EXHIBIT 10.31
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made and entered into as of August 8,
2001, by and between ▇▇▇▇▇▇▇ MORTUARY, INC., an Oregon corporation ("Borrower"),
and GREEN LEAF INVESTORS I, LLC, a California limited liability company
("Lender").
Recital
Borrower has requested from Lender the $1,575,000.00 credit facility
described herein, and Lender has agreed to provide such credit facility to
Borrower subject, however, to Lender receiving, as security therefore, certain
Collateral (defined herein) and further subject to the terms, conditions and
provisions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree:
1. Definitions. As used in this Agreement, terms with initial capitals
shall have the meanings given below, or as otherwise defined herein. Capitalized
terms used but not otherwise defined in this Agreement shall have the meanings
given them in the Note (as defined below).
"Agreement" means this Loan Agreement and all modifications or
amendments hereto, or extensions hereof.
"Assignment" means that certain Assignment of even date herewith by
The Neptune Society, Inc., a Florida corporation, and Neptune Society of
America, Inc., a California corporation, to Borrower.
"Bankruptcy Code" means the Bankruptcy Reform Act, Title 11 of the
United States Code, as amended or recodified from time to time, including
(unless the context otherwise requires) any rules or regulations promulgated
thereunder.
"Borrower's Financial Statements" means all financial statements of
Borrower and any Guarantor delivered from time to time to Lender.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks are authorized or required to close in Portland,
Oregon.
"Cash Loan Fee" means $75,000.
"Closing Date" shall mean the date on which the Loan is closed and
funded.
"Collateral" shall mean the Property as such term is defined in the
Trust Deed and the Personal Property Collateral as such term is defined in the
General Security Agreement.
"Common Stock" means shares of common stock of The Neptune Society,
Inc. par value $0.002 per share.
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"Default" means an Event of Default (defined below) or an event or
condition, which with the giving of notice or the passage of time, or both,
would constitute an Event of Default.
"Disclosure Schedule" has the meaning given that term in Section 3.
"Event of Default" has the meaning given that term in Section 7.1.
"Financial Statements" means, for or as of the end of the fiscal
period specified therein, balance sheets, profit and loss statements, statements
of cash flows, statement of capital accounts, and reconciliations of net worth,
in each case together with all notes and schedules thereto, prepared in
reasonable detail and in accordance with generally accepted accounting
principles applied consistently with past periods, as fairly presenting the
financial condition, results of operations, and changes in Borrower's or
Guarantors' financial position, as the case may be.
"Forbearance Agreement" means that certain Forbearance Agreement of
even date herewith by and between The Neptune Society, Inc., a Florida
corporation ("Neptune"), and Community Memorial Centers, L.L.C., an Oregon
limited liability company ("CMC"), whereby Borrower agrees to bring current a
Convertible Debenture dated July 5, 2000 issued by Neptune to CMC (the "Neptune
Debenture"), and CMC conditionally agrees to forbear legal action on the debt.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time, consistently applied.
"General Security Agreement" means that certain General Security
Agreement of even date herewith, made by Borrower in favor of Lender granting
Lender a security interest in all equipment, inventory, receivables, contract
rights, general intangibles, trademark and trade names and other personal
property, tangible and intangible, of Borrower, including all assets of the
businesses known as "▇▇▇▇▇▇▇ Mortuary", "Heritage Memorial Society" and "Oregon
Cremation Company".
"Guarantors" means, jointly and severally, The Neptune Society, Inc.,
a Florida corporation, and Neptune Society of America, Inc., a California
corporation.
"Guaranty" means each of those certain guaranties of even date
herewith made by a Guarantor in favor of Lender which guarantees the obligations
evidenced by the Note, the Trust Deed, this Agreement and the other Loan
Documents delivered to Lender pursuant hereto.
"Intercreditor Agreement" means that certain Intercreditor Agreement
of even date herewith by and among Lender, Borrower and Community Memorial
Centers, L.L.C., an Oregon limited liability company, with respect to the
Collateral.
"Laws" means any federal, state or local laws, ordinances, rules,
regulations or statutes, together with decisions, orders, judgments, directives,
or decrees of any governmental or regulatory authority, court, or arbitrator.
"Loan" means a non-revolving credit facility in the principal amount
of $1,575,000.00 as described more fully in Section 2 hereof.
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"Loan Costs and Expenses" has the meaning given that term in Section
4.11 hereof.
"Loan Documents" means this Loan Agreement, the other documents
required to be delivered pursuant to Section 5.3 hereof and all consents,
financing statements, or other documents or instruments executed and/or filed in
connection therewith, related thereto or to the Loan.
"Loan Put Agreement" means that certain Loan Put Agreement of even
date herewith by and among Lender, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇"), and ▇▇▇▇▇▇▇
▇▇▇▇ ("▇▇▇▇") whereby ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ agree to purchase the Loan and the
security therefor at Lender's option upon the occurrence of a Default.
"Maturity Date" means January 31, 2002.
"Note" means that certain $1,575,000 promissory note of even date
herewith, given by Borrower to Lender, and all modifications, amendments,
extensions or restatements thereof.
"Note Amount" means $1,575,000.
"Opinion of Counsel" means an opinion letter or letters in a form
acceptable to Lender from and signed by Borrower's legal counsel and addressed
to Lender.
"Permitted Encumbrances" means the encumbrances described in Exhibit A
to the Trust Deed.
"Piggyback Registration Agreement" means that certain Piggyback
Registration Agreement of even date herewith by and between Lender and The
Neptune Society, Inc., a Florida corporation, granting Lender certain
registration rights with respect to the Common Stock of The Neptune Society,
Inc.
"Senior Lender" means Community Memorial Centers, L.L.C., an Oregon
limited liability company.
"Senior Loan" means the Convertible Debenture issued by The Neptune
Society, Inc., a Florida corporation, to Senior Lender, secured by a Trust Deed
dated July 5, 2000 and recorded July 18, 2000 in the Records of Multnomah County
as Fee No. 2000-098983.
"Stock Loan Fee" means 15,789 shares of Common Stock of The Neptune
Society, Inc., a Florida corporation.
"Subordination Agreements" means those certain Subordination
Agreements of even date herewith whereby the ▇▇▇▇▇▇▇▇▇ Lenders and the CapEx
Lenders, as defined therein, subordinate their security interests, if any, in
the Collateral.
"Trust Deed" means that certain Trust Deed, Assignment of Leases and
Rents, Security Agreement and Fixture Filing of even date herewith made by
Borrower for the benefit of Lender with respect to premises located at ▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇.
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"Unsecured Indemnity" means that certain Unsecured Environmental
Indemnity Agreement of even date herewith executed and delivered by Borrower and
Guarantors indemnifying Lender with respect to environmental matters in
connection with the Collateral.
"Warrant" means that certain Warrant of even date herewith granting
Lender the right to purchase up to 30,000 shares of Common Stock of The Neptune
Society, Inc., a Florida corporation.
2. The Credit Facility.
2.1 Loan. Subject to the terms and conditions of this Agreement,
Lender agrees to make a single advance to Borrower under the Loan in the amount
of $1,575,000.
2.2 Application of Proceeds. The proceeds of the Loan will be applied
as follows: (a) $1,500,000 to the partial payment of the indebtedness owed by
Neptune Society of America, Inc. to the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Intervivos Trust
pursuant to that Promissory Note dated March 31, 1999 in the amount of
$19,000,000.00, as amended by the Third Amendment dated June 19, 2001; and (b)
$75,000 in payment of the Cash Loan Fee. The Loan shall be funded in accordance
with this Agreement and applicable provisions of the Note.
2.3 Borrowing and Repayment. The Loan is not a revolving credit
facility and once repayment is made Borrower shall not be entitled to reborrow
any sum advanced hereunder.
2.4 Intentionally Omitted.
2.5 Interest. The outstanding balance of the Loan shall bear interest
at the rate set forth in the Note.
2.6 Terms of Repayment. Borrower shall repay advances made under the
Loan, together with all interest and other fees and expenses, as provided in
this Agreement and the Note.
3. Representations and Warranties of Borrower. Except as is otherwise
disclosed in the Disclosure Schedule attached to this Agreement, Borrower
represents, warrants and covenants to and for the benefit of Lender, which
representations and warranties shall be deemed remade on and as of the date of
Closing:
3.1 Authority. Borrower and each of the Guarantors has the requisite
capacity and authority to make and enter into each of the Loan Documents to
which Borrower or Guarantor is a party and to carry out the transactions
contemplated therein. All authorizations have been secured that are necessary to
authorize the execution, delivery and performance of this Agreement and each of
the other Loan Documents to which Borrower and Guarantors are a party. Borrower
is in good standing in the State of Oregon.
3.2 Execution, Delivery and Effect of Loan Documents. Each of the Loan
Documents to which Borrower is a party is a legal, valid and binding obligation
of Borrower, enforceable in accordance with its terms.
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3.3 Other Obligations. Except with respect to the debt that is the
subject of the Forbearance Agreement, Borrower is not in material default under
any instruments or obligations relating to Borrower's business or assets. No
party has asserted any material claim or default relating to any of Borrower's
assets. The execution and performance of the Loan Documents and the consummation
of the transactions contemplated thereby will not result in any material breach
of or constitute a material default under, any contract, agreement, document or
other instrument to which Borrower is a party or by which Borrower may be bound
or affected, and do not and will not violate or contravene any material laws to
which Borrower is subject; nor do any such agreements, documents or instruments
impose or contemplate any obligations that are or will be materially
inconsistent with the Loan Documents.
3.4 Taxes. Borrower has filed all federal, state, and local income tax
returns required to have been filed by it, and has paid all taxes that have
become due pursuant to such returns or pursuant to any assessments on real or
personal property received by Borrower, except only those local taxes where any
such failure to file or pay amounts due would not have a material adverse affect
on Borrower's business, finances or operations. Borrower does not know of any
basis for additional assessment with regard to any such tax. Borrower has not
executed or filed with any taxing authority any agreement extending the period
for assessment or collection of any tax to a date subsequent to the date hereof,
and no issue has been raised by any federal, state, local or foreign taxing
authority in connection with an audit or examination of the tax returns,
business or properties of Borrower that has not been settled or resolved.
3.5 Consents and Governmental Approvals. The execution, delivery and
performance by Borrower of the Loan Documents, and Lender's exercise of any
remedy available to it thereunder, do not and will not require any consent or
approval of any person or entity, other than such consents as have been or will
have been obtained on or before the Closing Date. No approval by, authorization
of, or filing with any federal, state or municipal or other governmental
commission, board or agency or other governmental authority is necessary in
connection with the authorization, execution and delivery of the Loan Documents
by Borrower.
3.6 Legal Actions. There are no material actions, suits or proceedings
including, without limitation, any condemnation, insolvency or bankruptcy
proceedings, pending or, to the best of Borrower's knowledge and belief,
threatened, against or affecting Borrower, any Guarantor or their respective
businesses or assets. There are no investigations, at law or in equity, before
or by any court or governmental authority, pending or, to the best of Borrower's
knowledge and belief, threatened against or affecting Borrower, any Guarantor or
their respective businesses or assets, except actions, suits and proceedings
fully covered by insurance and heretofore fully disclosed in writing to Lender
or that, if resolved adversely to Borrower or any Guarantor, would have a
material adverse effect on Borrower, any Guarantor or their respective
businesses or assets. Neither Borrower nor any Guarantor is in default with
respect to any order, writ, injunction, decree or demand of any court or any
governmental authority affecting Borrower, any Guarantor or their respective
businesses or assets, which default would materially adversely affect Borrower,
any Guarantor or their respective businesses or assets.
3.7 Other Security Interests. Except as disclosed in the Trust Deed
and in Borrower's Financial Statements delivered to Lender before the date
hereof, there does not exist any pledge, mortgage, lien, hypothecation or
assignment for security affecting the Collateral, whether now owned or hereafter
acquired, except for any such pledge, mortgage, lien, hypothecation or
assignment for security constituting a Permitted Encumbrance.
3.8 Truth of Other Statements, Representations and Warranties. The
written statements, financial or otherwise, made by Borrower or any Guarantor to
Lender in connection with this Agreement, or in
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connection with the other Loan Documents, do not, taken as a whole, contain any
untrue statement of a material fact or omit a material fact necessary to make
the statements made therein not misleading. All Financial Statements given by
Borrower or any Guarantor to Lender in connection with this Agreement, or the
other Loan Documents have been prepared in accordance with GAAP, and such
statements, taken as a whole, fairly present the financial condition of the
parties or entities covered thereby. Since the date thereof, neither Borrower
nor any such other party or entity has experienced any material adverse change
in its finances, business, operations, affairs or prospects. To the best
knowledge of Borrower, there is no fact concerning Borrower or any of the
Guarantors that Borrower has not disclosed to Lender in writing that materially
and adversely affects, nor, so far as Borrower can foresee, is reasonably likely
to prove to materially and adversely affect, the Collateral or the ability of
Borrower to perform its obligations under the Loan Documents.
3.9 Insurance. Borrower shall maintain (a) such insurance required by
the Trust Deed and General Security Agreement with respect to the Collateral,
and (b) adequate insurance protection against all liabilities, claims and risks
against it that is customary for businesses similarly situated to Borrower.
3.10 Material Changes. Since the date of Borrower's Financial
Statements there has not been, with respect to Borrower:
(a) Any material adverse change in its financial condition from
that shown on Borrower's Financial Statements;
(b) Any damage or loss, whether covered by insurance or not,
materially and adversely affecting Borrower's or any Guarantor's business,
property, assets or prospects;
(c) Any other event or condition materially and adversely
affecting the results of Borrower's or any Guarantor's operations or business or
financial condition or prospects taken as a whole, or any event that could have
such an effect; or
(d) Any legislative or regulatory action or, to the best of
Borrower's knowledge and belief, proposals thereof, that does, or would if
enacted, materially adversely affect the results of Borrower's or any
Guarantor's operations or business or financial conditions or prospects taken as
a whole.
3.11 Compliance With Environmental Laws. To the best of Borrower's
knowledge, other than as may be disclosed by any third party environmental
studies provided to Lender prior to the date of this Agreement, there are no
underground storage tanks located on, or asbestos-containing materials located
in, any of the real property Collateral and there is not currently located on,
any such real property Collateral (or in the groundwater of such real property
Collateral) any Hazardous Material (defined below), in contravention of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
USC ▇▇.▇▇. 9601 et seq.) ("CERCLA") or of any other similar federal, state or
local law, rule or regulation. The term "Hazardous Material" shall include
petroleum, asbestos and all hazardous or toxic materials or pollutants
including, without limitation, substances defined as "hazardous substances,"
"hazardous materials," or "toxic substances" in CERCLA, the Hazardous Materials
Transportation Act, 42 USC ▇▇.▇▇. 1801, et seq., the Resource Conservation and
Recovery Act, 42 USC ▇▇.▇▇. 6901 et seq., any similar state law or the
regulations adopted and publications promulgated pursuant to said laws.
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3.12 Legal Parcels of Real Property Collateral. The real property
Collateral consists of one or more separate and distinct legal parcels for tax
purposes and is not subject to property taxes and a similar charge against any
other land. Borrower has not, by act or omission, impaired the integrity of the
real property Collateral as one or more legally separate, subdivided lots. The
use of the real property Collateral is permitted as a matter of right under
existing zoning and other land use laws, rules and regulations.
4. Covenants of Borrower. As a material inducement to Lender to make the
Loan, and in addition to performing each of its obligations under the other Loan
Documents to which it is a party, Borrower covenants with and for the benefit of
Lender that, unless Lender otherwise consents in writing, and for so long as any
amount remains outstanding under the Note or any other obligation under this
Agreement, the Trust Deed, or any other Loan Documents remains to be performed:
4.1 Financial Statements. Borrower shall deliver to Lender its
Financial Statements not later than forty-five (45) days after and as of the end
of each interim quarterly accounting period ended March 31, June 30 and
September 30, and not later than ninety (90) days after and as of the end of
each fiscal year ended December 31 of Borrower, prepared by Borrower and
certified by its manager(s) or officers.
4.2 Additional Information. Borrower shall promptly furnish to Lender
such other information and data with respect to Borrower as Lender from time to
time may reasonably request, except as otherwise may be prohibited by law.
4.3 Compliance With Laws. Borrower shall comply with the requirements
of all Laws, and with orders of any governmental agency, noncompliance with
which could materially adversely affect the business, activities or condition
(financial or otherwise) of Borrower, except that Borrower need not comply with
a requirement then being contested by it in good faith by appropriate
proceedings so long as no interest of Lender would be materially impaired
thereby.
4.4 Compliance With Agreements, Duties and Obligations. Borrower shall
promptly and fully comply with, and shall cause the Guarantors to comply with,
all agreements, duties and obligations arising under the Loan Documents, and
promptly and fully comply with all material duties and obligations under any
other material agreements, indentures, leases or instruments to which either
Borrower or any Guarantor is a party which materially affect the Loan Documents
or materially impair the Collateral.
4.5 Payment of Taxes and Claims. Borrower shall pay, or shall ensure
that the following are paid, before they become delinquent: all taxes,
assessments and governmental charges or levies imposed upon Borrower or upon the
assets of Borrower; and to the extent that the Collateral of Lender may be
impaired, all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like persons that, if unpaid, might result in
the creation of a lien upon any assets of Borrower; provided, however, that
payment of any such item may be deferred while being contested in good faith so
long as Borrower's title to, and its right to use, its assets is not materially
adversely affected thereby, and so long as reserves in amounts satisfactory to
Lender are maintained for such claims.
4.6 Inspection of Books. Borrower shall permit and shall cause each
Guarantor to permit Lender, after notice to Borrower and each Guarantor, as the
case may be, to examine or audit each requested party's books of account and
records and to copy and take extracts therefrom and to discuss said party's
affairs, finances or
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accounts, and to be advised as to the same such party, in such detail and
through such agents and representatives as Lender may desire, all at such
reasonable times and as often as may be reasonably requested.
4.7 Disclosure of Material Litigation. Borrower shall promptly notify
Lender of any litigation or other action, suit or proceeding, before any court
or governmental agency, to which Borrower or any Guarantor is a party if the
amount at risk in connection therewith is not fully covered by insurance, or if,
in the reasonable opinion of Borrower, such litigation otherwise is material to
obligations of Borrower hereunder. Thereafter, Borrower shall keep Lender
apprised of the status of such litigation or other such action, suit or
proceeding in such manner as Lender may request.
4.8 Grant of Additional Security Interests. Borrower shall not pledge,
mortgage, encumber, hypothecate or assign for security, or suffer the creation
or existence of any pledge, mortgage, encumbrance, hypothecation or assignment
for security on the Collateral other than (a) the Permitted Encumbrances and (b)
the Senior Loan, without the written consent of Lender which may not be
unreasonably withheld.
4.9 Misrepresentations. Borrower shall not knowingly make to Lender,
and Borrower shall not knowingly furnish to Lender any certificate or other
document that contains, any untrue statement of a material fact, nor shall
Borrower knowingly permit any such statement, certificate or other document to
omit a material fact necessary to make the statements made therein not
misleading taken as a whole.
4.10 Notice of Default. Borrower shall promptly notify Lender if it
learns that a Default has occurred, and shall specify with particularity the
nature of such Event of Default, the period of existence of such Default, and
the actions Borrower is taking or proposes to take with respect thereto.
4.11 Loan Costs and Expenses. Borrower shall pay or reimburse Lender,
upon demand, all of Lender's reasonable out-of-pocket costs and expenses
(including Lender's reasonable attorney's fees), to the extent incurred by
Lender in connection with the negotiation, preparation, review, carrying-out,
amendment, waiver, refinancing, restructuring, reorganization and enforcement
of, and collection pursuant to, this Agreement, the Trust Deed, and the other
Loan Documents, the Closing, any advance or disbursement of Loan proceeds, any
substitution of security under this Agreement and any amendment of any financing
statement made or given pursuant to this Agreement ("Loan Costs and Expenses")
including, without limitation, Lender's reasonable attorneys' fees; fees of
Lender's certified public accountants and other outside experts; credit reports;
appraisal fees; lien searches; escrow charges; recording or filing fees;
insurance premiums; inspection, due diligence and/or audit fees before Loan
closing and periodically during the term of the Loan.
4.12 Additional Acts. In addition to the acts that Borrower is
obligated to perform under this Agreement, or under any of the other Loan
Documents, Borrower shall from time to time perform, execute and deliver to or
for the benefit of Lender any and all such further acts, additional documents,
or further assurances as may be necessary or proper to: (a) implement the intent
of the parties to this Agreement; (b) correct any errors in this Agreement or
any of the other Loan Documents; (c) assure Lender of the validity and priority
of the liens and security interests Lender holds pursuant to the various
documents securing the Loan; (d) create, perfect, preserve, maintain and protect
the liens and security interests created or intended to be created by the Loan
Documents; (e) transfer all right, title and interest to Lender in the
Collateral to be transferred to Lender pursuant to the terms of this Agreement
as and when such
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transfer is contemplated by this Agreement; or (f) provide the rights and
remedies to Lender that are contemplated by the Loan Documents.
4.13 Indemnification. Borrower shall indemnify and defend Lender
against, and hold Lender harmless of and from, any and all losses, liability,
claims, damages, costs and expenses (including, but not limited to, reasonable
attorneys' fees and court costs, whether incurred at the trial, appellate or
administrative levels) that Lender may suffer or incur, or to which Lender may
be subjected, by reason of, arising out of, or in connection with:
(a) any default or breach by Borrower under any Loan Document,
any untrue statement contained in or made in connection with any Loan Document,
or the omission from the Loan Documents of any fact required to be stated
therein, or that is necessary to make the statement therein not misleading; and
(b) any violation or breach by Borrower or any of its agents,
servants, employees or licensees of any of the terms and provisions of this
Agreement or any of the other Loan Documents.
Upon demand by Lender, Borrower shall defend any action or proceeding brought
against Lender in connection with any of the foregoing, or Lender may elect to
conduct its own defense at the reasonable expense of Borrower; provided,
however, that Borrower will be entitled to participate in such defense. In any
event, Borrower shall reimburse Lender in full for all out-of-pocket costs
reasonably incurred investigating, preparing or defending against any action or
proceeding, commenced or threatened, in connection with any of the foregoing
matters, or incurred in settlement of any such action or proceeding (whether
commenced or threatened).
No compromise or settlement of any claims or proceedings may be effected by the
Lender without the Borrower's consent (which may not be unreasonably withheld).
Notwithstanding the foregoing, if the Lender determines in good faith that there
is a reasonable probability that a proceeding may adversely affect it or its
affiliates other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the indemnified party may, by
notice to the Borrower, assume the exclusive right to defend, compromise, or
settle such proceeding, but the indemnifying party will not be bound by any
determination of a proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
4.14 Other Affirmative Covenants. Borrower shall:
(a) at all times cause to be done all things necessary to
maintain, preserve and renew its legal existence as a corporation and all
licenses and permits necessary to the conduct of its businesses;
(b) comply with all applicable Laws, and with all obligations
that it incurs or to which it becomes subject pursuant to any contract or
agreement, whether oral or written, express or implied, the breach of which
could reasonably be expected to have a material adverse effect upon its business
or financial condition, unless and only to the extent that the same are being
contested in good faith and by appropriate proceedings and adequate reserves
have been set aside with respect thereto;
(c) apply for and, when obtained, continue in force, with good
and reputable insurance companies, adequate insurance covering risks of such
types and in such amounts as are reasonably necessary to conduct its business;
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(d) make and keep books, records and accounts that, in reasonable
detail, accurately and fairly reflect the transactions in which it has engaged
and the disposition of its assets, and devise and maintain a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and any other
criteria applicable to such statements, and to maintain accountability for
assets, (iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded assets are compared
with the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences discovered;
(e) use its best efforts to preserve and protect the value of the
Collateral;
(f) not amend its articles of incorporation in any manner
whatsoever without Lender's prior written consent if such amendment will affect
or impair the value of the Collateral;
(g) engage in no activity other than the current use of the
Property;
(h) maintain separate bank accounts in the name of Borrower and
separate accounting with respect to the business and activities of Borrower; and
(j) refrain from making distributions or other payments of any
kind to its shareholders or owners or their respective families or affiliates.
5. Conditions to Closing and to Disbursement of Funds. Lender's obligation
to close the Loan, to make the advances, and to disburse the Loan proceeds to
Borrower, is subject to satisfaction of all of the following conditions before
or contemporaneously with the Closing, any one or more of which Lender may waive
in writing:
5.1 Truth of Representations and Warranties. All of Borrower's and
each Guarantor's representations and warranties contained in this Agreement, in
any other Loan Document, and in any other certificate, instrument or document
submitted by Borrower or any Guarantor to Lender in connection with the making
of the Loan shall be true and accurate in all material respects.
5.2 Loan Fee. Borrower shall have paid Lender the Cash Loan Fee from
the proceeds of the Loan, and The Neptune Society, Inc. shall have executed and
delivered its Treasury Order directing Interwest Transfer Co., Inc., its stock
transfer agent, to issue 15,789 shares of its Common Stock to Lender in payment
of the Stock Loan Fee and a warrant certificate representing the Warrant.
5.3 Delivery of Loan Documents. Borrower shall have executed and
delivered to Lender, or caused to be executed and delivered to Lender by the
party or parties thereto, the following documents, each of which shall be in
form and substance satisfactory to Lender:
(a) this Agreement;
(b) the Note;
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(c) the Trust Deed;
(d) the Guaranty (The Neptune Society, Inc.);
(e) the Guaranty (Neptune Society of America, Inc.);
(f) the General Security Agreement;
(g) the Unsecured Indemnity;
(h) the Intercreditor Agreement;
(i) the UCC Financing Statements;
(j) the Warrant;
(k) the Piggyback Registration Agreement;
(l) the Subordination Agreements;
(m) the Assignment; and
(n) such other documents and instruments reasonably required by
Lender in connection with the Loan.
5.4 Delivery of Other Documents and Certificates. Borrower shall have
delivered or caused to be delivered to Lender each of the following additional
documents or certificates, each of which shall be in a form and substance
satisfactory to Lender:
(a) certificates of existence or qualification pertaining to
Borrower and the Guarantors, issued by the Secretary of State or other
appropriate official of Florida, California or Oregon, as the case may be, no
more than seven (7) business days before the Closing;
(b) a standard coverage lender's policy of title insurance
insuring Borrower's ownership of the real property Collateral and the lien
of the Trust Deed in favor of Lender, subject only to the Permitted
Encumbrances;
(c) the Opinion of Counsel; and
(d) the Forbearance Agreement.
5.5 Loan Put Agreement. Lender, ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ shall have executed
and delivered the Loan Put Agreement in form and substance satisfactory to
Lender.
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5.6 No Default. No Default shall have occurred and be continuing or
exist.
5.7 Subscription. Lender and The Neptune Society, Inc. shall have
executed and delivered a subscription agreement related to the issuance of the
Stock Loan Fee and the Warrant by The Neptune Society, Inc. to Lender.
5.8 Reset Provisions. Borrower, Guarantors and their affiliates shall
have satisfied their obligations, to Lender's satisfaction, under the "reset"
provisions of the Asset Purchase Agreement dated July 5, 2001 between
Acquisition, Heritage, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ and Neptune (Section 2.2(i) and (ii)),
the Asset Purchase Agreement dated July 5, 2001 between Acquisition, CMC,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ and Neptune (Section 2,2(i) and (ii)), the Agreement and Plan of
Merger dated July 5, 2000 between Acquisition, CMC, Wilhelm, Schroeder, ▇▇▇▇ and
Neptune (Sections 2.69(a)(i) and (ii)), the Apogee Non-Compete Agreement dated
July 5, 2001 (Sections 6(i) and (ii)), the ▇▇▇▇▇▇▇▇▇ Non-Compete Agreement dated
July 5, 2001 (Sections 6(i) and (ii)), and the ▇▇▇▇ Employment/Non-Compete
Agreement dated July 5, 2001 (Sections 20(i) and (ii)).
6. [Intentionally omitted.]
7. Default; Remedies on Default.
7.1 Event of Default. Unless waived in writing by Lender in the manner
described in Section 8.1, any of the following events shall be an "Event of
Default":
(a) If Borrower shall apply the funds advanced under and pursuant
to this Agreement and the Note other than as permitted at Section 2.2;
(b) If, for any payment due under the Note or any other Loan
Document, the entire amount due (including principal, interest and any
applicable premiums and late charges) is not paid when due;
(c) If there occurs a default under any other Loan Document,
under the Neptune Debenture or under the Forbearance Agreement that is not cured
within the applicable cure period, if any;
(d) If any representation made herein, under any Loan Document or
under any other document or instrument delivered by Borrower or any Guarantor to
Lender in connection herewith or pursuant hereto, or in connection with any
advance under the Note, shall be false in any material respect when made, or if
any warranty made herein, under any Loan Document or under any other document or
instrument delivered by Borrower or any Guarantor to Lender in connection
herewith or pursuant hereto, shall be breached in any material respect;
(e) If any of the following should occur: (i) Borrower or any
Guarantor becomes insolvent, makes a transfer in fraud to, or an assignment for
the benefit of, creditors, or admits in writing its inability, or is unable, to
pay debts as they become due; or (ii) a receiver, custodian, liquidator or
trustee is appointed for all or substantially all of the assets of Borrower or
any Guarantor, or for any portion of Borrower's or any Guarantor's accounts
receivable in any proceeding brought by Borrower or any Guarantor, or any such
receiver or trustee is appointed in any proceeding brought against Borrower or
any Guarantor or any portion of Borrower's or any
12
Guarantor's accounts receivable; or (iii) Borrower or any Guarantor files a
petition for relief under the federal Bankruptcy Code, as amended, or under any
similar law or statute of the United States or any state thereof; or (iv) a
petition against Borrower or any Guarantor is filed commencing an involuntary
case under any present or future Federal or state bankruptcy or similar law and
such petition is not dismissed or discharged within 60 days from the date of
filing; or (v) any composition, rearrangement, liquidation, extension,
reorganization or other relief of debtors now or hereafter existing is requested
by Borrower or any Guarantor; or (vi) Borrower or any Guarantor is dissolved or
liquidated or all or substantially all of the assets of Borrower or any
Guarantor are sold or otherwise transferred;
(f) If Borrower shall fail to perform any other obligation under
this Agreement within ten (10) days after notice from Lender specifying the
nature of the failure or default or, if the failure or default cannot be cured
within ten (10) days, failure within such time to commence and pursue with
reasonable diligence curative action. No notice of default and opportunity to
cure shall be required or given if during the preceding three (3) calendar
months Lender has sent a notice to Borrower concerning a default in performance
of the same obligation; or
(g) Any sale or transfer of the Collateral or of interests in
Borrower or any Guarantor in breach of the provisions of the Trust Deed or the
General Security Agreement.
7.2 Lender's Remedies on Default. Upon the occurrence of any Event of
Default, in addition to exercising any remedy available to Lender at law, in
equity or in any other Loan Document, and without impairing any of Lender's
rights, powers or privileges under this Agreement or under any other Loan
Document, Lender may do all or any of the following:
(a) Accelerate the maturity of the Note and demand payment of the
principal sums due thereunder, with interest and late charges, whereupon the
same shall become and be forthwith due and payable, without protest,
presentment, notice of dishonor, demand or future notice of any kind, all of
which Borrower expressly waives;
(b) Institute appropriate proceedings to specifically enforce
performance of this Agreement, the Trust Deed, the Guaranties, and/or any of the
other Loan Documents; or
(c) Exercise any right or remedy granted by the Trust Deed,
General Security Agreement or any other Loan Document.
Any funds expended by Lender in the exercise of its rights or remedies under
this Agreement and the other Loan Documents shall be payable to Lender on
demand, together with interest at the default rate applicable to the principal
balance of the Note from the date the funds were expended.
Lender may exercise its rights and remedies in any order or manner that Lender
may determine in its sole discretion. Regardless of how Lender may treat
payments for the purpose of its own accounting, for the purpose of computing
Borrower's obligations hereunder and under the Note, payments and proceeds of
collateral received following an acceleration of the amounts payable under the
Loan Documents shall be applied, first, to the costs and expenses of Lender,
second, to the payment of accrued and unpaid interest due under the Loan
Documents to and including the date of such application, third, to the payment
of all unpaid principal amounts due under the Loan Documents, and fourth, to the
payment of all other amounts (including fees) then owing to Lender under the
Loan Documents. No application of payments will cure any Event of Default, or
prevent acceleration, or continued acceleration, of amounts payable under
13
the Loan Documents, or prevent the exercise, or continued exercise, of rights or
remedies of Lender hereunder or thereunder or at law or in equity.
8. General Provisions.
8.1 Integration. This Agreement, together with the other Loan
Documents, constitutes the entire agreement of the parties with respect to the
Loan and supersedes all prior written or oral negotiations, letters of intent or
agreements with respect thereto. In the event of conflict between the terms and
provisions of this Agreement and any other Loan Document, the terms and
provisions of this Agreement shall control; provided, however, that if the terms
and conditions of the Note, Trust Deed or General Security Agreement impose on
Borrower additional or more stringent requirements than those set forth in the
other Loan Documents, such terms and conditions of the Note, Trust Deed or
General Security Agreement shall control. Borrower acknowledges that no agent of
Lender shall have any authority to make an oral modification, consent, waiver,
extension or amendment of this Agreement or of any Loan Document, or to agree
orally to forebear from taking some action pursuant thereto, and Borrower shall
not be entitled to rely upon any such oral consent, waiver, modification,
agreement or statement, if made. Any extension, modification or amendment of the
Loan Documents, and any consent or waiver thereunder or thereto, shall be
enforceable against Lender only if in writing and only if signed by a corporate
officer or trustee of Lender. The Loan Documents, and any instruments referred
to therein or herein, or executed and delivered in connection therewith or
herewith, can only be modified or amended by a written document signed by Lender
and the other party or parties thereto.
8.2 Attorneys' Fees. If any attorney is engaged by Lender to enforce
or defend any provision of this Agreement or the other Loan Documents, or as a
consequence of any Default under the Loan Documents, with or without the filing
of any legal action or proceeding, Borrower shall immediately pay to Lender upon
demand the amount of all attorneys' fees and expenses and costs incurred by
Lender in connection therewith, including all trial and appellate proceedings in
any action, suit, bankruptcy or other proceeding, together with interest thereon
from the date of such demand until paid at the default rate of interest
applicable to the principal balance of the Note as specified therein.
8.3 Notices. Notices under this Agreement shall be in writing and
shall be effective when delivered. Notices shall be deemed delivered when sent
by facsimile transmission, provided that a copy of the notice is sent by Federal
Express within twenty-four hours thereafter, directed to the other parties (or
to the party required to be provided with such notice) at the following
facsimile numbers and addresses:
If to Borrower: ▇▇▇▇▇▇▇ Mortuary, Inc.
c/o Neptune Society of America, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, President
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
14
With a copy to: ▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Lender: Green Leaf Investors I, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇, Esq.
With a copy to: ▇▇▇▇ ▇▇▇▇▇▇ Spears Lubersky LLP
▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
or to such other address or number as the intended addressee may have given to
the other party in writing in the manner set forth above. Such notices,
requests, demands and other communications shall be deemed given when actually
received or, if earlier, (a) in the case of delivery by courier service with
guaranteed next day delivery, the next day or the day designated for delivery,
(b) in the case of certified United States mail, three (3) days after deposit
therein, or (c) in the case of fax, the date upon which the transmitting party
received confirmation of receipt by fax, telephone or otherwise. No notice to or
demand on Borrower shall in any case, of itself, entitle Borrower to any other
or further notice or demand in similar or other circumstances.
8.4 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Oregon, without resort
to such State's choice of law rules. Any proceeding related to this Agreement
shall be commenced or maintained only in the courts in Multnomah County, Oregon,
and the parties hereto hereby irrevocably submit to the jurisdiction of any
state or federal court sitting in Multnomah County, Oregon, in any action or
proceeding brought to enforce or otherwise arising out of or relating to this
Agreement, and hereby waive any objection to venue in any such court and any
claim that such forum is an inconvenient forum.
8.5 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which taken together shall
constitute one and the same agreement, notwithstanding that one or more parties
may have signed a separate signature page..
8.6 Survival of Representations, Warranties and Covenants. All of the
representations, warranties and covenants contained herein or in any statement,
certificate or other instrument furnished (or to be furnished) by Borrower
pursuant to this Agreement shall survive the Closing and shall not be affected
by any investigation, verification or approval by Lender or by anyone on behalf
of Lender.
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8.7 Time of the Essence. Time is of the essence of this Agreement, it
being understood that each date set forth herein, and the obligations of the
parties to be satisfied by such date, have been the subject of specific
negotiation by the parties.
8.8 Relationship of Parties. The relationship of Borrower and Lender
under the Loan Documents is, and shall at all times remain, solely that of a
borrower and a lender, and Lender neither undertakes nor assumes any
responsibility or duty to Borrower or to any third party with respect to the
Collateral or any improvements thereon, except as expressly provided in this
Agreement and the other Loan Documents.
8.9 Lender's Agents. Lender may designate an agent or independent
contractor to exercise any of Lender's rights under this Agreement and any of
the other Loan Documents. Any reference to Lender in any of the Loan Documents
shall include for such purposes Lender's agents, employees and independent
contractors.
8.10 Waiver of Right to Jury Trial. EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING WITHOUT
LIMITATION ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE PARTIES TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO
TRIAL BY JURY.
8.11 Severability. If any provision or obligation under this Agreement
or the other Loan Documents shall be determined by a court of competent
jurisdiction to be invalid, illegal or unenforceable, that provision shall be
deemed severed from the Loan Documents and the validity, legality and
enforceability of the remaining provisions or obligations shall remain in full
force and effect as though the invalid, illegal or unenforceable provision had
never been a part of the Loan Documents, provided, however, that if the rate of
interest or any other amount payable under the Note or this Agreement or any
other Loan Document, or the right of collectibility therefore, are declared to
be or become invalid, illegal or unenforceable, Lender's obligations to make
advances under the Loan Documents shall not be enforceable by Borrower.
8.12 Statutory Notice. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND
COMMITMENTS MADE BY A LENDER AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER
CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR
SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS
CONSIDERATION AND BE SIGNED BY THE LENDER TO BE ENFORCEABLE. BORROWER
ACKNOWLEDGES RECEIPT OF A COPY OF THIS AGREEMENT.
16
IN WITNESS WHEREOF, the parties hereto have executed this Loan Agreement on
and as of the day and year first above written.
LENDER: GREEN LEAF INVESTORS I, LLC
a California limited liability company
By: The Apogee Management Company, Inc.,
a California corporation, Manager
By: [Illegible]
Its: [Illegible]
BORROWER: ▇▇▇▇▇▇▇ MORTUARY, INC.,
an Oregon corporation
By: [Illegible]
Its: [Illegible]
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Disclosure Schedule