IMPERIAL BANK
CREDIT AGREEMENT
This Agreement is made by and between ATC HOLDINGS, INC. ("Borrower") and
Imperial Bank, a California banking corporation, ("Bank").
Subject to the terms and conditions of the Loan Documents (as defined
below), Bank shall make loans to Borrower from time to time as advances are
requested by Borrower until October 3, 1997, not to exceed, in the aggregate,
$6,000,000.00. To induce Bank to make loans to Borrower and in consideration
of any loan or loans Bank may make to Borrower, Borrower warrants and agrees
as follows:
A. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that:
1) EXISTENCE AND RIGHTS. Borrower is a corporation duly organized and existing
and in good standing under the laws of California, without limit as to the
duration of its existence and is authorized and in good standing to do
business in the State of California; Borrower has corporate powers and
adequate authority, rights and franchises to own its property and to carry
on its business as now conducted, and is duly qualified and in good
standing in each State in which the character of the properties owned by it
therein or the conduct of its business makes such qualification necessary;
and Borrower has the power and adequate authority to make and carry out
this Agreement
2) AGREEMENT AUTHORIZED. The execution, delivery and performance of this
Agreement are duly authorized and do not require the consent or approval of
any governmental body or other regulatory authority; are not in
contravention of or in conflict with any law or regulation or any term or
provision of Borrower's articles of incorporation, by-laws, or Articles of
Association, as the case may be, and this Agreement is the valid, binding
and legally enforceable obligation of Borrower in accordance with its
terms; subject only to bankruptcy, insolvency or similar laws affecting
creditors rights generally.
3) NO CONFLICT. The execution, delivery and performance of this Agreement are
not in contravention of or in conflict with any agreement, indenture or
undertaking to which Borrower is a party or by which it or any of its
property may be bound or affected, and do not cause any lien, charge or
other encumbrance to be created or imposed upon any such property by reason
thereof.
4) LITIGATION. There is no litigation or other proceeding pending or
threatened against or affecting Borrower which if determined adversely
to Borrower or its interest would have a material adverse effect on the
financial condition of Borrower, and Borrower is not in default with
respect to any order, writ, injunction, decree or demand of any court or
other governmental or regulatory authority.
5) FINANCIAL CONDITION. The balance sheet of Borrower as of March 31, 1997, a
copy of which has heretofore been delivered to Bank by Borrower, and all
other statements and data submitted in writing by Borrower to Bank in
connection with this request for credit are true and correct, and said
balance sheet truly presents the financial condition of Borrower as of the
date thereof, and has been prepared in accordance with generally accepted
accounting principles on a basis consistently maintained. Since such date,
there have been no material adverse changes in the financial condition or
business of Borrower. Borrower has no knowledge of any liabilities,
contingent or otherwise, at such date not reflected in said balance sheet,
and Borrower has not entered into any special commitments or substantial
contracts which are not reflected in said balance sheet, other than in the
ordinary and normal course of its business, which may have a materially
adverse effect upon its financial condition, operations or business as now
conducted.
6) TITLE TO ASSETS. Borrower has good title to its assets, and the same are
not subject to any liens or encumbrances other than those permitted by
Section C.3 hereof.
7) TAX STATUS. Borrower has no liability for any delinquent state, local or
federal taxes, and, if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
8) TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights,
and licenses to conduct its business as now operated, without any known
conflict with the valid trademarks, trade names, copyrights, patents and
license rights of others.
9) REGULATION U. The proceeds of the Loan shall not be used to purchase or
carry margin stock (as defined within Regulation U of the Board of
Governors of the Federal Reserve system).
B. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, under
borrowings, or other indebtedness, it will, unless Bank shall otherwise consent
in writing:
1) RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises and
other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
2) INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against
fire and other hazards with responsible insurance carriers to the extent
usually maintained by similar businesses and/or in the exercise of good
business judgment and as to property insurance have Bank named as loss
payee in a Lenders "Loss Payable" Endorsement Form 438BFU or equivalent.
3) TAXES AND OTHER LIABILITIES. Pay and discharge, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments and
governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so
long as:
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a) The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse
effect upon its financial condition or the loss of any right of
redemption from any sale thereunder; and
b) It shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it
adequate with respect thereto.
4) RECORDS AND REPORTS. Maintain a standard and modern system of accounting in
accordance with generally accepted accounting principles on a basis
consistently maintained; permit Bank's representatives to have access to,
and to examine its properties, books and records at all reasonable times
and upon reasonable notice during normal business hours; and furnish Bank:
a) As soon as available, and in any event within forty five (45) days
after the close of each quarter of each fiscal year of
Borrower, commencing with the quarter next ending, a balance sheet,
profit and loss statement and reconciliation of Borrower's capital
accounts as of the close of such period and covering operations for
the portion of Borrower's fiscal year ending on the last day of such
period, all in reasonable detail, prepared in accordance with
generally accepted accounting principles on a basis consistently
maintained by Borrower and certified by an appropriate officer of
Borrower;
b) As soon as available, and in any event within one hundred and twenty
(120) days of fiscal year end, a report of Borrower as of the close
of and for each fiscal year, all in reasonable detail, prepared on an
audited basis by an independent certified public accountant selected
by Borrower and reasonably acceptable to Bank, in accordance with
generally accepted accounting principles on a basis consistently
maintained by Borrower and certified by an appropriate officer of
Borrower;
c) In connection with each fiscal year end financial statement furnished
to Bank hereunder, any management letter of Borrower's independent
certified public accountant;
d) Budgets, operating plans, and such other information relating to the
affairs of Borrower as the Bank may reasonably request from time to
time;
e) Personal financial statements and individual tax returns of all
guarantors of loans to Borrower, annually or otherwise as the Bank may
reasonably request from time to time;
f) As soon as available, and in any event within forty five (45) days
after the close of each quarter of each fiscal year of American Title
Company, commencing with the quarter next ending, a balance sheet,
profit and loss statement and reconciliation of American Title
Company's capital accounts as of the close of such period and
covering operations for the portion of American Title Company's
fiscal year ending on the last day of such period, all in reasonable
detail, prepared in accordance with generally accepted accounting
principles on a basis consistently maintained by American Title
Company and certified by an appropriate officer of American Title
Company;
g) As soon as available, and in any event within one hundred and twenty
(120) days of fiscal year end, a report of American Title Company as
of the close of and for each fiscal year, all in reasonable detail,
prepared on an audited basis by an independent certified public
accountant selected by American Title Company and reasonably
acceptable to Bank, in
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requirement of the Federal Reserve Board and uncollected funds.
Any deficiencies shall be charged directly to the Borrower on a
monthly basis.
7) ATTORNEY'S FEES. Pay promptly to Bank without demand after notice, with
interest thereon from the date of expenditure at the rate applicable to
any loans from Bank to Borrower, reasonable attorneys' fees and all
costs and expenses paid or incurred by Bank in collecting or
compromising any such loan after the occurrence of an Event of Default,
whether or not suit is filed. If suit is brought to enforce any
provision of this Agreement, the prevailing party shall be entitled to
recover its reasonable attorneys' fees and court costs in addition to
any other remedy or recovery awarded by the court.
8) FINANCIAL COVENANTS. Maintain the following financial covenants:
a) Tangible Net Worth of not less than $200,000.00;
b) Net current assets (Working Capital) of not less than $(250,000.00);
[initialed] ML
[initialed] MD
All financial covenants and financial information referenced herein
shall be interpreted and prepared in accordance with generally
accepted accounting principals applied on a basis consistent with
previous years. Compliance with financial covenants shall be
calculated and monitored on a quarterly basis.
C. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, it
will not, without Bank's written consent:
1. TYPE OF BUSINESS; MANAGEMENT. Make any substantial change in the
character of its business; or make any change in its executive
management.
2. OTHER INDEBTEDNESS. Other than in the ordinary course of business and
consistent with past practices, create, incur, assume or permit to
exist any indebtedness for borrowed moneys, other than loans from the
Bank, except obligations now existing as shown in the financial
statement dated March 31, 1997, excluding those obligations being
refinanced by Bank.
3. LIENS AND ENCUMBRANCES. Other than in the ordinary course of business
and consistent with past practices, create, incur, or assume any
mortgage, pledge, encumbrance, lien or charge of any kind upon any
asset now owned, other than liens for taxes not delinquent and liens
in Bank's favor, except for those already existing as of March 31, 1997.
4. LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or advances
to any person or other entity other than in the ordinary and normal
course of its business as now conducted or make any investment in the
securities of any person or other entity other than the United States
Government or commercial paper maturing no more than one (1) year
from the date of creation thereof and currently having the highest
rating obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Ind., or certificates of deposit maturing
more than one (1) year from the date of investment therein issued by
Bank; or guarantee or otherwise become liable upon the
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3. LIENS AND ENCUMBRANCES. Other than in the ordinary course of business
and consistent with past practices, create, incur, or assume any
mortgage, pledge, encumbrance, lien or charge of any kind upon any
asset now owned, other than liens for taxes not delinquent and liens
in Bank's favor, except for those already existing as of March 31,
1997.
4. LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or advances
to any person or other entity other than in the ordinary and normal
course of its business as now conducted or make any investment in the
securities of any person or other entity other than the United States
Government or commercial paper maturing no more than one (1) year
from the date of creation thereof and currently having the highest
rating obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Ind., or certificates of deposit maturing
more than one (1) year from the date of investment therein issued by
Bank; or guarantee or otherwise become liable upon the obligation of
any person or other entity, except by endorsement of negotiable
instruments for deposit or collection in the ordinary and normal
course of its business.
5. ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Purchase or
otherwise acquire the assets or business of any person or other
entity; or liquidate, dissolve, merge or consolidate, or commence any
proceedings therefor; or sell any assets except in the ordinary and
normal course of its business as now conducted; or sell, lease assign
or transfer any substantial part of its business or fixed assets, or
any property or other assets necessary for the continuance of its
business as now conducted, including without limitation the selling
of any property or other asset accompanied by the leasing back of the
same.
6. CAPITAL EXPENDITURES. Make or incur obligations for capital
expenditures, which includes purchase money indebtedness or capital
lease obligations, in excess of $500,000.00 in any one fiscal year.
7. LEASE LIABILITY. Make or incur additional liability for payments of
rent under leases of real property in excess of $250,000.00 or personal
property in excess of $250,000.00 in any one fiscal year.
D. EVENTS OF DEFAULT
The occurrence of any of the following Events of Default shall, at Bank's
option, terminate Bank's commitment to lend and make all sums of principal and
interest then remaining unpaid on all Borrower's indebtedness to Bank
immediately due and payable, all without demand, presentment or notice, all of
which are hereby expressly waived:
1) FAILURE TO PAY. Failure to pay any installment of principal or interest
on any indebtedness of Borrower to Bank.
2) BREACH OF COVENANT. Failure of Borrower to perform any other term or
condition of this Agreement binding upon Borrower.
3) BREACH OF WARRANTY. Any of Borrower's representations or warranties
made herein or any statement or certificate at any time given in
writing pursuant hereto or in connection herewith shall be false or
misleading in any respect.
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4) INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent; or
admit its inability to pay its debts as they mature; or make an
assignment for the benefit of creditors; or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part
of its property or business.
5) JUDGMENTS, ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process shall be entered or filed against
Borrower or any of its assets and shall remain unvacated, unbonded or
unstayed for a period later than five days prior to the date of any
proposed sale thereunder.
6) BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or
against Borrower and, if instituted against it, shall be consented to.
7) FAILURE TO MEET DEPARTMENT OF INSURANCE REQUIREMENTS. Failure of
American Title Company to meet the net worth and working capital
requirements, as they may exist from time to time, imposed upon
American Title Company by the State of California Department of
Insurance.
8) ADVERSE ACTION. Any action taken by the State of California
Department of Insurance which would adversely effect the continued
operation of American Title Company's business, including the
issuance of any notice of intended adverse action by the Department
of Insurance.
9) FAILURE TO MEET MINIMUM TANGIBLE NET WORTH. Failure of American Title
Company to maintain Tangible Net Worth of no less than $2,500,000.00.
E. MISCELLANEOUS PROVISIONS
1) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
Bank or any holder of any note issued by Borrower to Bank, in the
exercise of any power, right or privilege hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise
thereof or of any other right, power or privilege. All rights and
remedies existing under this Agreement or any note issued in
connection with a loan that Bank may make hereunder, are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
2) ADDITIONAL REMEDIES. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in
addition to all rights, powers and remedies given to Bank by law
against Borrower or any other person, including but not limited to
Bank's rights of setoff or banker's lien.
3) INUREMENT. The benefits of this Agreement shall inure to the successors
and assigns of Bank and the permitted successors and assigns of
Borrower.
4) APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be
governed by and construed according to the laws of the State of
California, to the jurisdiction of whose courts the parties hereby
agree to submit.
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5) OFFSET. In addition to and not in limitation of all rights of
offset that Bank or other holder of any note issued by Borrower in
favor of Bank may have under applicable law, Bank or other holder of
such notes shall, upon the occurrence of any Event of Default or any
event which with the passage of time or notice would constitute such
an Event of Default, have the right to appropriate and apply to the
payment of the outstanding under any such note any and all balances,
credits, deposits, accounts or monies of Borrower then or thereafter
with Bank or other holder, within ten (10) days after the Event of
Default, and notice of the occurrence of any Event of Default by Bank
to Borrower.
6) SEVERABILITY. Should any one or more provisions of the Agreement be
determined to be illegal or unenforceable, all other provisions
nevertheless shall be effective.
7) TIME OF THE ESSENCE. Time is hereby declared to be of the essence of this
Agreement and of every part hereof.
8) INTEGRATION CLAUSES. Except for documents and instruments
specifically referenced herein, the Agreement constitutes the entire
agreement between Bank and Borrower regarding the Loan, and all prior
communications verbal or written between Borrower and Bank shall be
of no further effect or evidentiary value. In the event of a conflict
or inconsistency among any other documents and instruments and this
Agreement, the provisions of this Agreement shall prevail.
9) ACCOUNTING. All accounting terms shall have the meanings applied under
generally accepted accounting principles unless otherwise specified.
10) MODIFICATION. This Agreement may be modified only by a writing signed by
both parties hereto.
11) SUPPLEMENTAL PRINCIPAL PAYMENTS. Borrower agrees that seventy five
percent (75%) of the annual excess cash flow of American Title
Company, as defined below, will be utilized as supplemental principal
payments to debt. Such payments are to be applied to principal in
inverse order of maturity and are to be made prior to the end of the
first quarter following the end of each fiscal year.
EXCESS CASH FLOW OF AMERICAN TITLE COMPANY:
1. Net Profit After Tax of American Title Company
2. Plus: Depreciation and Amortization
3. Equals American Title Company Operating Cash Flow
4. Less: American Title Company CPLTD
5. Less: American Title Company Capital Expenditures
6. Equals American Title Company Net Operating Cash Flow
7. Multiply by ATC Holdings, Inc. ownership percentage (60%)
8. Less: ATC Holdings, Inc. CPLTD
9. Less: ATC Holdings, Inc. Capital Expenditures
10. Equals: Excess Cash Flow of American Title Company
11. Multiply by seventy five percent (75%)
12. Equals: Supplemental Principal Payment
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12) RELEASE OF GUARANTORS. Providing that no Event of
Default exists, each of the personal guarantees taken in support of
any loans extended to Borrower pursuant to this Agreement shall be
reduced according to the following schedule:
OUTSTANDING LOAN BALANCE PERCENTAGE OF ORIGINAL GUARANTEE AMOUNT
$6,000,000 100%
$5,400,000 90%
$4,800,000 80%
$4,200,000 70%
$3,600,000 60%
$3,000,000 50%
13) COLLATERAL. Loan will be secured by a first priority lien on all corporate
assets of Borrower and one hundred percent (100%) of the Common Stock of
Borrower.
This Agreement is executed on behalf of the parties by duly authorized
representatives as of August 7, 1997.
IMPERIAL BANK ("Bank")
By: [Illegible]
Date: 8-7-97
ATC HOLDINGS, INC. ("Borrower")
By: /s/ Michael Lowther
By: /s/ Wayne Diaz
Date:
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