exclude any of the
foregoing resulting from such Indemnified Person's gross negligence or
willful misconduct. If Borrower or any third party ever alleges any
gross negligence or willful misconduct by any Indemnified Person, the
indemnification provided for in this Section shall nonetheless be paid
upon demand, subject to later adjustment or reimbursement, until such
time as a court of competent jurisdiction enters a final judgment as
to the extent and affect of the alleged gross negligence or willful
misconduct. Upon notification and demand, Borrower agrees to provide
defense of any Indemnified Claim and to pay all costs and expenses of
counsel selected by any Indemnified Person in respect thereof. Any
Indemnified Person against whom any Indemnified Claim may be asserted
reserves the right to settle or compromise any such Indemnified Claim
as such Indemnified Person may determine in its sole discretion, and
the obligations of such Indemnified Person, if any, pursuant to any
such settlement or compromise shall be deemed included within the
Indemnified Claims. Except as specifically provided in this Section,
Borrower waives all notices from any Indemnified Person. The provisions
of this Section shall survive the termination of this Agreement.
15. Rights Cumulative. All rights of Schlinger under the terms of this
Agreement shall be cumulative of, and in addition to, the rights of
Schlinger under any and all other agreements between Borrower and
Schlinger (including, but not limited to, the other Loan Documents),
and not in substitution or diminution of any rights now or hereafter
held by Schlinger under the terms of any other agreement.
16. Waiver and Agreement. Neither the failure nor any delay on the part of
Schlinger to exercise any right, power or privilege herein or under
any of the other Loan Documents shall operate as a waiver thereof, nor
shall any single or partial exercise of such right, power or privilege
preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. No waiver of any provision in this
Loan Agreement or in any of the other Loan Documents and no departure
by Borrower therefrom shall be effective unless the same shall be in
writing and signed by Schlinger, and then shall be effective only in
the specific instance as specified in such writing. No modification or
amendment to this Loan Agreement or to any of the other Loan Documents
shall be valid or effective unless the same is signed by the party
against whom it is sought to be enforced.
17. Benefits. This Agreement shall be binding upon and inure to the benefit
of Schlinger and Borrower, and their respective successors and assigns;
provided, however, that Borrower may not, without the prior written
consent of Schlinger, assign any rights, powers, duties or obligations
under this Agreement or any of the other Loan Documents.
18. Notices. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be
in writing and given by (i) personal delivery, (ii) expedited delivery
service with proof of delivery, (iii) United States mail, postage
prepaid, registered or certified mail, return receipt requested, or
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(iv) telecopy (with receipt thereof confirmed by telecopier) sent to
the intended addressee at the address set forth on the signature page
hereof and shall be deemed to have been received either, in the case
of personal delivery, as of the time of personal delivery, in the case
of expedited delivery service, as of the date of first attempted
delivery at the address and in the manner provided herein, in the case
of mail, upon deposit in a depository receptacle under the care and
custody of the United States Postal Service, or in the case of
telecopy, upon receipt. Either party shall have the right to change
its address for notice hereunder to any other location within the
continental United States by notice to the other party of such new
address at least thirty (30) days prior to the effective date of such
new address.
19. Governing Law; Venue; Submission to Jurisdiction. THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT
TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF, EXCEPT TO THE EXTENT
PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE
SECURITY INTEREST GRANTED HEREUNDER OR THEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF TEXAS. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS ARE PERFORMABLE BY THE PARTIES IN DALLAS COUNTY, TEXAS.
BORROWER AND SCHLINGER EACH AGREE THAT DALLAS COUNTY, TEXAS, SHALL BE
THE EXCLUSIVE VENUE FOR LITIGATION OF ANY DISPUTE OR CLAIM ARISING
UNDER OR RELATING TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND
THAT SUCH COUNTY IS A CONVENIENT FORUM IN WHICH TO DECIDE ANY SUCH
DISPUTE OR CLAIM. BORROWER AND SCHLINGER EACH CONSENT TO THE PERSONAL
JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN DALLAS COUNTY,
TEXAS FOR THE LITIGATION OF ANY SUCH DISPUTE OR CLAIM. BORROWER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE
VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM.
20. Waiver of Jury Trial. BORROWER AND SCHLINGER EACH HEREBY IRREVOCABLY
WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY OR ASSOCIATED HEREWITH.
21. Invalid Provisions. If any provision of this Agreement or any of the
other Loan Documents is held to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable
and the remaining provisions of this Agreement or any of the other Loan
Documents shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its
severance.
22. Expenses. Borrower shall pay all costs and expenses (including, without
limitation, reasonable attorneys' fees) in connection with (i) the
preparation of the Loan Documents, (ii) any action required in the
course of administration of the indebtedness and obligations evidenced
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by the Loan Documents, and (iii) any action in the enforcement of
Schlinger's rights upon the occurrence of Event of Default.
23. Participation of the Loan. Provided that the prospective purchaser
and/or assignee is not a business competitor of Borrower, as determined
by Schlinger in its reasonable discretion, Borrower agrees that
Schlinger may, at its option, sell interests in the Loan and its rights
under this Agreement and the other Loan Documents and, in connection
with each such sale, Schlinger may disclose any financial and other
information available to Schlinger concerning Borrower to each
prospective purchaser and assignee.
24. Maximum Interest Rate.
(a) No interest rate specified in this Agreement or any other Loan
Document shall at any time exceed the Maximum Rate. If at any
time the interest rate (the "Contract Rate") for the Loan or any
other indebtedness, liability or obligation shall exceed the
Maximum Rate, thereby causing the interest accruing thereon to be
limited to the Maximum Rate, then any subsequent reduction in the
Contract Rate therefor shall not reduce the rate of interest
therefor below the Maximum Rate until the aggregate amount of
interest accrued thereon equals the aggregate amount of interest
which would have accrued thereon if the Contract Rate had at all
times been in effect.
(b) Notwithstanding anything to the contrary contained in this
Agreement or the other Loan Documents, none of the terms and
provisions of this Agreement or the other Loan Documents shall
ever be construed to create a contract or obligation to pay
interest at a rate in excess of the Maximum Rate; and Schlinger
shall never charge, receive, take, collect, reserve or apply, as
interest on the Loan or any other indebtedness, liability or
obligation, any amount in excess of the Maximum Rate. The parties
hereto agree that any interest, charge, fee, expense or other
obligation provided for in this Agreement or in the other Loan
Documents which constitutes interest under applicable law shall
be, ipso facto and under any and all circumstances, limited or
reduced to an amount equal to the lesser of (i) the amount of
such interest, charge, fee, expense or other obligation that
would be payable in the absence of this Section 24(b) or (ii) an
amount, which when added to all other interest payable under this
Agreement and the other Loan Documents, equals the Maximum Rate.
If, notwithstanding the foregoing, Schlinger ever contracts for,
charges, receives, takes, collects, reserves or applies as
interest any amount in excess of the Maximum Rate, such amount
which would be deemed excessive interest shall be deemed a
partial payment or prepayment of principal of the Loan or any
other indebtedness, liability or obligation and treated hereunder
as such; and if the Loan or any other indebtedness, liability or
obligation, or applicable portions thereof, are paid in full, any
remaining excess shall promptly be paid to the Borrower or other
applicable Obligor or Obligors (as appropriate). In determining
whether the interest paid or payable, under any specific
contingency, exceeds the Maximum Rate, the Borrower and the other
Obligors and Schlinger shall, to the maximum extent permitted by
applicable law, (a) characterize any nonprincipal payment as an
expense, fee or premium rather than as interest, (b) exclude
voluntary prepayments and the effects thereof, and (c) amortize,
prorate, allocate and spread in equal or unequal parts the total
amount of interest throughout the entire contemplated term of the
Loan or any other indebtedness, liability or obligation, or
applicable portions thereof, so that the interest rate does not
exceed the Maximum Rate at any time during the term of the Loan
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or any other indebtedness, liability or obligation; provided
that, if the unpaid principal balance is paid and performed in
full prior to the end of the full contemplated term thereof, and
if the interest received for the actual period of existence
thereof exceeds the Maximum Rate, Schlinger shall refund to the
Borrower or other applicable Obligor or Obligors (as appropriate)
the amount of such excess and, in such event, Schlinger shall not
be subject to any penalties provided by any laws for contracting
for, charging, receiving, taking, collecting, reserving or
applying interest in excess of the Maximum Rate.
25. Conflicts. In the event any term or provision hereof is inconsistent
with or conflicts with any term or provision in any of the Loan
Documents, the terms and provisions contained in this Agreement shall
be controlling.
26. Counterparts. This Agreement may be separately executed in any number
of counterparts, each of which shall be an original, but all of which,
taken together, shall be deemed to constitute one and the same
instrument. Delivery of an executed counterpart of this Agreement by
telecopy shall be equally as effective as delivery of a manually
executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telecopy also shall deliver a
manually executed counterpart of this Agreement but the failure to
deliver a manually executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
27. Agreement Subject to Subordination Agreement. This Agreement and the
terms and provisions hereof are subject to the terms and provisions of
that certain Subordination Agreement of even date herewith between
Schlinger and KBK.
28. ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT
TO THE TRANSACTIONS CONTEMPLATED HEREIN AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF
THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. THIS AGREEMENT ALSO AMENDS AND SUPERSEDES ANY OF THE TERMS OF
ANY PRIOR WRITTEN AGREEMENTS WITH RESPECT TO THE MATTERS SET FORTH IN
THIS AGREEMENT.
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EXECUTED as of the date first above written.
BORROWER: SCHLINGER:
KARTS INTERNATIONAL THE SCHLINGER FOUNDATION
INCORPORATED
By: /s/ Charles Brister By:
------------------------
Charles Brister Name:
President & C.E.O. Title:
Borrower's Address: Schlinger's Address:
P. O. Box 695 The Schlinger Foundation
62204 Commercial Street 1944 Edison Street
Roseland, Louisiana 70456 Santa Yinez, California 93460
Telecopy No.: 504-747-2700 Telecopy No.: (805) 686-1618
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