EXHIBIT 10.16

     
(BANK1ONE LOGO) [c89159c8915901.gif]
  Line of Credit Note

     

  $500,00.00

Due: July 9, 2005
  Date: July 9, 2004

Promise to Pay. On or before July 9, 2005, for value received, ARI Network
Services, Inc. (the “Borrower”) promises to pay to Bank One, NA, with its main
office in Chicago, IL, whose address is 111 E. Wisconsin Ave, Milwaukee, Wl
53202 (the “Bank”) or order, in lawful money of the United States of America,
the sum of Five Hundred Thousand and 00/100 Dollars ($500,000.00) or such lesser
sum as is indicated on Bank records, plus interest computed on the basis of the
actual number of days elapsed in a year of 360 days at the rate of 0% per annum
above the Prime Rate (the “Note Rate”), and at the rate of 3.00% per annum above
the Note Rate, at the Bank’s option, upon the occurrence of any default under
this Note, whether or not the Bank elects to accelerate the maturity of this
Note, from the date such increased rate is imposed by the Bank. In this Note,
“Prime Rate” means a rate per annum equal to the prime rate of interest
announced from time to time by the Bank or its parent (which rate is not
necessarily the lowest rate charged to any customer), changing when and as the
prime rate changes.

In no event shall the interest rate exceed the maximum rate allowed by law. Any
interest payment that would for any reason be unlawful under applicable law
shall be applied to principal.

Interest will be computed on the unpaid principal balance from the date of each
borrowing.

Until maturity, the Borrower will pay consecutive monthly installments of
interest only commencing August 9, 2004.

The Borrower will pay, without setoff, deduction, or counterclaim, the Bank at
the Bank’s address above or at such other place as the Bank may designate in
writing. If any payment of principal or interest on this Note shall become due
on a day that is not a Business Day, the payment will be made on the next
succeeding Business Day. The term “Business Day” in this Note means a day other
than a Saturday, Sunday or any other day on which national banking associations
are authorized to be closed. Payments shall be allocated among principal,
interest and fees at the discretion of the Bank unless otherwise agreed or
requited by applicable law. Acceptance by the Bank of any payment that is less
than the payment due at that time shall not constitute a waiver of the Bank’s
right to receive payment in full at that time or any other time.

Authorization for Direct Payments (ACH Debits). To effectuate any payment due
under this Note, the Borrower hereby authorizes the Bank to initiate debit
entries to Account Number 660612953 at the Bank and to debit the same to such
account. This authorization to initiate debit entries shall remain in full force
and effect until the Bank has received written notification of its termination
in such time and in such manner as to afford the Bank a reasonable opportunity
to act on it. The Borrower represents that the Borrower is and will be the owner
of all funds in such account. The Borrower acknowledges (1) that such debit
entries may cause an overdraft of such account which may result in the Bank’s
refusal to honor items drawn on such account until adequate deposits are made to
such account; (2) that the Bank is under no duty or obligation to initiate any
debit entry for any purpose; and (3) that if a debit is not made because the
above-referenced account dues not have a sufficient. available balance, or
otherwise, the payment may be late or past due.

Late Fee. If any payment is not received by the Bank within ten (10) days after
its due date, the Bank may assess and the Borrower agrees to pay a late fee
equal to the greater of: (a) five percent (5.00%) of the past due amount or
(b) Twenty Five and 00/100 Dollars ($25.00), up to the maximum amount of One
Thousand Five Hundred and 00/100 Dollars ($1,500.00) per late charge

Business Loan. The Borrower acknowledges and agrees that this Note evidences a
loan for a business, commercial, agricultural or similar commercial enterprise
purpose, and that all advances made under this Note shall not be used for any
personal, family or household purpose.

Credit Facility. The Bank has approved a credit facility to the Borrower in a
principal amount not to exceed the face amount of this Note. The credit facility
is in the form of advances made from time to time by the Bank to the Borrower.
This Note evidences the Borrower’s obligation to repay those advances. The
aggregate principal amount of debt evidenced by this Note is the amount
reflected from time to time in the records of the Bank. Until the earliest of
maturity, the occurrence of any default, or the occurrence of any event that
would constitute a default but for the giving of notice or the lapse of time or
both until the end of any grace or cure period, the Borrower may borrow, pay
down and reborrow under this Note subject to the terms of the Related Documents.

Liabilities. The term “Liabilities” in this Note means all obligations,
indebtedness and liabilities of the Borrower to any one or more of the Bank,
BANK ONE CORPORATION, and any of their subsidiaries, affiliates or successors,
now existing or later arising, including, without limitation, all loans,
advances, interest, costs, overdraft indebtedness, credit card indebtedness,
lease obligations, or obligations relating to any Rate Management Transaction,
all monetary obligations incurred or accrued during the pendency of any

 

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bankruptcy, insolvency, receivership or other similar proceedings, regardless of
whether allowed or allowable in such proceeding, and all renewals, extensions,
modifications, consolidations or substitutions of any of the foregoing, whether
the Borrower may be liable jointly with others or individually liable as a
debtor, maker, co-maker, drawer, endorser, guarantor, surety or otherwise, and
whether voluntarily or involuntarily incurred, due or not due, absolute or
contingent, direct or indirect, liquidated or unliquidated. The term “Rate
Management Transaction” in this Note means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into among the
Borrower the Bank or BANK ONE CORPORATION, or any of its Subsidiaries or
affiliates or their successors, which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.

Related Documents. The term “Related Documents” in this Note means all loan
agreements, credit agreements, reimbursement agreements, security agreements,
mortagages, deeds of trust, pledge agreements, assignments, guaranties, or any
other instrument or document executed in connection with this Note or in
connection with any of the Liabilities.

Security. The term “Collateral’ in this Note means all real or personal property
described in all security agreements, pledge agreements, mortgages, deeds of
trust, assignments, or other instruments now or hereafter executed in connection
with this Note or in connection with any of the Liabilities. If applicable, the
Collateral secures the payment of this Note and the Liabilities.

Bank’s Right of Setoff. In addition to the Collateral, if any, the Borrower
grants to the Bank a security interest in, and the Bank is authorized after
default to setoff and apply, all Accounts, Securities and Other Property, and
Bank Debt against any and all Liabilities of the Borrower. This right of setoff
may be exercised at any time after default and from time to time, and without
prior notice to the Borrower. This security interest and right of setoff may be
enforced or exercised by the Bank regardless of whether or not the Bank has made
any demand under this paragraph or whether the liabilities are contingent,
matured, or unmatured. Any delay, neglect or conduct by the Bank in exercising
its rights under this paragraph will not be a waiver of the right to exercise
this right of setoff or enforce this security interest. The rights of the Bank
under this paragraph are in addition to other rights the Bank may have in the
Related Documents or by law. In this paragraph: (a) the term “Accounts” means
any and all accounts and deposits of the Borrower (whether general, special,
time, demand, provisional or final) at any time held by the Bank (including all
Accounts held jointly with another, but excluding any IRA or Keogh Account, or
any trust Account in which a security interest would be prohibited by law):
(b) the term “Securities and Other Property” means any and all securities and
other property of the Borrower in the custody, possession or control of the Bank
(other than property held by the Bank in a fiduciary capacity); and (c) the term
“Bank Debt” means all indebtedness at any time owing by the Bank, to or for the
credit or account of the Borrower.

Representations by Borrower. Each Borrower represents that: (a) the execution,
and delivery of this Note and the performance of the obligations it imposes do
not violate any law, conflict with any agreement by which it is bound, or
require the consent or approval of any governmental authority or other third
party; (b) this Note is a valid and binding agreement, enforceable according to
its terms; and (c) all balance sheets, profit and loss statements, and other
financial statements furnished to the Bank in connection with the Liabilities
are accurate and fairly reflect the financial condition of the organizations and
persons to which they apply in all material respects on their effective dates,
including contingent liabilities of every type, which financial condition has
not changed materially and adversely since those dates. Each Borrower, other
than a natural person, further represents that: (a) it is duly organized,
existing and in good standing pursuant to the laws under which it is organized;
and (b) the execution and delivery of this Note and the performance of the
obligations it imposes (i) are within its powers and have been duly authorized
by all necessary action of its governing body, and (ii) do not contravene the
terms of its articles of incorporation or organization, its by-Laws, or any
partnership, operating or other agreement governing its affairs.

Events of Default/Acceleration. If any of the following events occur this Note
shall become due immediately, without notice, at the Bank’s option:

1.   The Borrower, or any guarantor of this Note (the “Guarantor”), fails to pay
when due any amount payable under this Note, under any of the Liabilities, or
under any agreement or instrument evidencing debt to any creditor.

2.   The Borrower or any Guarantor (a) fails to observe or perform any other
term of this Note; (b) makes any materially incorrect or misleading
representation, warranty, or certificate to the Bank; (c) makes any materially
incorrect or misleading representation in any financial statement or other
information delivered to the Bank; or (d) defaults under the terms of any
agreement or instrument relating to any debt for borrowed money (other than the
debt evidenced by this Note) having an outstanding principal balance of more
than $50,000.00, and the effect of such default will allow the creditor to
declare the debt due before its maturity.

3.   In the event (a) there is a default under the terms of any Related
Document, (b) any guaranty of the loan evidenced by this Note is terminated or
becomes unenforceable in whole or in part, (c) any Guarantor fails to promptly
perform under its guaranty, or (d) the Borrower fails to comply with, or pay, or
perform under any agreement, now or hereafter in effect, between the Borrower
and BANK ONE CORPORATION, or any of its subsidiaries or affiliates or their
successors.

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4.   There is any loss, theft, damage, or destruction of any Collateral not
covered by insurance, and having a fair market value as reasonably determined by
the Bank which would, as a result of such loss, theft, damage or destruction,
render the Bank inadequately secured.   5.   A “reportable event” (as defined in
the Employee Retirement Income Security Act of 1974 as amended) occurs that
would permit the Pension Benefit Guaranty Corporation to terminate any employee
benefit plan of the Borrower or any affiliate of the Borrower.   6.   The
Borrower or any Guarantor becomes insolvent or unable to pay its debts as they
become due.   7.   The Borrower or any Guarantor (a) makes an assignment for the
benefit of creditors; (b) consents to the appointment of a custodian, receiver,
or trustee for itself or for a substantial part of its assets; or (c) commences
any proceeding under any bankruptcy, reorganization, liquidation, insolvency or
similar laws of any jurisdiction.   8   A custodian, receiver, or trustee is
appointed for the Borrower or any Guarantor or for a substantial part of its
assets without its consent.   9.   Proceedings are commenced against the
Borrower or any Guarantor under any bankruptcy, reorganization, liquidation, or
similar laws of any jurisdiction, and they remain undismissed for thirty
(30) days after commencement; of the Borrower or the Guarantor consents to the
commencement of those proceedings.   10.   Any judgment is entered against the
Borrower or any Guarantor, or any attachment levy, or garnishment is issued
against any property of the Borrower or any Guarantor.   11.   The Borrower or
any Guarantor dies, or a guardian or conservator is appointed for the Borrower
or any Guarantor or all or any portion of the Borrower’s assets, any Guarantor’s
assets, or the Collateral.   12.   The Borrower or any Guarantor, without the
Bank’s written consent (a) is dissolved, (b) merges or consolidates with any
third party, (c) leases, sells or otherwise conveys a material part of its
assets or business outside the ordinary course of its business, (d) leases,
purchases, or otherwise acquires a material part of the assets of any other
business entity, except in the ordinary course of its business, or (e) agrees to
do any of the foregoing (notwithstanding the foregoing, any subsidiary may merge
or consolidate with any other subsidiary, or with the Borrower, so long as the
Borrower is the survivor).   13.   There is a substantial change in the existing
or prospective financial condition of the Borrower or any Guarantor that the
Bank in good faith determines to be materially adverse.

Cure Periods. Except as expressly provided to the contrary in this Note or any
of the Related Documents, no condition, event or occurrence shall constitute the
occurrence of a default under this Note, of a default under any of the
Liabilities or of a default under any of the Related Documents unless: (a) the
Bank has notified the Borrower of such condition, event or occurrence in writing
(a “Default Notice”); and (b) such condition, event, or occurrence has not been
fully cured (i) within five (5) days after the Borrower’s receipt of a Default
Notice, if the condition, event or occurrence giving rise to such Default Notice
can be cured solely by the payment of money or (ii) within thirty (30) days
after the Borrower’s receipt of a Default Notice, if the condition, event or
occurrence giving rise to such Default Notice is of a nature that it cannot be
cured solely by the payment of money.

Provided, however, that the Borrower shall have no notice and cure rights under
this section if: (a) the condition, event or occurrence giving rise to the
occurrence of a default under this Note, of a default under the Liabilities or
of a default under the Related Documents (i) is a condition, event or occurrence
described in any of clauses 3(b), (6), (7), (8), (9), (11) or (12) of the
section captioned Events of Default/Acceleration section above or
(ii) constitutes a breach of any covenant in any Related Document prohibiting
the sale or transfer of (1) any assets of any Borrower, Mortgagor, Pledgor,
Debtor, Assignor, Trustor or any similar pledging or borrowing party or (2) any
of the Collateral; or (b) the Borrower, during the twelve (12) month period
immediately preceding any Default Notice, has been given either (i) any other
Default Notice covering the same condition, event or occurrence or (ii) three
(3) or more other Default Notices of any nature.

Remedies. If this Note is not paid at maturity, whether by acceleration or
otherwise, the Bank shall have all of the rights and remedies provided by any
law or agreement. The Bank is authorized to cause all or any part of the
Collateral to be transferred to or registered in its name or in the name of any
other person or business entity, with or without designating the capacity of
that nominee. Without limiting any other available remedy, the Borrower is
liable for any deficiency remaining after disposition of any Collateral. The
Borrower is liable to the Bank for all reasonable documented costs and expenses
of every kind incurred in the making or collection of this Note, both before and
after judgment, including without limitation reasonable attorneys’ fees and
court costs. These costs and expenses include without limitation any costs or
expenses incurred by the Bank in any bankruptcy, reorganization, insolvency or
other similar proceeding.

Waivers. Any party (other than the Borrower) liable on this Note waives (a) to
the extent permitted by law, all rights and benefits under any laws or statutes
regarding sureties, as may be amended; (b) any right to receive notice of the
following matters before the Bank enforces any of its rights: (i) the Bank’s
acceptance of this Note, (ii) any credit that the Bank extends to the Borrower,
(iii) the Borrower’s default, (iv) any demand, diligence, presentment, dishonor
and protest, or (v) any action that the Bank takes regarding the Borrower,
anyone else, any Collateral, or any of the Liabilities, that it might be
entitled to by law or under any other agreement; (c) any right to require the
Bank to proceed against the Borrower, any other obligor or guarantor of the
Liabilities, or any Collateral, or pursue any remedy in the Bank’s power to
pursue; (d) any defense based on any claim that any endorser of other parties’
obligations exceed or are more burdensome than those of the Borrower; (e) the
benefit of any statute of limitations affecting liability of any endorser or
other party liable hereunder or the enforcement hereof; (f) any defense arising
by reason of any disability or other defense

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of the Borrower or by reason of the cessation from any cause whatsoever (other
than payment in full) of the obligation of the Borrower for the Liabilities; and
(g) any defense based on or arising out of any defense that the Borrower may
have to the payment or performance of the Liabilities or any portion thereof.
Any party (other than the Borrower) liable on this Note consents to any
extension or postponement of time of its payment without limit as to the number
or period, to any substitution, exchange or release of all or any part of the
Collateral, to the addition of any other party, and to the release or discharge
of, or suspension of any rights and remedies against, any person who may be
liable for the payment of this Note. The Bank may waive or delay enforcing any
of its rights without losing them. Any waiver affects only the specific terms
and time period stated in the waiver. No modification or waiver of any provision
of this Note is effective unless it is in writing and signed by the party
against whom it is being enforced.

Subordination. Any rights of any party (other than the Borrower) liable on this
Note, whether now existing or hereafter arising, to receive payment on account
of any indebtedness (including interest) owed to any party liable on this Note
by the Borrower, or to withdraw capital invested by it in the Borrower, or to
receive distributions from the Borrower, shall at all times be subordinate to
the full and prior repayment to the Bank of the Liabilities. No party liable on
this Note shall be entitled to enforce or receive payment of any sums hereby
subordinated until the Liabilities have been paid in full and any such sums
received in violation of this paragraph shall be received by such party in trust
for the Bank. Any party (other than the Borrower) liable on this Note agrees to
stand still with regard to the Bank’s enforcement of its rights, including
taking no action to delay, impede or otherwise interfere with the Bank’s rights
to realize on the Collateral. The foregoing notwithstanding, until the
occurrence of any default, any party liable on this Note is not prohibited from
receiving distributions from the Borrower in an amount equal to any income tax
liability imposed on such party liable on this Note attributable to an ownership
interest, if any, in the Borrower.

Rights of Subrogation. Any party liable on this Note waives and agrees not to
enforce any rights of subrogation, contribution or indemnification that it may
have against the Borrower, any person liable on the Liabilities, or the
Collateral, until the Borrower and such party liable on this Note have fully
performed all their obligations to the Bank, even if those obligations are not
covered by this Note.

Reinstatement. All parties liable on this Note agree that to the extent any
payment is received by the Bank in connection with the Liabilities, and all or
any part of such payment is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid by the Bank or paid over to
a trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a “Preferential
Payment”), then this Note shall continue to be effective or shall be reinstated,
as the case may be, and whether or not the Bank is in possession of this Note,
and, to the extent of such payment or repayment by the Bank, the Liabilities or
part thereof intended to be satisfied by such Preferential Payment shall be
revived and continued in full force and effect as if said Preferential Payment
had not been made.

Governing Law and Venue. This Note is delivered in the State of Wisconsin and
governed by Wisconsin law (without giving effect to its laws of conflicts). The
Borrower agrees that any legal action or proceeding with respect to any of its
obligations under this Note may be brought by the Bank in any state or federal
court located in the State of Wisconsin, as the Bank in its; sole discretion may
elect. By the execution and delivery of this Note, the Borrower submits to and
accepts, for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of those courts. The Borrower
waives any claim that the State of Wisconsin is not a convenient forum or the
proper venue for any such suit, action or proceeding.

Miscellaneous. The Borrower, if more than one, is jointly and severally liable
for the obligations represented by this Note, the term “Borrower” means any one
or more of them, and the receipt of value by any one of them constitutes the
receipt of value by the others. This Note binds the Borrower and its successors,
and benefits the Bank, its successors and assigns. Any reference to the Bank
includes any holder of this Note. Section headings are for convenience of
reference only and do not affect the interpretation of this Note. Any notices
and demands under or related to this document shall be in writing and delivered
to the intended party at its address stated herein, and if to the Bank, at its
main office if no other address of the Bank is specified herein, by one of the
following means: (a) by hand, (b) by a nationally recognized overnight courier
service, or (c) by certified mail, postage prepaid, with return receipt
requested. Notice shall be deemed given: (a) upon receipt if delivered by hand,
(b) on the Delivery Day after the day of deposit with a nationally recognized
courier service, or (c) on the third Delivery Day after the notice is deposited
in the mail. “Delivery Day” means a day other than a Saturday, a Sunday, or any
other day on which national banking associations are authorized to be closed.
Any party may change its address for purposes of the receipt of notices and
demands by giving notice of such change in the manner provided in this
provision. This Note and any Related Documents embody the entire agreement
between the Borrower and the Bank regarding the terms of the loan evidenced by
this Note and supercede all oral statements and prior writings relating to that
loan. If any provision of this Note cannot be enforced, the remaining portions
of this Note shall continue in effect. The Borrower agrees that the Bank may
provide any information or knowledge the Bank may have about the Borrower or
about any matter relating to this Note or the Related Documents to BANK ONE
CORPORATION, or any of its subsidiaries or affiliates or their successors, or to
any one or more purchasers or potential purchasers of this Note or the Related
Documents. The Borrower agrees that the Bank may at any time sell, assign or
transfer one or more interests or participations in all or any part of its
rights and obligations in this Note to one or more purchasers whether or not
related to the Bank.

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Government Regulation. Borrower shall not (a) be or become subject at any time
to any law, regulation, or list of any government agency (including, without
limitation, the U.S. Office of Foreign Asset Control list) that prohibits or
limits Bank from making any advance or extension of credit to Borrower or from
otherwise conducting business with Borrower, or(b) fail to provide documentary
and other evidence of Borrower’s identity as may be requested by Bank at any
time to enable Bank to verify Borrower’s identity or to comply with any
applicable law or regulation, including, without limitation, Section 326 of the
USA Patriot Act of 2001, 31 U.S.C. Section 5 318.

USA PATRIOT ACT NOTIFICATION. The following notification is provided to Borrower
pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the
government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record
information that identifies each person or entity that opens an account,
including any deposit account, treasury management account, loan, other
extension of credit, or other financial services product. What this means for
Borrower: When Borrower opens an account, if Borrower is an individual Bank will
ask for Borrower’s name, taxpayer identification number, residential address,
date of birth, and other information that will allow Bank to identify Borrower,
and if Borrower is not an individual Bank will ask for Borrower’s name, taxpayer
identification number, business address, and other information that will allow
Bank to identify Borrower. Bank may also ask, if Borrower is an individual to
see Borrower’s driver’s license or other identifying documents, and if Borrower
is not an individual to see Borrower’s legal organizational documents or other
identifying documents.

WAIVER OF SPECIAL DAMAGES. THE BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM
THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.

JURY WAIVER. THE BORROWER AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR
OTHERWISE) BETWEEN THE BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY
RELATED TO THIS NOTE OR THE OTHER RELATED DOCUMENTS, THIS PROVISION IS A
MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE FINANCING EVIDENCED BY THIS NOTE.

                          Borrower:    
 
                Address:   11425 W. Lake Park Dr., Suite 900   ARI Network
Services, Inc.    

  Milwaukee, Wl 53224            
 
               
 
               

      By:   /s/ Timothy Sherlock                

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          Timothy Sherlock   CFO            

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          Printed Name   Title
 
                        Date Signed: 7/9/04

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