EXHIBIT 10.20
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (this "Agreement") made as of February 23,
2005, by and among TEKNIK DIGITAL ARTS INC., a Nevada corporation ("Borrower")
and CODEFIRE ACQUISITION CORP., a California corporation ("Lender").
Borrower and Lender agree as follows:
1. The Revolving Credit. Lender agrees, subject to the terms and
conditions hereof, to lend to Borrower from time to time from the date hereof
until February 23, 2006 (unless the Note is accelerated or terminated earlier
than such date) (the "Commitment Period"), such sums (the "Advances") not to
exceed $1,000,000 in the aggregate at any one time outstanding (the "Credit") as
Borrower may request from time to time. The Credit is subject to the terms and
conditions of this Agreement and the Revolving Credit Note (the "Note"), which,
together with this Agreement, evidences the Credit. The Note shall be in the
form attached hereto as Exhibit A.
2. Proceeds of the Credit are to be used for the general corporate
purposes of Borrower. Reduction of Credit. Borrower shall have the right, upon
at least thirty (30) business days notice to Lender, to terminate in whole or
reduce in part the unused portion of the Credit; provided that no reduction
shall be permitted if, after giving effect thereto, and to any prepayment made
therewith, the outstanding and unpaid principal amount of the Advances shall
exceed the Credit. The Credit once reduced or terminated may not be reinstated.
3. Conditions to all Loans. The obligation of Lender to make any Advance
is subject to its satisfaction of the following conditions precedent:
(a) Delivery of Note. Borrower shall have delivered the Note to
Lender, properly executed by Borrower.
(b) No Event of Default. No event of default caused by Borrower
under this Agreement or the Note shall have occurred and be continuing on the
date the Advance is to be made or after giving effect to the Advance to be made.
(c) Borrowing Certificate. Lender shall have received a signed,
completed borrowing request from Borrower in the form of Exhibit B hereto as
provided in the Note. Such borrowing certificate signed by Borrower shall
constitute a request for an Advance by Borrower and shall be binding on
Borrower. Borrower shall give Lender at least [five (5)] business days notice of
any Advance under this Agreement.
(d) Representations and Warranties. The representations and
warranties of Borrower contained in this Agreement shall be true and correct in
all material respects as of the date of each Advance.
4. Repayment of Advances. All Advances, if not earlier repaid, shall be
repaid to Lender by the last business day in the relevant Commitment Period.
5. Interest. Borrower agrees to pay Lender interest on the unpaid
principal amount from time to time outstanding under this Agreement, in arrears,
at a rate equal the lesser of (i) seven percent (7%) per annum or (ii) the
highest lawful rate permissible under any applicable law. Interest shall be
computed as simple interest. Interest shall be paid in immediately available
funds on the [first (1st)] business day of each [month] and at maturity of the
relevant Advances.
6. Prepayments. Borrower may upon at least thirty (30) days notice to
Lender, prepay the Note in whole or in part with accrued interest to the date of
such prepayment on the amount prepaid.
7. Method of Payment. Borrower shall make each payment under this
Agreement and under the Note not later than 5:00 p.m. Arizona time on the date
when due in lawful money of the United States to the bank account specified in
writing to Borrower by Lender in immediately available funds.
8. Extension of Commitment Period. Borrower may, at least thirty (30) days
before the end of the Commitment Period then in effect, request in writing to
Lender that the Commitment period be extended one (1) year to the anniversary
date next following the last day of the Commitment Period then in effect. Lender
shall not be obligated to grant Borrower any such extension. If any such
extension is granted by Lender, Borrower shall execute and deliver an amended
and restated Note reflecting such extension.
9. Representations and Warranties. Borrower makes the following
representations and warranties, all of which shall be deemed to be continuing
representations and warranties so long as any part of the Credit is unpaid or
any commitment of Lender to make Advances exists hereunder.
(a) Good Standing and Authority of Borrower. Borrower is duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. Borrower has corporate power and authority to transact the
business in which it is engaged; is duly licensed or qualified and in good
standing in each jurisdiction in which the conduct of business or ownership of
property requires such licensing or such qualification, except where the failure
to be so licensed or qualified could not reasonably be expected to have a
material adverse effect on the business or financial condition of Borrower; and
has all necessary corporate power and authority to enter into this Agreement and
to execute, deliver and perform this Agreement, the Note and any other document
executed in connection with this Agreement to which it is a party, all of which
have been duly authorized by all proper and necessary corporate and shareholder
action, as appropriate. This Agreement and the Note constitute the legal, valid
and binding obligations of Borrower, enforceable in accordance with their
respective terms. To the knowledge of Borrower, after reasonable review and
consideration, the execution and delivery of this Agreement and the Note is not
and will not be in violation of any agreement to which Borrower is a party
(except for any violation which would not have a material adverse effect on
Borrower), and no consent of any kind is required for Borrower to enter into or
perform this Agreement or to execute and deliver the Note.
(b) Financial Condition. Borrower has the financial resources or can
obtain the necessary financing to meet its debt obligations under this Agreement
and the Note.
(c) Litigation. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of Borrower, threatened against
Borrower, which could reasonably be expected to, in any case or in the
aggregate, materially adversely affect the property, assets, financial condition
or business of Borrower taken as a whole.
10. Covenants. So long as any part of the Credit is unpaid, or there
exists any commitment of Lender to make Advances:
(a) Future Financial Statements. Borrower will furnish or cause to
be furnished to Lender: (i) within 45 days after the end of each quarter,
including the last quarter of any fiscal year, an unaudited financial statement,
in consolidated form under GAAP, of Borrower as of the end of such and as of the
end of each month in such quarter, which statement shall consist of a balance
sheet, and related statements of income and retained earnings, covering the
period from the end of Borrower's immediately preceding fiscal year to the end
of such quarter, certified to be correct in all material respects by the
President or Chief Financial Officer of Borrower, subject to such year-end
accounting adjustments as are normal and customary; and (ii) within 120 days
after the end of each of its fiscal years, a financial statement of Borrower,
which shall consist of a balance sheet, and related statements of income and
retained earnings, covering the period of Borrower's immediately preceding
fiscal year, and which shall be audited by independent certified public
accountants reasonably satisfactory to Lender, and in consolidated form under
GAAP.
(b) Taxes. Borrower will promptly pay and discharge all of its
taxes, assessments and other governmental charges (including any charged or
assessed on the issuance of the Note) prior to the date on which material
penalties are attached thereto, establish adequate reserves for the payment of
taxes and assessments and make all required withholding and other tax deposits;
provided, however, that nothing contained herein shall require
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the payment of any tax assessment or charge so long as its validity is being
contested in good faith and by appropriate proceedings diligently conducted.
(c) Litigation. Borrower will promptly notify Lender in writing as
soon as Borrower has knowledge of the institution or filing of any material
litigation, or governmental or regulatory proceeding against, or investigation
of, Borrower: (i) the outcome of which may reasonably be expected to materially
and adversely affect the finances or operations of Borrower or Borrower's
ability to fulfill its obligations hereunder; or (ii) which questions the
validity of this Agreement, the Note or any action taken or to be taken pursuant
thereto; and furnish or cause to be furnished to Lender such information
regarding any such matter as Lender may request.
(d) Corporate Standing; Business. Borrower will maintain its
corporate existence in good standing and remain or become duly licensed or
qualified and in good standing in each jurisdiction in which the conduct of its
business or ownership of its property requires such qualification or licensing.
(e) Other Acts. Borrower will execute and deliver, or cause to be
executed and delivered, to Lender all further documents and perform all other
acts which Lender reasonably deems necessary or appropriate to protect the
Credit.
11. Events of Default. The occurrence of any one or more of the following
events shall constitute an event of default ("Event of Default"):
(a) Nonpayment. Nonpayment within five business days of when due,
whether by acceleration or otherwise, of principal of or interest on the Note or
of any cost or expense provided for in this Agreement.
(b) Covenants. Default in the observance of covenants or agreements
contained in this Agreement, which is not remedied within thirty (30) days after
written notice thereof by Lender to Borrower.
(c) Financial Condition. The filing by or against Borrower of a
request or petition for liquidation, reorganization, arrangement adjustment of
debts, adjudication as a bankrupt, relief as a debtor or other relief under the
bankruptcy, insolvency or similar laws of the United States or any state or
territory thereof or any foreign jurisdiction, now or hereafter in effect (but
in the case of a filing against Borrower, only if such filing is not vacated or
bonded within sixty (60) days of filing); the making of any general assignment
by Borrower for the benefit of creditors; the appointment of a receiver or
trustee for Borrower or for any assets of any of them, including, without
limitation, the appointment of or taking possession by a "custodian," as defined
in the Federal Bankruptcy Code; or the institution by or against Borrower of any
other type of insolvency proceeding (under the Federal Bankruptcy Code or
otherwise) or of any formal or informal proceeding for the dissolution or
liquidation of, settlement of claims against or winding up of affairs of
Borrower (but in the case of a proceeding instituted against Borrower, only if
such proceeding is not vacated or bonded within sixty (60) days of such
institution).
(d) Business; Judgments. The cessation of Borrower as a going
business concern; the entry judgment against Borrower in an amount in excess of
$5,000,000.00, other than a judgment for which Borrower is fully insured, if
thirty (30) days after entry of judgment, such judgment is not satisfied,
vacated, bonded or stayed pending appeal; or if Borrower is generally not paying
its debts as such debts become due.
(e) Representations. If any certificate, statement, representation,
warranty or audit heretofore or hereafter furnished by or on behalf of Borrower
pursuant to or in connection with this Agreement, or as an inducement to Lender
to extend the Credit to, or to enter into this or any other agreement with
Borrower proves to have been false in any material respect at the time as of
which the facts therein set forth were stated or certified, or to have omitted
any substantial and material contingent or unliquidated liability or claim
against Borrower.
(f) Other Indebtedness. Nonpayment by Borrower when due of any
indebtedness for borrowed money owing to any party other than Lender and such
failure continues after any applicable grace or notice period, or the occurrence
of any event which permits the acceleration of payment of any such indebtedness
except where such nonpayment would not have a material adverse effect on the
Borrower.
12. Acceleration. Upon the happening of an Event of Default specified in
subsection (f), above, any obligation of Lender to make Advances shall cease
immediately, and the Note shall become immediately due and payable, without
presentation, demand or notice of any kind to Borrower. Upon the happening of
any other Event of Default, Lender may, upon notice to Borrower, terminate any
obligation of Lender to make Advances and declare
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the Note immediately due and payable, without presentation, demand or further
notice of any kind to Borrower. Notwithstanding the foregoing, any acceleration
herein shall be subject to any applicable grace periods provided for in this
Agreement.
13. Expenses. Borrower shall reimburse Lender promptly for all of its
reasonable and documented out-of-pocket costs and expenses incurred in
connection with the Credit including, without limitation, filing fees, recording
fees, any taxes which Lender may be required to pay in connection with the
execution and delivery of this Agreement and the Note, and any costs and
expenses incident to the enforcement of any provision of this Agreement or the
Note. "Costs and expenses" as used in the preceding sentence shall also include,
without limitation, the reasonable outside attorneys' fees incurred by Lender in
retaining counsel in connection with the preparation or execution of this
Agreement; for advice, suit, appeal, any insolvency or other proceedings under
the Federal Bankruptcy Code or otherwise; or for any other purpose related to
the Credit.
14. Miscellaneous.
(a) Amendments and Waivers. No modification, rescission, waiver,
release, or amendment of any provision of this Agreement shall be made except by
a written agreement signed by a duly authorized officer of Borrower and a duly
authorized officer of Lender.
(b) Delays and Omissions. No delay or omission by Lender in
exercising any right or remedy hereunder or with respect to the Credit shall
operate as a waiver thereof or of any other right or remedy, and no single or
partial exercise thereof shall preclude any other or further exercise thereof or
the exercise of any other right or remedy. Lender may remedy any default by
Borrower hereunder or with respect to the Credit in any reasonable manner
without waiving the default remedied and without waiving any other prior or
subsequent default by Borrower, and shall be reimbursed for its expenses in so
remedying such default. All rights and remedies of Lender hereunder, under any
other agreement and otherwise are cumulative; if any provision of this Agreement
is inconsistent with any provision of any other agreement between Lender and
Borrower, the provisions of this Agreement shall control.
(c) Successors and Assigns. Borrower and Lender as used herein shall
include the legal representatives, successors, and assigns of those parties.
Notwithstanding the foregoing, Borrower may not assign or transfer this
Agreement, the Note, or any rights under the Note or this Agreement without the
prior written consent of Lender.
(d) Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
If to Lender, addressed to:
CodeFire Acquisition Corp.
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If to Borrower, addressed to:
Teknik Digital Arts Inc.
c/o Corporation Trust Company of Nevada
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with a copy to:
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Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
Two Renaissance Square
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or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
(e) Generally Accepted Accounting Principles. Any financial
calculation to be made, and books and records to be kept, in connection with the
provisions of this Agreement shall be in accordance with generally accepted
accounting principles consistently applied each year and from year to year.
(f) Severability. The invalidity, illegality or unenforceability of
any provision of this Agreement shall not affect or impair the validity,
legality or enforceability of the remainder of this Agreement, and to this end,
the provisions of this Agreement are declared to be severable.
(g) Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the substantive laws (other than conflict laws)
of the State of Arizona.
(h) Arbitration. Any controversy arising out of or relating to this
Agreement shall be settled by arbitration conducted in Phoenix, Arizona in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect. The award rendered by the arbitrator(s) shall be
final and judgment upon the award rendered by the arbitrator(s) may be entered
upon it in any court having jurisdiction thereof. The arbitrator(s) shall
possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration. The expenses of the arbitration shall be borne
by the losing party unless otherwise allocated by the arbitrator(s). The
agreement to arbitrate shall be specifically enforceable under the prevailing
arbitration law. During the continuance of any arbitration proceedings, the
parties shall continue to perform their respective obligations under this
Agreement.
THE PARTIES HERETO have signed this Agreement on the date written above.
LENDER
CodeFire Acquisition Corp.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇
Its: Secretary
BORROWER
Teknik Digital Arts Inc.
By: /s/ ▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇
Its: hief Executive Officer
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EXHIBIT A TO THE REVOLVING CREDIT AGREEMENT
FORM OF REVOLVING CREDIT NOTE
February 23, 2005
$1,000,000
Due: March 1, 2006
1. Promise to Pay. FOR VALUE RECEIVED, TEKNIK DIGITAL ARTS INC., a Nevada
corporation ("Borrower"), promises to pay to the order of CODEFIRE ACQUISITION
CORP., a California corporation ("Lender"), the sum not to exceed of One Million
Dollars ($1,000,000.00), or so much thereof as may be from time to time
outstanding, together with all other amounts added thereto pursuant to this Note
or otherwise payable to Lender (together, the "Loan"), together with default
interest thereon (if any) as hereinafter set forth, payable in lawful money of
the United States of America. Payments shall be made to Lender at such address
or account as Lender may hereafter designate in writing to Borrower.
2. Revolving Loan. This Note evidences a revolving credit, all or any part of
which may be advanced to Borrower, repaid by Borrower, and readvanced to
Borrower from time to time, subject to the other provisions hereof and the
provisions of the Revolving Credit Agreement (the "Credit Agreement"), dated as
of February 23, 2005, by and between Borrower and Lender provided that the
principal balance outstanding hereunder at any one time shall not exceed
$1,000,000.00.
3. Interest. Borrower promises to pay interest on the unpaid principal amount
of each Advance (as defined in the Credit Agreement) evidenced hereby from the
date of such Advance until the principal amount is paid in full, at such
interest rates, and payable at such times, as are specified in the Credit
Agreement.
4. Repayment of Advances. Borrower promises to pay the principal of any
Advance at such times and on such dates as specified in the Credit Agreement.
5. Governing Law; Severability. This Note shall be governed by and construed
in accordance with the internal laws of the State of Arizona, without regard to
conflicts of laws principles. The invalidity, illegality or unenforceability of
any provision of this Note shall not affect or impair the validity, legality or
enforceability of the remainder of this Note, and to this end, the provisions of
this Note are declared to be severable.
6. Miscellaneous.
6.1 Amendments. This Note may not be terminated or amended orally, but
only by a termination or amendment in writing signed by Lender.
6.2 Lawful Rate of Interest. In no event whatsoever shall the amount of
interest paid or agreed to be paid to Lender pursuant to this Note exceed the
highest lawful rate of interest permissible under applicable law.
6.3 Waivers. Borrower hereby waives grace, diligence, presentment, demand,
notice of demand, dishonor, notice of dishonor, protest, notice of protest, any
and all exemption rights against the indebtedness evidenced by this Note and the
right to plead any statute of limitations as a defense to the repayment of all
or any portion of this Note, and interest thereon, to the fullest extent allowed
by law. No delay, omission and/or failure on the part of the Lender in
exercising any right and/or remedy hereunder shall operate as a waiver of such
right and/or remedy or of any other right and/or remedy of Lender.
6.4 Captions. The captions of the Sections of this Note are for
convenience of reference only and shall not be deemed to modify, explain,
enlarge or restrict any of the provisions hereof.
6.5 Notices. Notices shall be given under this Note in conformity with the
terms and conditions of the Credit Agreement.
6.6 Time of Essence. Time is of the essence of this Note and the
performance of each of the covenants and agreements contained herein.
6.7 Arbitration. Any controversy arising out of or relating to this Note
shall be settled by arbitration conducted in Phoenix, Arizona in accordance with
the Commercial Arbitration Rules of the American Arbitration Association then in
effect. The award rendered by the arbitrator(s) shall be final and judgment upon
the award rendered by the arbitrator(s) may be entered upon it in any court
having jurisdiction thereof. The arbitrator(s) shall possess the powers to issue
mandatory orders and restraining orders in connection with such arbitration. The
expenses of the arbitration shall be borne by the losing party unless otherwise
allocated by the arbitrator(s). The agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law. During the continuance of any
arbitration proceedings, the parties shall continue to perform their respective
obligations under this Note.
IN WITNESS WHEREOF, Borrower has executed this Note or has caused the same
to be executed by its duly authorized representatives as of the date set first
forth above.
BORROWER:
TEKNIK DIGITAL ARTS INC.
By:
__________________________________
Name:
Its:
EXHIBIT B TO THE REVOLVING CREDIT AGREEMENT
FORM OF ADVANCE REQUEST
Date: ____________
Time: ____________
CodeFire Acquisition Corp.
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Dear Ladies and Gentlemen:
The undersigned, Teknik Digital Arts Inc. ("Borrower") refers to the
Revolving Credit Agreement dated as of February 23, 2005 (as it may hereafter be
amended, modified, extended or restated from time to time, the "Credit
Agreement") by and between Borrower and CodeFire Acquisition Corp., a California
corporation. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Credit Agreement.
Borrower hereby gives notice that it requests an Advance pursuant to the
Credit Agreement and sets forth below the terms of such requested Advance:
A. Date of Advance _______________
B. Principal Amount of Advance _______________
Sincerely,
TEKNIK DIGITAL ARTS INC.
By: __________________________
Its: _________________________
