exv10w16



 





EXHIBIT 10.16




	 	 	 
	

	 	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




 









 








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	 	 
	 	 	 	 	 	 	

	

	 	 	 	 	 	Timothy Sherlock
	 	CFO
	 	 	 	 	 	 	

	

	 	 	 	 	 	Printed Name
	 	Title
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	Date Signed: 7/9/04








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