CREDIT AGREEMENT
THIS AGREEMENT is entered into as of December 17, 1996, by and between
XXXXXX AND XXXXXXXXXX SALES, CO., a California corporation ("Borrower"), and
XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITAL
Borrower has requested from Bank the credit accommodations described below
(each, a "Credit" and collectively, the "Credits"), and Bank has agreed to
provide the Credits to Borrower on the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
THE CREDITS
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make advances to Borrower from time to time up to and
including February 5, 1998, not to exceed at any time the aggregate principal
amount of Six Million Five Hundred Thousand Dollars ($6,500,000.00) ("Line of
Credit"), the proceeds of which shall be used to finance working capital.
Borrower's obligation to repay advances under the Line of Credit shall be
evidenced by a promissory note substantially in the form of Exhibit A attached
hereto ("Line of Credit Note"), all terms of which are incorporated herein by
this reference.
(b) Limitation on Borrowings. Outstanding borrowings under the Line of
Credit, to a maximum of the principal amount set forth above, shall not at any
time exceed an aggregate of ninety percent (90%) of Borrower's eligible accounts
receivable less grower payables, plus fifty percent (50%) of the value of
Borrower's eligible inventory (exclusive of work in process and inventory which
is obsolete, unsaleable or damaged), with inventory defined as processed fruit
and produce and with value defined as the lower of cost or market value.
All of the foregoing shall be determined by Bank upon receipt and review
of all collateral reports required hereunder and such other documents and
collateral information as Bank may from time to time require. Borrower
acknowledges that said borrowing base was established by Bank with the
understanding that, among other items, the aggregate of all returns, rebates,
discounts, credits and allowances for the immediately preceding three (3) months
at all times shall be less than five percent
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(5%) of Borrower's gross sales for said period. If such dilution of Borrower's
accounts for the immediately preceding three (3) months at any time exceeds five
percent (5%) of Borrower's gross sales for said period, or if there at any time
exists any other matters, events, conditions or contingencies which Bank
reasonably believes may affect payment of any portion of Borrower's accounts,
Bank, in its sole discretion, may reduce the foregoing advance rate against
eligible accounts receivable to a percentage appropriate to reflect such
additional dilution and/or establish additional reserves against Borrower's
eligible accounts receivable.
As used herein, "eligible accounts receivable" shall consist solely of
trade accounts created in the ordinary course of Borrower's business, upon which
Borrower's right to receive payment is absolute and not contingent upon the
fulfillment of any condition whatsoever, and in which Bank has a perfected
security interest of first priority, and shall not include:
(i) any account which is past due more than twice Borrower's
standard selling, except with respect to any account for which Borrower
has provided extended payment terms not to exceed one hundred eighty (180)
days, any such account which is more than thirty (30) days past due;
(ii) that portion of any account for which there exists any right of
setoff, defense or discount (except regular discounts allowed in the
ordinary course of business to promote prompt payment) or for which any
defense or counterclaim has been asserted;
(iii) any account which represents an obligation of any state or
municipal government or of the United States government or any political
subdivision thereof (except accounts which represent obligations of the
United States government and for which Bank's forms N-138 and N-139 have
been duly executed and acknowledged);
(iv) any account which represents an obligation of an account debtor
located in a foreign country;
(v) any account which arises from the sale or lease to or
performance of services for, or represents an obligation of, an employee,
affiliate, partner, member, parent or subsidiary of Borrower;
(vi) that portion of any account which represents interim or
progress xxxxxxxx or retention rights on the part of the account debtor;
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(vii) any account which represents an obligation of any account
debtor when twenty percent (20%) or more of Borrower's accounts from such
account debtor are not eligible pursuant to (i) above;
(viii) that portion of any account from an account debtor which
represents the amount by which Borrower's total accounts from said account
debtor exceeds twenty-five percent (25%) of Borrower's total accounts;
(ix) any account deemed ineligible by Bank when Bank, in its sole
discretion, deems the creditworthiness or financial condition of the
account debtor, or the industry in which the account debtor is engaged, to
be unsatisfactory.
(c) Borrowing and Repayment. Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.
SECTION 1.2. TERM LOAN.
(a) Term Loan. Bank has made a loan to Borrower in the original principal
amount of Two Hundred Fifty-three Thousand Five Hundred Dollars ($253,500.00)
("Term Loan"), on which the outstanding principal balance as of the date hereof
is Two Hundred Two Thousand Eight Hundred Dollars ($202,800.00). Borrower's
obligation to repay the Term Loan shall be evidenced by a promissory note
substantially in the form of Exhibit B attached hereto ("Term Note"), all terms
of which are incorporated herein by this reference. Any reference in the Term
Note to any prior loan agreement between Bank and Borrower shall be deemed a
reference to this Agreement.
(b) Repayment. The principal amount of the Term Loan shall be repaid
in accordance with the provisions of the Term Note.
(c) Prepayment. Borrower may prepay principal on the Term Loan at any
time, in any amount and without penalty. All prepayments of principal shall be
applied on the most remote principal installment or installments then unpaid.
SECTION 1.3. INTEREST/FEES.
(a) Interest. The outstanding principal balances of the Line of
Credit and the Term Loan (collectively, the "Credits")
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shall bear interest at the rates of interest set forth in the Line of Credit
Note and Term Note (collectively, the "Notes").
(b) Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Notes.
SECTION 1.5. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all principal, interest and fees due under each Credit by charging Borrower's
demand deposit account number 4160- 085460 with Bank, or any other demand
deposit account maintained by Borrower with Bank, for the full amount thereof.
Should there be insufficient funds in any such demand deposit account to pay all
such sums when due, the full amount of such deficiency shall be immediately due
and payable by Borrower.
SECTION 1.6. COLLATERAL. As security for all indebtedness of Borrower to
Bank under the Line of Credit, Borrower hereby grants to Bank security interests
of first priority in all Borrower's accounts receivables and other rights to
payment, general intangibles, inventory and equipment.
As security for all indebtedness of Borrower to Bank under the Term Loan
Borrower hereby grants to Bank a lien of not less than first priority on that
certain real property located at Traver, California, as more fully described on
Exhibit D attached hereto, all terms of which are incorporated herein by this
reference.
All of the foregoing shall be evidenced by and subject to the terms of
such security agreements, financing statements, deeds of trust and other
documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for
all costs and expenses incurred by Bank in connection with any of the foregoing
security, including without limitation, filing and recording fees and costs of
appraisals, audits and title insurance.
SECTION 1.7. GUARANTIES. All indebtedness of Borrower to Bank shall be
guaranteed by Epitope, Inc. ("Guarantor") in the principal amount of Six Million
Seven Hundred Fifty-six Thousand Eight Hundred Dollars ($6,756,800.00), as
evidenced by and subject to the terms of guaranties in form and substance
satisfactory to Bank.
SECTION 1.8. SUBORDINATION OF DEBT. All obligations of Borrower to
Epitope, Inc. shall be subordinated in right of repayment to all obligations of
Borrower to Bank, as evidenced by and subject to the terms of subordination
agreements in form and substance satisfactory to Bank.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the state of California, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Notes, and
each other document, contract and instrument required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement
of Borrower dated September 30, 1996, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the financial condition of Borrower, (b) discloses all
liabilities of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been
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prepared in accordance with generally accepted accounting principles
consistently applied. Since the date of such financial statement there has been
no material adverse change in the financial condition of Borrower, nor has
Borrower mortgaged, pledged, granted a security interest in or otherwise
encumbered any of its assets or properties except in favor of Bank or as
otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which Borrower is a party or by which Borrower may be bound
that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of
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1986, the Federal Resource Conservation and Recovery Act of 1976, and the
Federal Toxic Substances Control Act, as any of the same may be amended,
modified or supplemented from time to time. None of the operations of Borrower
is the subject of any federal or state investigation evaluating whether any
remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.
SECTION 2.12. REAL PROPERTY COLLATERAL. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, with respect to any real property
collateral required hereby:
(a) All taxes, governmental assessments, insurance premiums, and
water, sewer and municipal charges, and rents (if any) which previously
became due and owing in respect thereof have been paid as of the date
hereof.
(b) There are no mechanics' or similar liens or claims which have
been filed for work, labor or material (and no rights are outstanding that
under law could give rise to any such lien) which affect all or any
interest in any such real property and which are or may be prior to or
equal to the lien thereon in favor of Bank.
(c) None of the improvements which were included for purpose of
determining the appraised value of any such real property lies outside of
the boundaries and/or building restriction lines thereof, and no
improvements on adjoining properties materially encroach upon any such
real property.
(d) There is no pending, or to the best of Borrower's knowledge
threatened, proceeding for the total or partial condemnation of all or any
portion of any such real property, and all such real property is in good
repair and free and clear of any damage that would materially and
adversely affect the value thereof as security and/or the intended use
thereof.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to grant any of the Credits is subject to
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the fulfillment to Bank's satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
granting of each of the Credits shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Notes.
(ii) Articles of Incorporation (Borrower and Guarantor).
(iii) Continuing Guaranty.
(iv) Subordination Agreement.
(v) Security Agreement: Equipment and Fixtures.
(vi) Security Agreement: Crops.
(vii) Continuing Security Agreement: Rights to Payment and
Inventory.
(viii) Deed of Trust.
(ix) UCC Financing Statements.
(x) Such other documents as Bank may require under any other Section
of this Agreement.
(c) Financial Condition. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower or any guarantor hereunder, nor any material decline, as determined by
Bank, in the market value of any collateral required hereunder or a substantial
or material portion of the assets of Borrower or any such guarantor.
(d) Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where required
by Bank, with loss payable endorsements in favor of Bank, including without
limitation, policies of fire and extended coverage insurance covering all real
property collateral required hereby, with replacement cost and mortgagee loss
payable endorsements, and such policies of insurance against specific hazards
affecting any such real property as may be required by governmental regulation
or Bank.
(e) Appraisals. Bank shall have obtained, at Borrower's cost, an
appraisal of all real property collateral required hereby, and all improvements
thereon, issued by an appraiser acceptable to Bank and in form, substance and
reflecting values satisfactory to Bank, in its discretion.
(f) Title Insurance. Bank shall have received an ALTA Policy of
Title Insurance, with such endorsements as Bank
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may require, including without limitation, CLTA endorsements issued by a company
and in form and substance satisfactory to Bank, in such amount as Bank shall
require, insuring Bank's lien on the real property collateral required hereby to
be of first priority, subject only to such exceptions as Bank shall approve in
its discretion, with all costs thereof to be paid by Borrower.
(g) Tax Service Contract. Borrower shall have procured and delivered
to Bank, at Borrower's cost, such tax service contract as Bank shall require for
any real property collateral required hereby, to remain in effect as long as
such real property secures any obligations of Borrower to Bank as required
hereby.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) Compliance. The representations and warranties contained herein
and in each of the other Loan Documents shall be true on and as of the date of
the signing of this Agreement and on the date of each extension of credit by
Bank pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein, and immediately upon demand by Bank,
the amount by which the outstanding principal balance of any of the
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Credits at any time exceeds any limitation on borrowings applicable thereto.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following,
in form and detail satisfactory to Bank:
(a) not later than 90 days after and as of the end of each fiscal
year, an audited financial statement of Borrower, prepared by a certified public
accountant acceptable to Bank, to include balance sheet, income statement,
statement of cash flow and all footnotes;
(b) not later than 45 days after and as of the end of each fiscal
quarter, a financial statement of Borrower, prepared by Borrower, to include
balance sheet and income statement;
(c) not later than 15 days after and as of the end of each month, a
borrowing base certificate, an inventory collateral report, an aged listing of
accounts receivable and accounts payable and grower accounts payable;
(d) not later than 90 days after and as of the end of each fiscal
year, an audited financial statement of Guarantor, prepared by a certified
public accountant acceptable to Bank, to include balance sheet, income
statement, statement of cash flow and all footnotes;
(e) not later than 45 days after and as of the end of each fiscal
quarter, a financial statement of Guarantor, prepared by Guarantor, to include
balance sheet and income statement;
(f) from time to time such other information as Bank may reasonably
request, including without limitation, copies of rent rolls and other
information with respect to any real property collateral required hereby.
SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
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SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower with a claim in excess of
$250,000.00.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial condition
as follows using generally accepted accounting principles consistently applied
and used consistently with prior practices (except to the extent modified by the
definitions herein):
(a) Working Capital not at any time less than $1,500,000.00, with
"Working Capital" defined as total current assets minus total current
liabilities.
(b) Tangible Net Worth not at any time less than $2,600,000.00, with
"Tangible Net Worth" defined as the aggregate of total stockholders' equity plus
subordinated debt less any intangible assets.
(c) Total Liabilities divided by Tangible Net Worth not at any time
greater than 3.5 to 1.0, with "Total Liabilities" defined as the aggregate of
current liabilities and non-current liabilities less subordinated debt, and with
"Tangible Net Worth" as defined above.
(d) Net income after taxes not less than $1.00 on an annual basis,
determined as of each fiscal year end.
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SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five (5)
days after the occurrence of each such event or matter) give written notice to
Bank in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any of the Credits
except for the purposes stated in Article I hereof.
SECTION 5.2. CAPITAL EXPENDITURES. Make any additional investment in fixed
assets in any fiscal year in excess of an aggregate of $150,000.00.
SECTION 5.3. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Bank, and (b) any
other liabilities of Borrower existing as of, and disclosed to Bank prior to,
the date hereof.
SECTION 5.4. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower's
assets except in the ordinary course of its business.
SECTION 5.6. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable
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instruments for deposit or collection in the ordinary course of business),
accommodation endorser or otherwise for, nor pledge or hypothecate any assets of
Borrower as security for, any liabilities or obligations of any other person or
entity, except any of the foregoing in favor of Bank.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest,
fees or other amounts payable under any of the Loan Documents; provided,
however, that no Event of Default shall be deemed to have occurred under this
subsection (a) unless (i) Bank sends written notice to Borrower and to Epitope,
Inc. of such failure to pay and (ii) Borrower and/or Epitope, Inc. fail to pay
such amount within five (5) Business Days of the date Bank sends such notice. As
used herein, "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in California are authorized or required by law to
close.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections (a) and (b) above), and
with respect to any such default which by its nature can be cured, such default
shall continue for a period of thirty (30) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or
any defined event of default, under the terms of any contract or instrument
(other than any of the Loan Documents) pursuant to which Borrower or any
guarantor hereunder has incurred any debt or other liability to any person or
entity, including Bank; provided, however, that in the case of a default or
defined event of default under the terms of indebtedness to a person or entity
other than Bank, such indebtedness is in excess of $100,000.00 individually or
in the aggregate for all such defaults by Borrower or any guarantor hereunder
combined.
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(e) The filing of a notice of judgment lien against Borrower or any
guarantor hereunder; or the recording of any abstract of judgment against
Borrower or any guarantor hereunder in any county in which Borrower or such
guarantor has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower or any guarantor hereunder; or the entry of a judgment
against Borrower or any guarantor hereunder.
(f) Borrower or any guarantor hereunder shall become insolvent, or
shall suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any guarantor hereunder shall file a
voluntary petition in bankruptcy, or seeking reorganization, in order to effect
a plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended or
recodified from time to time ("Bankruptcy Code"), or under any state or federal
law granting relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors is filed or commenced against Borrower or any guarantor
hereunder, or Borrower or any such shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or any such guarantor shall be adjudicated a bankrupt, or
an order for relief shall be entered against Borrower or any such guarantor by
any court of competent jurisdiction under the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors.
(g) The dissolution or liquidation of Borrower or any guarantor
hereunder; or Borrower or any such guarantor, or any of its their directors,
stockholders or members, shall take action seeking to effect the dissolution or
liquidation of Borrower or such guarantor.
(h) The sale, transfer, hypothecation, assignment or encumbrance,
whether voluntary, involuntary or by operation of law, without Bank's prior
written consent, of all or any part of or interest in any real property
collateral required hereby.
(i) The failure of Guarantor to maintain Tangible Net Worth at all
times greater than or equal to $20,000,000.00, with "Tangible Net Worth" defined
as the
- 14 -
aggregate of total stockholders' equity plus subordinated debt less any
intangible assets.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a)
all indebtedness of Borrower under each of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Bank's option and without notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by each Borrower;
(b) the obligation, if any, of Bank to extend any further credit under any of
the Loan Documents shall immediately cease and terminate; and (c) Bank shall
have all rights, powers and remedies available under each of the Loan Documents,
or accorded by law, including without limitation the right to resort to any or
all security for any of the Credits and to exercise any or all of the rights of
a beneficiary or secured party pursuant to applicable law. All rights, powers
and remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity. Notwithstanding anything to the contrary contained herein, if
Borrower fails to pay when due any principal, interest, fees or other amounts
payable under any of the Loan Documents, Bank shall have no obligation to extend
any further credit under any of the Loan Documents unless and until such amount
is paid within the five (5) Business-Day period specified in Section 6.1 (a)
above.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: XXXXXX AND XXXXXXXXXX, SALES CO.
0000 Xxxxxxx Xxxxx
Xxx Xxxxx, XX 00000
with copies of any notices of payment defaults to
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EPITOPE, INC.
0000 X.X. Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxx 00000
BANK: XXXXX FARGO BANK, NATIONAL ASSOCIATION
Bakersfield Regional Commercial Banking Xxxxxx
0000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxxx, XX 00000
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank's continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank's rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any of the Credits, Borrower or its business, any guarantor
hereunder or the business of such guarantor, or any collateral required
hereunder. Prior to disclosing any confidential information relating to Borrower
or any guarantor hereunder, Bank shall use its best efforts to cause the
proposed
- 16 -
purchaser, assignee or participant to enter into a confidentiality agreement
relating to such confidential information.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to the Credits and supersede all prior negotiations, communications,
discussions and correspondence concerning the subject matter hereof. This
Agreement may be amended or modified only in writing signed by each party
hereto. If Borrower requests an amendment or modification to this Agreement or
to any of the other Loan Documents, Bank shall consider such request in good
faith and in a reasonable period of time.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
SECTION 7.11. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit
- 17 -
and other activities, transactions or obligations of any kind related directly
or indirectly to any of the Loan Documents, including without limitation, any of
the foregoing arising in connection with the exercise of any self-help,
ancillary or other remedies pursuant to any of the Loan Documents. Any party may
by summary proceedings bring an action in court to compel arbitration of a
Dispute. Any party who fails or refuses to submit to arbitration following a
lawful demand by any other party shall bear all costs and expenses incurred by
such other party in compelling arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by the
American Arbitration Association ("AA") or such other administrator as the
parties shall mutually agree upon in accordance with the AA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in California
selected by the AA or other administrator. If there is any inconsistency between
the terms hereof and any such rules, the terms and procedures set forth herein
shall control. All statutes of limitation applicable to any Dispute shall apply
to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of
- 18 -
the state of California could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award, and (iii) shall
have the power to award recovery of all costs and fees, to impose sanctions and
to take such other actions as they deem necessary to the same extent a judge
could pursuant to the Federal Rules of Civil Procedure, the California Rules of
Civil Procedure or other applicable law. Any Dispute in which the amount in
controversy is $5,000,000 or less shall be decided by a single arbitrator who
shall not render an award of greater than $5,000,000 (including damages, costs,
fees and expenses). By submission to a single arbitrator, each party expressly
waives any right or claim to recover more than $5,000,000. Any Dispute in which
the amount in controversy exceeds $5,000,000 shall be decided by majority vote
of a panel of three arbitrators; provided however, that all three arbitrators
must actively participate in all hearings and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary, in
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
California, and (iii) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
California. Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and
not based on legal error under the substantive law of the state of California.
(f) Real Property Collateral; Judicial Reference. Notwithstanding anything
herein to the contrary, no Dispute shall be submitted to arbitration if the
Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to
- 19 -
arbitration, the Dispute shall be referred to a referee in accordance with
California Code of Civil Procedure Section 638 et seq., and this general
reference agreement is intended to be specifically enforceable in accordance
with said Section 638. A referee with the qualifications required herein for
arbitrators shall be selected pursuant to the AA's selection procedures.
Judgment upon the decision rendered by a referee shall be entered in the court
in which such proceeding was commenced in accordance with California Code of
Civil Procedure Sections 644 and 645.
(g) Miscellaneous. To the maximum extent practicable, the AA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the AA.
No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
- 20 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
XXXXX FARGO BANK,
XXXXXX AND XXXXXXXXXX SALES, CO. NATIONAL ASSOCIATION
By: /s/ Xxxx X. Xxxxxxxxxx By: /s/ Xxxxxx X. Del Papa
Title: President/Chief Xxxxxx X. Del Papa
Executive Officer Vice President
- 21 -
Acknowledged by the undersigned ("Guarantor"), which specifically
acknowledges that the failure of Guarantor to maintain Tangible Net Worth
(defined as the aggregate of total stockholders' equity plus subordinated debt
less any intangible assets) at all times greater than or equal to $20,000,000.00
shall constitute an "Event of Default" under the foregoing Credit Agreement.
EPITOPE, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Executive Vice President/
Chief Financial Officer
- 22 -
Exhibit A
REVOLVING LINE OF CREDIT NOTE
$6,500,000.00 Bakersfield, California
December 17, 1996
FOR VALUE RECEIVED, the undersigned XXXXXX AND XXXXXXXXXX SALES, CO.
("Borrower") promises to pay to the order of XXXXX FARGO BANK, NATIONAL
ASSOCIATION ("Bank") at its office at Bakersfield RCBO, 5401 California Avenue,
2nd Floor, Bakersfield, California, or at such other place as the holder hereof
may designate, in lawful money of the United States of America and in
immediately available funds, the principal sum of Six Million Five Hundred
Thousand Dollars ($6,500,000.00), or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the date
of its disbursement (computed on the basis of a 360-day year, actual days
elapsed) either (i) at a fluctuating rate per annum equal to the Prime Rate in
effect from time to time, or (ii) at a fixed rate per annum determined by Bank
to be two and one-half percent (2.50%) above Bank's LIBOR in effect on the first
day of the applicable Fixed Rate Term. When interest is determined in relation
to the Prime Rate, each change in the rate of interest hereunder shall become
effective on the date each Prime Rate change is announced within Bank. With
respect to each LIBOR option selected hereunder, Bank is hereby authorized to
note the date, principal amount, interest rate and Fixed Rate Term applicable
thereto and any payments made thereon on Bank's books and records (either
manually or by electronic entry) and/or on any schedule attached to this Note,
which notations shall be prima facie evidence of the accuracy of the information
noted.
A. DEFINITIONS:
As used herein, the following terms shall have the meanings set forth
after each:
1. "Business Day" means any day except a Saturday, Sunday or any other day
designated as a holiday under Federal or California statute or regulation.
2. "Fixed Rate Term" means a period commencing on a Business Day and
continuing for one (1), two (2), three (3), six (6) or twelve (12) months, as
designated by Borrower, during which all or a portion of the outstanding
principal balance of this Note bears interest determined in relation to Bank's
LIBOR; provided however, that no Fixed Rate Term may be selected for a principal
amount less than Two Hundred Fifty Thousand Dollars ($250,000.00); and provided
further, that no Fixed Rate Term shall extend beyond the scheduled maturity date
hereof. If any
- 23 -
Fixed Rate Term would end on a day which is not a Business Day, then such Fixed
Rate Term shall be extended to the next succeeding Business Day.
3. "LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) and determined pursuant to the following formula:
LIBOR = Base LIBOR
100% - LIBOR Reserve Percentage
(a) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an
amount approximately equal to the principal amount to which such Fixed Rate Term
applies. Borrower understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators of
the Inter-Bank Market as Bank in its discretion deems appropriate including, but
not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.
(b) "LIBOR Reserve Percentage" means the reserve percentage prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable Fixed Rate Term.
4. "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office in San Francisco as its Prime
Rate, with the understanding that the Prime Rate is one of Bank's base rates and
serves as the basis upon which effective rates of interest are calculated for
those loans making reference thereto, and is evidenced by the recording thereof
after its announcement in such internal publication or publications as Bank may
designate.
B. INTEREST:
1. Payment of Interest. Interest accrued on this Note shall be payable on
the fifth day of each month, commencing January 5, 1997.
2. Selection of Interest Rate Options. At any time any portion of this
Note bears interest determined in relation to Bank's LIBOR, it may be continued
by Borrower at the end of the Fixed Rate Term applicable thereto so that all or
a portion thereof bears interest determined in relation to the Prime Rate
- 24 -
or in relation to Bank's LIBOR for a new Fixed Rate Term designated by Borrower.
At any time any portion of this Note bears interest determined in relation to
the Prime Rate, Borrower may convert all or a portion thereof so that it bears
interest determined in relation to Bank's LIBOR for a Fixed Rate Term designated
by Borrower. At the time each advance is requested hereunder or Borrower wishes
to select the LIBOR option for all or a portion of the outstanding principal
balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank
notice specifying (a) the interest rate option selected by Borrower, (b) the
principal amount subject thereto, and (c) if the LIBOR option is selected, the
length of the applicable Fixed Rate Term. Any such notice may be given by
telephone so long as, with respect to each LIBOR selection, (i) Bank receives
written confirmation from Borrower not later than three (3) Business Days after
such telephone notice is given, and (ii) such notice is given to Bank prior to
10:00 a.m., California time, on the first day of the Fixed Rate Term. For each
LIBOR option requested hereunder, Bank will quote the applicable fixed rate to
Borrower at approximately 10:00 a.m., California time, on the first day of the
Fixed Rate Term. If Borrower does not immediately accept the rate quoted by
Bank, any subsequent acceptance by Borrower shall be subject to a
redetermination by Bank of the applicable fixed rate; provided however, that if
Borrower fails to accept any such rate by 11:00 a.m., California time, on the
Business Day such quotation is given, then the quoted rate shall expire and Bank
shall have no obligation to permit a LIBOR option to be selected on such day. If
no specific designation of interest is made at the time any advance is requested
hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have
made a Prime Rate interest selection for such advance or the principal amount to
which such Fixed Rate Term applied.
3. Additional LIBOR Provisions.
(a) If Bank at any time shall determine that for any reason adequate and
reasonable means do not exist for ascertaining Bank's LIBOR, then Bank shall
promptly give notice thereof to Borrower. If such notice is given and until such
notice has been withdrawn by Bank, than (i) no new LIBOR option may be selected
by Borrower, and (ii) any portion of the outstanding principal balance hereof
which bears interest determined in relation to Bank's LIBOR, subsequent to the
end of the Fixed Rate Term applicable thereto, shall bear interest determined in
relation to the Prime Rate.
(b) If any law, treaty, rule, regulation or determination of a court or
governmental authority or any change therein or in the interpretation or
application thereof (each, a "Change in Law") shall make it unlawful for Bank
(i) to make LIBOR options available hereunder, or (ii) to maintain interest
rates based on Bank's LIBOR, then in the former event, any obligation of Bank to
make available such unlawful LIBOR options shall immediately be
- 25 -
canceled, and in the latter event, any such unlawful LIBOR-based interest rates
then outstanding shall be converted, at Bank's option, so that interest on the
portion of the outstanding principal balance subject thereto is determined in
relation to the Prime Rate; provided however, that if any such Change in Law
shall permit any LIBOR-based interest rates to remain in effect until the
expiration of the Fixed Rate Term applicable thereto, then such permitted
LIBOR-based interest rates shall continue in effect until the expiration of such
Fixed Rate Term. Upon the occurrence of any of the foregoing events, Borrower
shall pay to Bank immediately upon demand such amounts as may be necessary to
compensate Bank for any fines, fees, charges, penalties or other costs incurred
or payable by Bank as a result thereof and which are attributable to any LIBOR
options made available to Borrower hereunder, and any reasonable allocation made
by Bank among its operations shall be conclusive and binding upon Borrower.
(c) If any Change in Law or compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority shall:
(i) subject Bank to any tax, duty or other charge with respect to
any LIBOR options, or change the basis of taxation of payments to Bank of
principal, interest, fees or any other amount payable hereunder (except
for changes in the rate of tax on the overall net income of Bank); or
(ii) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by, deposits or
other liabilities in or for the account of, advances or loans by, or any
other acquisition of funds by any office of Bank; or
(iii) impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduce any
amount receivable by Bank in connection therewith, then in any such case,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to such LIBOR
options. In determining which costs incurred by Bank and/or reductions in
amounts received by Bank are attributable to any LIBOR options made available to
Borrower hereunder, any reasonable allocation made by Bank among its operations
shall be conclusive and binding upon Borrower.
4. Default Interest. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the
- 26 -
outstanding principal balance of this Note shall bear interest until paid in
full at an increased rate per annum (computed on the basis of a 360-day year,
actual days elapsed) equal to four percent (4%) above the rate of interest from
time to time applicable to this Note.
C. BORROWING AND REPAYMENT:
1. Borrowing and Repayment. Borrower may from time to time during the term
of this Note borrow, partially or wholly repay its outstanding borrowings, and
reborrow, subject to all of the limitations, terms and conditions of this Note
and of any document executed in connection with or governing this Note; provided
however, that the total outstanding borrowings under this Note shall not at any
time exceed the principal amount stated above. The unpaid principal balance of
this obligation at any time shall be the total amounts advanced hereunder by the
holder hereof less the amount of principal payments made hereon by or for any
Borrower, which balance may be endorsed hereon from time to time by the holder.
The outstanding principal balance of this Note shall be due and payable in full
on February 5, 1998.
2. Advances. Advances hereunder, to the total amount of the principal sum
stated above, may be made by the holder at the oral or written request of (a)
Xxxx X. Xxxxxx or Xxxx X. Xxxxxxxxxx or Xxxx Xxxxxx or Xxx Xxxxxxx, any one
acting alone, who are authorized to request advances and direct the disposition
of any advances until written notice of the revocation of such authority is
received by the holder at the office designated above, or (b) any person, with
respect to advances deposited to the credit of any account of any Borrower with
the holder, which advances, when so deposited, shall be conclusively presumed to
have been made to or for the benefit of each Borrower regardless of the fact
that persons other than those authorized to request advances may have authority
to draw against such account. The holder shall have no obligation to determine
whether any person requesting an advance is or has been authorized by any
Borrower.
3. Application of Payments. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
Bank's LIBOR, with such payments applied to the oldest Fixed Rate Term first.
4. Prepayment.
(a) Prime Rate. Borrower may prepay principal on any portion of this Note
which bears interest determined in relation to the Prime Rate at any time, in
any amount and without penalty.
- 27 -
(b) LIBOR. Borrower may prepay principal on any portion of this Note which
bears interest determined in relation to Bank's LIBOR at any time and in the
minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however,
that if the outstanding principal balance of such portion of this Note is less
than said amount, the minimum prepayment amount shall be the entire outstanding
principal balance thereof. In consideration of Bank providing this prepayment
option to Borrower, or if any such portion of this Note shall become due and
payable at any time prior to the last day of the Fixed Rate Term applicable
thereto by acceleration or otherwise, Borrower shall pay to Bank immediately
upon demand a fee which is the sum of the discounted monthly differences for
each month from the month of prepayment through the month in which such Fixed
Rate Term matures, calculated as follows for each such month:
(i) Determine the amount of interest which would have accrued each
month on the amount prepaid at the interest rate applicable to
such amount had it remained outstanding until the last day of
the Fixed Rate Term applicable thereto.
(ii) Subtract from the amount determined in (i) above the amount of
interest which would have accrued for the same month on the
amount prepaid for the remaining term of such Fixed Rate Term
at Bank's LIBOR in effect on the date of prepayment for new
loans made for such term and in a principal amount equal to
the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than
zero, discount that difference by Bank's LIBOR used in (ii)
above.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to
pay any prepayment fee when due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum four percent (4%) above
the Prime Rate in effect from time to time (computed on the basis of a 360-day
year, actual days elapsed).
D. EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions
of that certain Credit Agreement between Borrower and Bank dated as of December
17, 1996, as amended from time to time (the "Credit Agreement"). Any default in
the payment or performance of any obligation under this Note, or any defined
- 28 -
event of default under the Credit Agreement, shall constitute an "Event of
Default" under this Note.
E. MISCELLANEOUS:
1. Remedies. Upon the occurrence of any Event of Default, the holder of
this Note, at the holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, protest or notice of dishonor, all of which are expressly
waived by each Borrower, and the obligation, if any, of the holder to extend any
further credit hereunder shall immediately cease and terminate. Each Borrower
shall pay to the holder immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys' fees (to
include outside counsel fees and all allocated costs of the holder's in-house
counsel), incurred by the holder in connection with the enforcement of the
holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, and including any of the foregoing incurred in connection with any
bankruptcy proceeding relating to any Borrower.
2. Obligations Joint and Several. Should more than one person or entity
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.
3. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of California, except to the extent Bank
has greater rights or remedies under Federal law, whether as a national bank or
otherwise, in which case such choice of California law shall not be deemed to
deprive Bank of any such rights and remedies as may be available under Federal
law.
XXXXXX AND XXXXXXXXXX SALES, CO.
By: ____________________________
Title: _______________________
- 29 -
April 19, 1996
Xxxxxx & Xxxxxxxxxx Sales, Co.
0000 Xxxxxxx Xx.
Xxx Xxxxx, XX 00000
Re: Your $253,500.00 credit accommodation evidenced by
promissory note dated as of March 18, 1993 (the "Note")
Dear Sirs:
This letter is to advise you that, effective as of April 19, 1996, the
variable rate of interest applicable to the above-described credit accommodation
from Xxxxx Fargo Bank, National Association ("Bank.) is hereby reduced to
one-half percent (0.50%) above the Prime Rate in effect from time to time. The
Note is hereby deemed modified by this letter to reflect said interest rate
reduction. Except as expressly set forth herein, all terms and conditions of the
Note remain in full force and effect, without waiver or modification.
Sincerely,
XXXXX FARGO BANK,
NATIONAL ASSOCIATION
By: /s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx
Vice President
Acknowledged and agreed as of May 6, 1996:
XXXXXX & XXXXXXXXXX SALES, CO.
By: /s/ Xxxx X. Xxxxxx
Title: Secretary
- 30 -
XXXXX FARGO BANK PROMISSORY NOTE
$253,500.00 Bakersfield, California
March 18, 1993
FOR VALUE RECEIVED, the undersigned XXXXXX AND XXXXXXXXXX SALES, CO.
("Borrower") promises to pay to the order of XXXXX FARGO BANK, NATIONAL
ASSOCIATION ("Bank") at its office at 0000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxxxx,
Xxxxxxxxxx, or at such other place as the holder hereof may designate, in lawful
money of the United States of America and in immediately available funds, the
principal sum of Two Hundred Fifty-Three Thousand Five Hundred and No/100
Dollars ($253.500.00), with interest thereon at a rate per annum (computed on
the basis of a 360-day year, actual days elapsed) 1.25% above the Prime Rate in
effect from time to time. The "Prime Rate" is a base rate that the Bank from
time to time establishes and which serves as the basis upon which effective
rates of interest are calculated for those loans making reference thereto. Each
change in the rate of interest hereunder shall become effective on the date each
Prime Rate change is announced within the Bank.
Interest accrued on this Note shall be payable on the fifth day of each
month, commencing April 5, 1993.
Principal shall be payable in installments as follows:
Principal shall be payable annually on the fifth day of each March in four (4)
equal successive installments of Sixteen Thousand Nine Hundred and No/100
Dollars ($16,900.00) each, commencing March 5, 1994, and continuing up to and
including March 5, 1997,
with a final installment consisting of all remaining unpaid principal due and
payable in full on March 5, 1998. Each payment made on this Note shall be
credited first, to any interest then due and second, to the outstanding
principal balance hereof.
From and after the maturity date of this Note, or such earlier date as all
principal owing hereunder becomes due and payable by acceleration or otherwise,
the outstanding principal balance of this Note shall bear interest until paid in
full at an increased rate per annum (computed on the basis of a 360-day year,
actual days elapsed) equal to four percent (4%) above the rate of interest from
time to time applicable to this Note.
The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
1. The failure to pay any principal, interest, fees or other charges when
due under this Note or any contract, instrument or document executed in
connection with this Note.
- 31 -
2. The filing of a petition by or against any Borrower, any guarantor of
this Note or any general partner or joint venturer in any Borrower which is a
partnership or a joint venture (with each such guarantor, general partner and/or
joint venturer referred to herein as a "Third Party Obligor") under any
provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, as
amended or recodified from time to time, or under any similar or other law
relating to bankruptcy, insolvency, reorganization or other relief for debtors;
the appointment of a receiver, trustee, custodian or liquidator of or for any
part of the assets or property of any Borrower or Third Party Obligor; any
Borrower or Third Party Obligor becomes insolvent, makes a general assignment
for the benefit of creditors or is generally not paying its debts as they become
due; or any attachment or like levy on any property of any Borrower or Third
Party Obligor.
3. The death or incapacity of any individual Borrower or Third Party
Obligor, or the dissolution or liquidation of any Borrower or Third Party
Obligor which is a corporation. partnership, joint venturer or any other type of
entity.
4. Any default in the payment or performance of any obligation, or any
defined event of default, under any provisions of any contract, instrument or
document pursuant to which any Borrower or Third Party Obligor has incurred any
obligation for borrowed money, any purchase obligation or any other liability of
any kind to any person or entity, including the holder.
5. Any financial statement provided by any Borrower or Third Party Obligor
to Bank proves false.
6. Any sale or transfer of all or a substantial or material part of the
assets of any Borrower or Third Party Obligor other than in the ordinary course
of business.
7. Any violation or breach of any provision of, or any defined event of
default under, any addendum to this Note or any loan agreement, guaranty,
security agreement, deed of trust or other document executed in connection with
or securing this Note.
Upon the occurrence of any Event of Default, the holder of this Note, at
the holder's option, may declare all sums of principal and interest outstanding
hereunder to be immediately due and payable without presentment, demand, protest
or notice of dishonor, all of which are expressly waived by each Borrower. Each
Borrower shall pay to the holder immediately upon demand the full amount of all
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of the holder's in-house counsel), incurred
by the holder in connection with the enforcement of the holder's rights and/or
the collection of any amounts which become due to the holder under this Note,
and the prosecution or defense of any
- 32 -
action in any way related to this Note, including without limitation, any action
for declaratory relief.
Should more than one person or entity sign this Note as a Borrower, the
obligations of each such Borrower shall be joint and several.
This Note shall be governed by and construed in accordance with the laws
of the State of California, except to the extent Bank has greater rights or
remedies under Federal law, whether as a national bank or otherwise, in which
case such choice of California law shall not be deemed to deprive Bank of any
such rights and remedies as may be available under Federal law.
See Addendum to Promissory Note attached hereto, all terms of which are
incorporated herein by this reference.
XXXXXX AND XXXXXXXXXX SALES, CO. This Note is secured by a Deed
of Trust of even date
herewith.
By: /s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx, Secretary
- 33 -
ADDENDUM TO PROMISSORY NOTE
THIS ADDENDUM is attached to and made a part of that certain promissory
note executed by XXXXXX AND XXXXXXXXXX SALES, CO. ("Borrower") and payable to
XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Bank"), or order, dated as of March 18,
1993, in the principal amount of Two Hundred Fifty-Three Thousand Five Hundred
Dollars ($253,500.00) (the "Note").
The following provisions are hereby incorporated into the Note:
1. So long as Bank remains committed to extend credit to Borrower under
this Note and until payment in full of all obligations of Borrower hereunder,
Borrower shall unless Bank otherwise consents in writing:
(a) Provide to Bank all of the following, in form and detail
satisfactory to Bank:
(i) not later than 90 days after and as of the end of each fiscal
year, a reviewed financial statement of Borrower, prepared by a certified
public accountant acceptable to Bank, to include a balance sheet, income
statement, statement of retained earnings, cash flow and accompanying
footnotes;
(ii) not later than 20 days after and as of the end of each quarter,
a compiled financial statement of Borrower, prepared by Borrower, to
include a balance sheet and income statement;
(iii) not later than each May 15, a financial statement of each
Guarantor, dated not more than 12 months after the date of the most recent
financial statement received by Bank from each Guarantor, prepared by each
Guarantor, to include a balance sheet, and within 30 days after filing,
but in no event later than each May 15, a copy of each Guarantor's filed
federal income tax return for such year;
(iv) from time to time such other information as Bank may reasonably
request.
(b) Maintain its financial condition as follows using generally
accepted accounting principles consistently applied and used consistently
with prior practices, except to the extent modified by the following
definitions:
- 34 -
(i) Working Capital (defined as total current assets, excluding
prepaids, less total current liabilities) not at any time less than
$450,000.00.
(ii) Tangible Net Worth (defined as the aggregate of total
stockholders' equity plus subordinated debt less the aggregate of any
treasury stock, any intangible assets and any obligations due from
stockholders, employees and/or affiliates) not at any time less than
$1,100,000.00 on an annual basis, determined as of each fiscal year end.
(iii) Cash Flow Coverage Ratio (defined as the aggregate of net
income after taxes plus depreciation and other non-cash expenses, less
gain on sale of assets, dividends, withdrawals and treasury stock
purchases divided by the aggregate of the current portion of long-term
debt) not less than 1.5 to 1.0 on an annual basis, determined as of each
fiscal year end.
(iv) not make any additional investment in fixed assets in any
fiscal year in excess of an aggregate of $150,000.00.
(v) not declare or pay any dividend or distribution either in cash,
stock or any other property on Borrower's stock now or hereafter
outstanding; nor redeem, retire, repurchase or otherwise acquire any
shares of any class of Borrower's stock now or hereafter outstanding;
provided however, that so long as Borrower maintains its valid election as
an S corporation, Borrower may pay cash dividends or distributions to its
shareholders in any fiscal year to cover its shareholders' federal income
tax liability for the immediately preceding fiscal year arising as a
direct result of Borrower's reported income for such fiscal year, but not
to exceed the minimum amount so required, and Borrower shall provide to
Bank, upon request, any documentation required by Bank to substantiate the
appropriateness of amounts paid or to be paid.
(vi) give notice in writing to Bank of any litigation pending or
threatened against Borrower in excess of $50,000.00.
2. All obligations of Borrower to Xxxx X. Xxxxxxxxxx and Xxxx X. Xxxxxx
shall be subordinated in right of repayment to all obligations of Borrower to
Bank, up to an aggregate of $460,000.00, as evidenced by and subject to the
terms of
- 35 -
subordination agreements in form and substance satisfactory to Bank.
3. Borrower shall pay to Bank a non-refundable commitment fee for the Note
in the amount of $3,802.50, which commitment fee shall be due and payable in
full upon execution of loan documents.
IN WITNESS WHEREOF, this Addendum has been executed as of the same date as
the Note.
XXXXXX AND XXXXXXXXXX SALES, CO.
By: /s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx, Secretary
- 36 -
EXHIBIT C
Exhibit A to Deed of Trust executed by XXXXXX AND XXXXXXXXXX SALES, CO. as
Trustor, to AMERICAN SECURITIES COMPANY, as Trustee, for the benefit of XXXXX
FARGO BANK, NATIONAL ASSOCIATION, as Beneficiary, dated as of March 18, 1993.
DESCRIPTION OF PROPERTY
The land referred to in this report is situated in the State of
California, County of Tulare and is described as follows:
The South half of the West half of the Norwest quarter and the East half of the
Norwest quarter of the Norwest quarter, Section 22, Township 17 South, Range 23
East, Mount Diablo Base and Meridian, according to the official plat thereof.
EXCEPTING from the North half of the Southwest quarter of the Norwest quarter
all oil and mineral rights in and to said property as reserved from Xxxxx X.
Xxxxxxxx to X. X. Xxxx, dated December 1, 1933, recorded December 8, 1933, in
Book 533, Page 371, Official Records.
- 37 -
CONTINUING GUARANTY
TO: XXXXX FARGO BANK, NATIONAL ASSOCIATION
1. GUARANTY; DEFINITIONS. In consideration of any credit or other
financial accommodation heretofore, now or hereafter extended or made to XXXXXX
& XXXXXXXXXX SALES CO., INC. ("Borrower") by XXXXX FARGO BANK, NATIONAL
ASSOCIATION ("Bank"), and for other valuable consideration, the undersigned
EPITOPE, INC. ("Guarantor"), jointly and severally unconditionally guarantees
and promises to pay to Bank, or order, on demand in lawful money of the United
States of America and in immediately available funds, any and all Indebtedness
of Borrower to Bank. The term "Indebtedness" is used herein in its most
comprehensive sense and includes any and all advances, debts, obligations and
liabilities of Borrower, heretofore, now or hereafter made, incurred or created,
whether voluntary or involuntary and however arising, whether due or not due,
absolute or contingent, liquidated or unliquidated, determined or undetermined,
and whether Borrower may be liable individually or jointly with others, or
whether recovery upon such Indebtedness may be or hereafter becomes
unenforceable.
2. MAXIMUM LIABILITY; SUCCESSIVE TRANSACTIONS; REVOCATION; OBLIGATION
UNDER OTHER GUARANTIES. The liability of Guarantor shall not exceed at any one
time the sum of Six Million Seven Hundred Fifty-Six Thousand Eight Hundred
Dollars ($6,756,800.00) for principal, plus all interest thereon and costs and
expenses pertaining to the enforcement of this Guaranty and/or the collection of
the Indebtedness of Borrower to Bank. Notwithstanding the foregoing, Bank may
permit the Indebtedness of Borrower to exceed Guarantor's liability. This is a
continuing guaranty and all rights, powers and remedies hereunder shall apply to
all past, present and future Indebtedness of Borrower to Bank, including that
arising under successive transactions which shall either continue the
Indebtedness, increase or decrease it, or from time to time create new
Indebtedness after all or any prior Indebtedness has been satisfied, and
notwithstanding the death, incapacity, dissolution, liquidation or bankruptcy of
Borrower or Guarantor or any other event or proceeding affecting Borrower or
Guarantor. This Guaranty shall not apply to any new Indebtedness created after
actual receipt by Bank of written notice of its revocation as to such new
Indebtedness; provided however, that loans or advances made by Bank to Borrower
after revocation under commitments existing prior to receipt by Bank of such
revocation, and extensions, renewals or modifications, of any kind, of
Indebtedness incurred by Borrower or committed by Bank prior to receipt by Bank
of such revocation, shall not be considered new Indebtedness. Any such notice
must be sent to Bank by registered U.S. mail, postage prepaid, addressed to its
office at Bakersfield Regional Commercial Banking Office, 5401 California
- 0 -
Xxxxxx, 0xx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxxx 00000, or at such other address as
Bank shall from time to time designate. Any payment by Guarantor shall not
reduce Guarantor's maximum obligation hereunder unless written notice to that
effect is actually received by Bank at or prior to the time of such payment. The
obligations of Guarantor hereunder shall be in addition to any obligations of
Guarantor under any other guaranties of any liabilities or obligations of
Borrower or any other person heretofore or hereafter given to Bank unless said
other guaranties are expressly modified or revoked in writing; and this Guaranty
shall not, unless expressly herein provided, affect or invalidate any such other
guaranties.
3. OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF STATUTE OF
LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder are joint and
several and independent of the obligations of Borrower, and a separate action or
actions may be brought and prosecuted against Guarantor whether action is
brought against Borrower or any other person, or whether Borrower or any other
person is joined in any such action or actions. Guarantor acknowledges that this
Guaranty is absolute and unconditional, there are no conditions precedent to the
effectiveness of this Guaranty, and this Guaranty is in full force and effect
and is binding on Guarantor as of the date written below, regardless of whether
Bank obtains collateral or any guaranties from others or takes any other action
contemplated by Guarantor. Guarantor waives the benefit of any statute of
limitations affecting Guarantor's liability hereunder or the enforcement
thereof, and Guarantor agrees that any payment of any Indebtedness or other act
which shall toll any statute of limitations applicable thereto shall similarly
operate to toll such statute of limitations applicable to Guarantor's liability
hereunder. The liability of Guarantor hereunder shall be reinstated and revived
and the rights of Bank shall continue if and to the extent for any reason any
amount at any time paid on account of any Indebtedness guaranteed hereby is
rescinded or must otherwise be restored by Bank, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise, all as though such
amount had not been paid. The determination as to whether any amount so paid
must be rescinded or restored shall be made by Bank in its sole discretion;
provided however, that if Bank chooses to contest any such matter at the request
of Guarantor, Guarantor agrees to indemnify and hold Bank harmless from and
against all costs and expenses, including reasonable attorneys' fees, expended
or incurred by Bank in connection therewith, including without limitation, in
any litigation with respect thereto.
4. AUTHORIZATIONS TO BANK. Guarantor authorizes Bank either before or
after revocation hereof, without notice to or demand on Guarantor, and without
affecting Guarantor's liability hereunder, from time to time to: (a) alter,
compromise, renew, extend, accelerate or otherwise change the time for payment
of,
- 2 -
or otherwise change the terms of the Indebtedness or any portion thereof,
including increase or decrease of the rate of interest thereon; (b) take and
hold security for the payment of this Guaranty or the Indebtedness or any
portion thereof, and exchange, enforce, waive, subordinate or release any such
security; (c) apply such security and direct the order or manner of sale
thereof, including without limitation, a non-judicial sale permitted by the
terms of the controlling security agreement or deed of trust, as Bank in its
discretion may determine; (d) release or substitute any one or more of the
endorsers or any other guarantors of the Indebtedness, or any portion thereof,
or any other party thereto; and (e) apply payments received by Bank from
Borrower to any Indebtedness of Borrower to Bank, in such order as Bank shall
determine in its sole discretion, whether or not such Indebtedness is covered by
this Guaranty, and Guarantor hereby waives any provision of law regarding
application of payments which specifies otherwise. Bank may without notice
assign this Guaranty in whole or in part. Upon Bank's request, Guarantor agrees
to provide to Bank copies of Guarantor's financial statements.
5. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to
Bank that: (a) this Guaranty is executed at Borrower's request; (b) Guarantor
shall not, without Bank's prior written consent, sell, lease, assign, encumber,
hypothecate, transfer or otherwise dispose of all or a substantial or material
part of Guarantor's assets other than in the ordinary course of Guarantor's
business; (c) Bank has made no representation to Guarantor as to the
creditworthiness of Borrower; and (d) Guarantor has established adequate means
of obtaining from Borrower on a continuing basis financial and other information
pertaining to Borrower's financial condition. Guarantor agrees to keep
adequately informed from such means of any facts, events or circumstances which
might in any way affect Guarantor's risks hereunder, and Guarantor further
agrees that Bank shall have no obligation to disclose to Guarantor any
information or material about Borrower which is acquired by Bank in any manner.
6. GUARANTOR'S WAIVERS.
(a) Guarantor waives any right to require Bank to: (i) proceed against
Borrower or any other person; (ii) marshal assets or proceed against or exhaust
any security held from Borrower or any other person; (iii) give notice of the
terms, time and place of any public or private sale of personal property
security held from Borrower or any other person, or otherwise comply with the
provisions of Section 9504 of the California Uniform Commercial Code; (iv) take
any action or pursue any other remedy in Bank's power; or (v) make any
presentment or demand for performance, or give any notice of nonperformance,
protest, notice of protest or notice of dishonor hereunder or in connection with
any obligations or evidences of indebtedness held by Bank as security for or
which constitute in whole or in part
- 3 -
the Indebtedness guaranteed hereunder, or in connection with the
creation of new or additional Indebtedness.
(b) Guarantor waives any defense to its obligations hereunder based upon
or arising by reason of: (i) any disability or other defense of Borrower or any
other person; (ii) the cessation or limitation from any cause whatsoever, other
than payment in full, of the Indebtedness of Borrower or any other person; (iii)
any lack of authority of any officer, director, partner, agent or any other
person acting or purporting to act on behalf of Borrower which is a corporation,
partnership or other type of entity, or any defect in the formation of such
Borrower; (iv) the application by Borrower of the proceeds of any Indebtedness
for purposes other than the purposes represented by Borrower to, or intended or
understood by, Bank or Guarantor; (v) any act or omission by Bank which directly
or indirectly results in or aids the discharge of Borrower or any portion of the
Indebtedness by operation of law or otherwise, or which in any way impairs or
suspends any rights or remedies of Bank against Borrower; (vi) any impairment of
the value of any interest in any security for the Indebtedness or any portion
thereof, including without limitation, the failure to obtain or maintain
perfection or recordation of any interest in any such security, the release of
any such security without substitution, and/or the failure to preserve the value
of, or to comply with applicable law in disposing of, any such security; or
(vii) any modification of the Indebtedness, in any form whatsoever, including
any modification made after revocation hereof to any Indebtedness incurred prior
to such revocation, and including without limitation the renewal, extension,
acceleration or other change in time for payment of, or other change in the
terms of, the Indebtedness or any portion thereof, including increase or
decrease of the rate of interest thereon. Until all Indebtedness shall have been
paid in full, Guarantor shall have no right of subrogation, and Guarantor waives
any right to enforce any remedy which Bank now has or may hereafter have against
Borrower or any other person, and waives any benefit of, or any right to
participate in, any security now or hereafter held by Bank. Guarantor further
waives all rights and defenses Guarantor may have arising out of (A) any
election of remedies by Bank, even though that election of remedies, such as a
non-judicial foreclosure with respect to any security for any portion of the
Indebtedness, destroys Guarantor's rights of subrogation or Guarantor's rights
to proceed against Borrower for reimbursement, or (B) any loss of rights
Guarantor may suffer by reason of any rights, powers or remedies of Borrower in
connection with any anti-deficiency laws or any other laws limiting, qualifying
or discharging Borrower's Indebtedness, whether by operation of Sections 726,
580a or 580d of the Code of Civil Procedure as from time to time amended, or
otherwise, including any rights Guarantor may have to a Section 580a fair market
value hearing to determine the size of a deficiency following any trustee's
foreclosure sale or other disposition of any real property security for any
portion of the Indebtedness.
- 4 -
7. BANK'S RIGHTS WITH RESPECT TO GUARANTOR'S PROPERTY IN BANK'S
POSSESSION. In addition to all liens upon and rights of setoff against the
monies, securities or other property of Guarantor given to Bank by law, Bank
shall have a lien upon and a right of setoff against all monies, securities and
other property of Guarantor now or hereafter in the possession of or on deposit
with Bank, whether held in a general or special account or deposit or for
safekeeping or otherwise, and every such lien and right of setoff may be
exercised without demand upon or notice to Guarantor. No lien or right of setoff
shall be deemed to have been waived by any act or conduct on the part of Bank,
or by any neglect to exercise such right of setoff or to enforce such lien, or
by any delay in so doing, and every right of setoff and lien shall continue in
full force and effect until such right of setoff or lien is specifically waived
or released by Bank in writing.
8. SUBORDINATION. Any Indebtedness of Borrower now or hereafter held by
Guarantor is hereby subordinated to the Indebtedness of Borrower to Bank. Such
Indebtedness of Borrower to Guarantor is assigned to Bank as security for this
Guaranty and the Indebtedness and, if Bank requests, shall be collected and
received by Guarantor as trustee for Bank and paid over to Bank on account of
the Indebtedness of Borrower to Bank but without reducing or affecting in any
manner the liability of Guarantor under the other provisions of this Guaranty.
Any notes or other instruments now or hereafter evidencing such Indebtedness of
Borrower to Guarantor shall be marked with a legend that the same are subject to
this Guaranty and, if Bank so requests, shall be delivered to Bank. Guarantor
will, and Bank is hereby authorized in the name of Guarantor from time to time
to, execute and file financing statements and continuation statements and
execute such other documents and take such other action as Bank deems necessary
or appropriate to perfect, preserve and enforce its rights hereunder.
9. REMEDIES; NO WAIVER. All rights, powers and remedies of Bank hereunder
are cumulative. No delay, failure or discontinuance of Bank in exercising any
right, power or remedy hereunder shall affect or operate as a waiver of such
right, power or remedy; nor shall any single or partial exercise of any such
right, power or remedy preclude, waive or otherwise affect any other or further
exercise thereof or the exercise of any other right, power or remedy. Any
waiver, permit, consent or approval of any kind by Bank of any breach of this
Guaranty, or any such waiver of any provisions or conditions hereof, must be in
writing and shall be effective only to the extent set forth in writing.
10. COSTS, EXPENSES AND ATTORNEYS' FEES. Guarantor shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and
- 5 -
all allocated costs of Bank's in-house counsel), expended or incurred by Bank in
connection with the enforcement of any of Bank's rights, powers or remedies
and/or the collection of any amounts which become due to Bank under this
Guaranty, and the prosecution or defense of any action in any way related to
this Guaranty, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to Guarantor or any other person or entity. All of the
foregoing shall be paid by Guarantor with interest from the date of demand until
paid in full at a rate per annum equal to the greater of ten percent (10%) or
the Prime Rate in effect from time to time. The "Prime Rate" is a base rate that
Bank from time to time establishes and which serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto.
11. SUCCESSORS; ASSIGNMENT. This Guaranty shall be binding upon and inure
to the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties; provided however, that Guarantor may not
assign or transfer any of its interests or rights hereunder without Bank's prior
written consent. Guarantor acknowledges that Bank has the right to sell, assign,
transfer, negotiate or grant participations in all or any part of, or any
interest in, any Indebtedness of Borrower to Bank and any obligations with
respect thereto, including this Guaranty. In connection therewith, Bank may
disclose all documents and information which Bank now has or hereafter acquires
relating to Guarantor and/or this Guaranty, whether furnished by Borrower,
Guarantor or otherwise. Guarantor further agrees that Bank may disclose such
documents and information to Borrower.
12. AMENDMENT. This Guaranty may be amended or modified only in writing
signed by Bank and Guarantor.
13. OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this
Guaranty as a Guarantor hereby expressly agrees that recourse may be had against
his or her separate property for all his or her obligations under this Guaranty.
14. UNDERSTANDING WITH RESPECT TO WAIVERS; SEVERABILITY OF PROVISIONS.
Guarantor warrants and agrees that each of the waivers set forth herein is made
with Guarantor's full knowledge of its significance and consequences, and that
under the circumstances, the waivers are reasonable and not contrary to public
policy or law. If any waiver or other provision of this Agreement shall be held
to be prohibited by or invalid under applicable public policy or law, such
waiver or other provision shall be ineffective only to the extent of such
prohibition or
- 6 -
invalidity, without invalidating the remainder of such waiver or other provision
or any remaining provisions of this Agreement.
15. GOVERNING LAW. This Guaranty shall be governed by and construed in
accordance with the laws of the State of California.
16. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Guaranty. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, this Guaranty and each other
document, contract and instrument required hereby or now or hereafter delivered
to Bank in connection herewith (collectively, the "Documents"), or any past,
present or future extensions of credit and other activities, transactions or
obligations of any kind related directly or indirectly to any of the Documents,
including without limitation, any of the foregoing arising in connection with
the exercise of any self-help, ancillary or other remedies pursuant to any of
the Documents. Any party may by summary proceedings bring an action in court to
compel arbitration of a Dispute. Any party who fails or refuses to submit to
arbitration following a lawful demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by the
American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Documents.
The arbitration shall be conducted at a location in California selected by the
AAA or other administrator. If there is any inconsistency between the terms
hereof and any such rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any Dispute shall apply to any
arbitration proceeding. All discovery activities shall be expressly limited to
matters directly relevant to the Dispute being arbitrated. Judgment upon any
award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. ss. 91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure
- 7 -
against or sale of any real or personal property collateral or security, or to
obtain provisional or ancillary remedies, including without limitation
injunctive relief, sequestration, attachment, garnishment or the appointment of
a receiver, from a court of competent jurisdiction before, after or during the
pendency of any arbitration or other proceeding. The exercise of any such remedy
shall not waive the right of any party to compel arbitration or reference
hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive law
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary, in
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
California, and (iii) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
California. Judgment confirming
- 8 -
an award in such a proceeding may be entered only if a court determines the
award is supported by substantial evidence and not based on legal error under
the substantive law of the state of California.
(f) Real Property Collateral; Judicial Reference. Notwithstanding anything
herein to the contrary, no Dispute shall be submitted to arbitration if the
Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
(g) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Documents or the subject matter of the Dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Documents or any relationship between the parties.
17. PAYMENT DEFAULT BY BORROWER. Notwithstanding anything to the contrary
contained herein, no "Event of Default" shall be deemed to have occurred under
that certain Credit Agreement dated as of December 17, 1996 between Borrower and
Bank as a consequence of Borrower's failure to pay when due any principal,
interest, fees or other amounts payable thereunder or under any of the loan
documents related thereto unless (a) Bank sends written notice to Borrower and
to Guarantor of such failure to pay and (b) Borrower and/or Guarantor fail to
pay such amount
- 9 -
within five (5) Business Days of the date Bank sends such notice. As used
herein, "Business Day" means any day except a Saturday, Sunday or any other day
on which commercial banks in California are authorized or required by law to
close.
IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty
as of December 17, 1996.
EPITOPE, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Executive Vice President/
Chief Financial Officer
- 10 -
SUBORDINATION AGREEMENT
THIS AGREEMENT is entered into by and among XXXXXX & XXXXXXXXXX SALES CO.,
INC. ("Borrower"), EPITOPE, INC. ("Creditor"), and XXXXX FARGO BANK, NATIONAL
ASSOCIATION ("Bank").
RECITALS
A. Borrower is indebted to Creditor, and Borrower proposes to obtain
credit or has obtained credit from Bank; and
B. Bank has indicated that it will extend or continue credit to Borrower
if certain conditions are met, including without limitation, the requirement
that Creditor execute this Agreement.
NOW, THEREFORE, as an inducement to Bank to extend or continue credit and
for other valuable consideration, the parties hereto agree as follows:
1. INDEBTEDNESS SUBORDINATED. Creditor subordinates all Indebtedness now
or at any time hereafter owing from Borrower to Creditor (including without
limitation, interest thereon which may accrue subsequent to Borrower becoming
subject to any state or federal debtor-relief statute) ("Junior Debt") to all
Indebtedness now or at any time hereafter owing from Borrower to Bank ("Senior
Debt"). Creditor irrevocably consents and directs that all Senior Debt shall be
paid in full prior to Borrower making any payment on any Junior Debt, except
such payments as are expressly permitted by Section 3 of this Agreement.
Creditor will, and Bank is authorized in the name of Creditor from time to time
to, execute and file such financing statements and other documents as Bank may
require in order to give notice to other persons and entities of the terms and
provisions of this Agreement. As long as this Agreement is in effect, Creditor
will not take any action or initiate any proceedings, judicial or otherwise, to
enforce Creditor's rights or remedies with respect to any Junior Debt, including
without limitation, any action to enforce remedies with respect to any
collateral securing any Junior Debt or to obtain any judgment or prejudgment
remedy against Borrower or any such collateral.
2. INDEBTEDNESS DEFINED. The word "Indebtedness" is used herein in its
most comprehensive sense and includes any and all advances, debts, obligations
and liabilities of Borrower heretofore, now or hereafter made, incurred or
created, whether voluntary or involuntary and however arising, whether due or
not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, and whether Borrower may be liable individually or jointly with
others, including without limitation, obligations and liabilities arising from
notes, repurchase agreements and trust receipts.
- 1 -
3. RESTRICTION OF PAYMENT OF JUNIOR DEBT; DISPOSITION OF PAYMENTS RECEIVED
BY CREDITOR. Borrower will not make, and Creditor will not accept or receive,
any payment or benefit in cash, by setoff or otherwise, directly or indirectly,
on account of principal, interest or any other amounts owing on any Junior Debt,
except such payments as are expressly permitted herein. Borrower is permitted to
make and Creditor to receive payments of principal and interest on the Junior
Debt; provided however, that no payment of principal or interest on the Junior
Debt shall be made by Borrower, or received by Creditor, if (a) a default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute a default, has occurred under the terms of any
Senior Debt, or (b) a default would exist under the terms of any Senior Debt
after giving effect to any such payment. Borrower agrees that Bank may disclose
to Creditor at any time (i) the existence of a default under any Senior Debt,
(ii) the existence of any condition, event or act which with the giving of
notice or the passage of time or both would constitute a default under any
Senior Debt, and/or (iii) whether a default under any Senior Debt would or might
exist after giving effect to any payment on the Junior Debt. If any payment is
made in violation of this Agreement, Creditor shall promptly deliver the same to
Bank in the form received, with any endorsement or assignment necessary for the
transfer of such payment or amounts setoff from Creditor to Bank, to be either
(in Bank's sole discretion) held as cash collateral securing the Senior Debt or
applied in reduction of the Senior Debt in such order as Bank shall determine,
and until so delivered, Creditor shall hold such payment in trust for and on
behalf of, and as the property of, Bank.
4. DISPOSITION OF EVIDENCE OF INDEBTEDNESS. If there is any existing
promissory note or other evidence of any of the Junior Debt, or if any
promissory note or other evidence of Indebtedness is executed at any time
hereafter with respect thereto, then Borrower and Creditor will xxxx the same
with a legend stating that it is subject to this Agreement, and if asked to do
so, will deliver the same to Bank. Creditor shall not, without Bank's prior
written consent, assign, transfer, hypothecate or otherwise dispose of any claim
it now has or may at any time hereafter have against Borrower at any time that
any Senior Debt remains outstanding and/or Bank remains committed to extend any
credit to Borrower.
5. AGREEMENT TO BE CONTINUING; APPLIES TO BORROWER'S EXISTING INDEBTEDNESS
AND ANY INDEBTEDNESS HEREAFTER ARISING. This Agreement shall be a continuing
agreement and shall apply to any and all Indebtedness of Borrower to Bank or
Creditor now existing or hereafter arising, including any Indebtedness arising
under successive transactions, related or unrelated, and notwithstanding that
from time to time all Indebtedness theretofore existing may have been paid in
full.
- 2 -
6. TERMINATION BY CREDITOR. Creditor may, to the extent provided herein,
terminate this Agreement by delivering written notice to Bank. Any such notice
must be sent to Bank by registered U.S. mail, postage prepaid, addressed to its
office at Bakersfield Regional Commercial Banking Office, 0000 Xxxxxxxxxx
Xxxxxx, 0xx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxxx, 00000, or at such other address as
Bank shall from time to time designate. If such notice is received by Bank, this
Agreement shall terminate as of the date of receipt, except that the obligations
of Creditor and the rights of Bank hereunder shall continue with respect to all
Senior Debt which existed at the time of Bank's receipt of such notice, or
thereafter arose pursuant to any agreement to extend credit by which Bank is
bound at the time of its receipt of such notice, and any extensions, renewals or
modifications of any such then existing or committed Senior Debt, including
without limitation, modifications to the amount of principal or interest payable
on any Senior Debt and the release of any security for or any guarantors of all
or any portion of any Senior Debt.
7. REPRESENTATIONS AND WARRANTIES; INFORMATION. Borrower and Creditor
represent and warrant to Bank that: (a) no interest in the Junior Debt has been
assigned or otherwise transferred to any person or entity; (b) payment of the
Junior Debt has not been heretofore subordinated to any other creditor of
Borrower; and (c) Creditor has the requisite power and authority to enter into
and perform its obligations under this Agreement. Creditor further represents
and warrants to Bank that Creditor has established adequate, independent means
of obtaining from Borrower on a continuing basis financial and other information
pertaining to Borrower's financial condition. Creditor agrees to keep adequately
informed from such means of any facts, events or circumstances which might in
any way affect Creditor's risks hereunder, and Creditor agrees that Bank shall
have no obligation to disclose to Creditor information or material about
Borrower which is acquired by Bank in any manner. Bank may, at Bank's sole
option and without obligation to do so, disclose to Creditor any information or
material relating to Borrower which is acquired by Bank by any means, and
Borrower hereby agrees to and authorizes any such disclosure by Bank.
8. TRANSFER OF ASSETS OR REORGANIZATION OF BORROWER. If any petition is
filed or any proceeding is instituted by or against Borrower under any
provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, or
any other or similar law relating to bankruptcy, insolvency, reorganization or
other relief for debtors, or generally affecting creditors' rights, or seeking
the appointment of a receiver, trustee, custodian or liquidator of or for
Borrower or any of its assets, any payment or distribution of any of Borrower's
assets, whether in cash, securities or any other property, which would be
payable or deliverable with respect to any Junior Debt, shall be paid or
delivered to Bank until all Senior Debt is paid in full. Creditor grants to Bank
the right to enforce, collect and receive
- 3 -
any such payment or distribution and to give releases or acquittances therefor,
and Creditor authorizes Bank as its attorney-in-fact to vote and prove the
Junior Debt in any of the above-described proceedings or in any meeting of
creditors of Borrower relating thereto.
9. OTHER AGREEMENTS; NO THIRD PARTY BENEFICIARIES. Bank shall have no
direct or indirect obligations to Creditor of any kind with respect to the
manner or time in which Bank exercises (or refrains from exercising) any of its
rights or remedies with respect to the Senior Debt, Borrower or any of
Borrower's assets. Creditor understands that there may be various agreements
between Bank and Borrower evidencing and governing the Senior Debt, and Creditor
acknowledges and agrees that such agreements are not intended to confer any
benefits on Creditor. Creditor further acknowledges that Bank may administer the
Senior Debt and any of Bank's agreements with Borrower in any way Bank deems
appropriate, without regard to Creditor or the Junior Debt. Creditor waives any
right Creditor might otherwise have to require a marshalling of any security
held by Bank for all or any part of the Senior Debt or to direct or affect the
manner or timing with which Bank enforces any of its security. Nothing in this
Agreement shall impair or adversely affect any right, privilege, power or remedy
of Bank with respect to the Senior Debt, Borrower or any assets of Borrower,
including without limitation, Bank's right to: (a) waive, release or subordinate
any of Bank's security or rights; (b) waive or ignore any defaults by Borrower;
and/or (c) restructure, renew, modify or supplement the Senior Debt, or any
portion thereof, or any agreement with Borrower relating to any Senior Debt. All
rights, privileges, powers and remedies of Bank may be exercised from time to
time by Bank without notice to or consent of Creditor.
10. BREACH OF AGREEMENT BY BORROWER OR CREDITOR. In the event of any
breach of this Agreement by Borrower or Creditor, then and at any time
thereafter Bank shall have the right to declare immediately due and payable all
or any portion of the Senior Debt without presentment, demand, notice of
nonperformance, protest, notice of protest or notice of dishonor, all of which
are hereby expressly waived by Borrower and Creditor. No delay, failure or
discontinuance of Bank in exercising any right, privilege, power or remedy
hereunder shall be deemed a waiver of such right, privilege, power or remedy;
nor shall any single or partial exercise of any such right, privilege, power or
remedy preclude, waive or otherwise affect the further exercise thereof or the
exercise of any other right, privilege, power or remedy. Any waiver, permit,
consent or approval of any kind by Bank with respect to this Agreement must be
in writing and shall be effective only to the extent set forth in such writing.
11. LIQUIDATED DAMAGES. Inasmuch as the actual damages which could result
from a breach by Creditor of its duties under
- 4 -
Section 3 hereof are uncertain and would be impractical or extremely difficult
to fix, Creditor shall pay to Bank, in the event of any such breach by Creditor,
as liquidated and agreed damages, and not as a penalty, all sums received by
Creditor in violation of this Agreement on account of the Junior Debt, which
sums represent a reasonable endeavor to estimate a fair compensation for the
foreseeable losses that might result from such a breach.
12. COSTS, EXPENSES AND ATTORNEYS' FEES. If any party hereto institutes
any arbitration or judicial or administrative action or proceeding to enforce
any provisions of this Agreement, or alleging any breach of any provision hereof
or seeking damages or any remedy, the losing party or parties shall pay to the
prevailing party or parties all costs and expenses, including reasonable
attorneys' fees (to include outside counsel fees and all allocated costs of such
prevailing party's in-house counsel), expended or incurred by the prevailing
party or parties in connection therewith, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise, and including any of
the foregoing incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or motion brought
by Bank or any other person) relating to Borrower, Creditor or any other person
or entity.
13. SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties. This Agreement may be
amended or modified only in writing signed by all parties hereto. If Borrower or
Creditor requests an amendment or modification to this Agreement, Bank shall
consider such request in good faith and in a reasonable period of time.
14. OBLIGATIONS JOINT AND SEVERAL; CONSTRUCTION. If this Agreement is
executed by more than one Creditor, it shall bind them jointly and severally.
All words used herein in the singular shall be deemed to have been used in the
plural where the context so requires.
15. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall
be held to be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such waiver or other provision or any
remaining provisions of this Agreement.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
- 5 -
17. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, this Agreement and each other
document, instrument or contract required hereby or now or hereafter delivered
to Bank in connection herewith (collectively, the "Documents"), or any past,
present or future extensions of credit and other activities, transactions or
obligations of any kind related directly or indirectly to any of the Documents,
including without limitation, any of the foregoing arising in connection with
the exercise of any self-help, ancillary or other remedies pursuant to any of
the Documents. Any party may by summary proceedings bring an action in court to
compel arbitration of a Dispute. Any party who fails or refuses to submit to
arbitration following a lawful demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by the
American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Documents.
The arbitration shall be conducted at a location in California selected by the
AAA or other administrator. If there is any inconsistency between the terms
hereof and any such rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any Dispute shall apply to any
arbitration proceeding. All discovery activities shall be expressly limited to
matters directly relevant to the Dispute being arbitrated. Judgment upon any
award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.
- 6 -
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive law
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary, in
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
California, and (iii) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
California. Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and
not based on legal error under the substantive law of the state of California.
(f) Real Property Collateral; Judicial Reference. Notwithstanding anything
herein to the contrary, no Dispute shall be submitted to arbitration if the
Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real
- 7 -
property unless (i) the holder of the mortgage, lien or security interest
specifically elects in writing to proceed with the arbitration, or (ii) all
parties to the arbitration waive any rights or benefits that might accrue to
them by virtue of the single action rule statute of California, thereby agreeing
that all indebtedness and obligations of the parties, and all mortgages, liens
and security interests securing such indebtedness and obligations, shall remain
fully valid and enforceable. If any such Dispute is not submitted to
arbitration, the Dispute shall be referred to a referee in accordance with
California Code of Civil Procedure Section 638 et seq., and this general
reference agreement is intended to be specifically enforceable in accordance
with said Section 638. A referee with the qualifications required herein for
arbitrators shall be selected pursuant to the AAA's selection procedures.
Judgment upon the decision rendered by a referee shall be entered in the court
in which such proceeding was commenced in accordance with California Code of
Civil Procedure Sections 644 and 645.
(g) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Documents or the subject matter of the Dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Documents or any relationship between the parties.
18. PAYMENT DEFAULT BY BORROWER. Notwithstanding anything to the contrary
contained herein, no "Event of Default" shall be deemed to have occurred under
the Senior Debt subject to that certain Credit Agreement dated as of December
17, 1996 between Borrower and Bank as a consequence of Borrower's failure to pay
when due any principal, interest, fees or other amounts payable thereunder or
under any of the loan documents related thereto unless (a) Bank sends written
notice to Borrower and to Creditor of such failure to pay and (b) Borrower
and/or Creditor fail to pay such amount within five (5) Business Days of the
date Bank sends such notice. As used herein "Business Day" means any day except
a Saturday, Sunday or any other day on which commercial banks in California are
authorized or required by law to close.
- 8 -
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
December 17, 1996.
BORROWER: XXXXX FARGO BANK,
NATIONAL ASSOCIATION
XXXXXX AND XXXXXXXXXX SALES, CO.
By: /s/ Xxxxxx X. Del Papa
Xxxxxx X. Del Papa
By: /s/ Xxxxxxx X. Xxxxxx Vice President
Xxxxxxx X. Xxxxxx
Executive Vice President
CREDITOR:
EPITOPE, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Executive Vice President/
Chief Financial Officer
- 9 -