Document:

hgbl-ex101_84.htm

 

Exhibit 10.1

SEparation AGREEMENT & GENERAL RELEASE

This Separation Agreement and General Release (“Agreement”) is made and entered into as by and between Heritage Global Inc. (“HGI”) on the one hand, and Scott A. West (“Executive”), on the other hand.  HGI and Executive together are referred to herein as the Parties.  This Agreement shall be effective on the eighth day after it is signed by Executive and returned to James Sklar at HGI, provided it has not been revoked by Executive (“Effective Date”).  

RECITALS

WHEREAS certain disputes have arisen between Executive and HGI concerning their respective rights and liabilities arising out of Executive’s employment at HGI, and the separation of his employment following a paid administrative leave that commenced on March 18, 2021;

WHEREAS, the Parties have agreed that Executive’s employment shall end effective March 31, 2021 (“Separation Date”);

WHEREAS, HGI and Executive desire to compromise, settle and release any claims, whether known or unknown, relating to or arising out of any dispute involving Executive’s employment with HGI and the separation thereof (“the Dispute”);

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

TERMS

1.Payment of Money.  HGI shall pay to Executive the gross amount of two hundred thousand dollars ($200,000.00), less applicable payroll deductions, as a compromise payment (“Payment”) and in settlement of all claims covered by this Agreement.  The Payment will be made payable to “Scott A. West” via Direct Deposit, in regular increments for six months, commencing no sooner than eight (8) days and no later than thirty (30) days after HGI’s receipt (by James Sklar) of Executive’s signature on this Agreement. 

2.Cobra Reimbursement.  HGI shall reimburse Executive for the current amount HGI pays for Executive’s health coverage, in the amount of seven hundred and seventy five dollars ($775) per month (“Monthly Cobra Offset”) to offset his costs under Cobra.  The Monthly Cobra Offset may continue for up to one year following the Effective Date.  Moreover, Executive understands that if he is employed elsewhere within one year of the Effective Date, and health coverage is provided by his new employer, that he will so notify HGI and will no longer be eligible for the Monthly Cobra Offset.  

		
	
 
	
 

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3.Restricted Stock.  Within five (5) Business Days following the execution of this Agreement, Company shall issue to Executive 25,000 shares of the Company’s common stock, subject to restrictions as set forth below (the “Restricted Stock”). The Restricted Stock shall be forfeited to the Company during the two (2) years following the date of this Agreement (the “Restricted Period”) in the event that Executive breaches this Agreement. During the Restricted Period, Executive will be prohibited from selling, transferring, pledging, assigning or otherwise encumbering or disposing of the Restricted Stock, and the Company may take reasonable steps to ensure compliance with these prohibitions. Executive represents to the Company that he meets the definition of an accredited investor, as that term is defined in Rule 501 of Regulation D.

4.Indemnification.  Executive acknowledges that the Payment paid to him described in Paragraph 1, and the Cobra reimbursement in Paragraph 2, and the Restricted Stock in Paragraph 3, are a liquidated payment, and Executive agrees to indemnify and hold harmless HGI and its current and former officers, owners, directors, employees, administrators, agents and assigns against any and all claims or liabilities that may be asserted by any governmental agency (including but not limited to any local, state, or federal taxing authority or agency) with respect to any local, state, or federal taxes that may be payable by Executive as a result of such Payment paid to him by HGI.  This indemnity will continue in full force and effect for so long as any governmental agency can or may assert such a claim against HGI.

5.Executive’s Representations.  

(a)Executive acknowledges that as of the Separation Date, all wages and accrued vacation owed to him by HGI have been paid, and that all business expenses he has incurred in connection with his employment have been reimbursed, and that any bonus he believes he may be owed is included in the Payment.  

(b)Executive further acknowledges that he has returned all of HGI’s property and equipment in his possession or otherwise under his control, including but not limited to:  all originals and any copies of any of HGI documents containing confidential information (such as financial information, reports, Board documents, manuals, personnel information, etc.); keys; laptop; cellular telephone; and any other property of HGI.  Executive further agrees to provide (at the time he signs this Agreement) a list of all HGI vendors or third parties for which he has a password or login credentials.

(c)Executive represents that he has not filed a claim for workers’ compensation benefits and has no known occupational injury or illness. 

6.Request for References/Letter of Recommendation.  HGI will provide a letter of reference to Executive along with the first installment of the Payment.  The reference letter may be negotiated by the Parties, but is subject to approval by HGI’s counsel.  Executive agrees that he will direct any requests for references to Ross Dove, who will provide references consistent with the letter of reference.  

			
	
 
	
 

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7.Non-admission of Liability.  Executive and HGI acknowledge that the foregoing consideration does not constitute an admission of liability, express or implied, on the part of HGI with respect to any fact or matter which may be involved in Executive’s employment with HGI, or any dispute or claim he might have.  Executive acknowledges that HGI is providing Executive with the above-recited consideration solely for the purpose of resolving any potential controversy relating to Executive’s employment with HGI.

8.General Mutual Release.

(a)Executive (for himself, his heirs, administrators, executors, agents and assigns) does hereby forever release, waive, discharge and covenant not to sue HGI, or any related entity, or its respective current or former predecessors, successors, parent entities, owners, subsidiaries, related entities (including Heritage Global Partners, Inc.), officers, employees, directors, partners, agents and assigns (collectively “HGI Released Parties”) (including but not limited to Allan Silber, Morris Perlis, Michael Hexner, Ross Dove and Kirk Dove), with respect to any and all claims, assertions of claims, debts, demands, actions, suits, expenses, attorneys’ fees, costs, damages and liabilities of any nature, type and description, known or unknown, arising out of any fact or matter in any way connected with Executive’s employment at HGI.  This release specifically includes (but is not limited to) any claims under any foreign national, federal, state or local employment, wrongful dismissal, fair employment practices, civil rights or any other laws or regulations, including, but not limited to, the California Constitution, the California Labor Code (including but not limited to Sections 132a and 4553), the California Fair Employment & Housing Act, the California Government Code, the California Civil Code, the California Penal Code, the Families First Coronavirus Response Act, Title VII of the Civil Rights Act, the Employee Retirement Income Security Act, the Civil Rights Act, the Equal Pay Act, the Americans with Disabilities Act, the United States Constitution, the Age Discrimination in Employment Act, the Older Workers’ Benefit Protection Act, and/or any other local, state, or federal law governing discrimination in employment and/or the payment of wages and benefits.  This release will apply to all known, unknown, suspected, unsuspected, anticipated, and unanticipated claims, liens, injuries and damages including, but not limited to, claims sounding in tort or contract, claims for compensation, benefits or other remuneration or attorneys’ fees, costs or disbursements, claims for physical or emotional distress or injuries and claims based upon any other duty or obligation of any kind or description whether arising in law, under statute, or in equity, which can lawfully be released under federal and state law.  This release does not affect any legal rights that Executive may have arising after the Effective Date.  

(b)HGI for itself, its current or former predecessors, successors, parent entities, owners, subsidiaries, related entities (including Heritage Global Partners, Inc.), officers, employees, directors, partners, agents and assigns does hereby forever release, waive, discharge and covenant not to sue Executive (his heirs, administrators, executors, agents and assigns) (collectively “West Released Parties”), with respect to any and all claims, assertions of claims, debts, demands, actions, suits, expenses, attorneys’ fees, costs, damages and liabilities of any nature, type and description, known or unknown, arising out of any fact or matter in any way connected with Executive’s employment at HGI.  This release specifically includes (but is not limited to) any claims under any foreign national, federal, state or local employment, wrongful dismissal, fair employment practices, 

			
	
 
	
 

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civil rights or any other laws or regulations, including, but not limited to, the California Constitution, the California Labor Code (including but not limited to Sections 132a and 4553), the California Fair Employment & Housing Act, the California Government Code, the California Civil Code, the California Penal Code, the Families First Coronavirus Response Act, Title VII of the Civil Rights Act, the Employee Retirement Income Security Act, the Civil Rights Act, the Equal Pay Act, the Americans with Disabilities Act, the United States Constitution, the Age Discrimination in Employment Act, the Older Workers’ Benefit Protection Act, and/or any other local, state, or federal law governing discrimination in employment and/or the payment of wages and benefits.  This release will apply to all known, unknown, suspected, unsuspected, anticipated, and unanticipated claims, liens, injuries and damages including, but not limited to, claims sounding in tort or contract, claims for compensation, benefits or other remuneration or attorneys’ fees, costs or disbursements, claims for physical or emotional distress or injuries and claims based upon any other duty or obligation of any kind or description whether arising in law, under statute, or in equity, which can lawfully be released under federal and state law.  

(c)Executive and HGI understand and for valuable consideration hereby expressly waive all of the rights and benefits of Section 1542 of the California Civil Code, which section reads as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR THE RELEASED PARTY.

9.No Pending Litigation.  Executive represents that there is no pending action filed in any court of law against HGI or any HGI Released Party in connection with Executive’s employment with HGI, and that there is no pending charge or complaint filed with any state, federal or local agency, including but not limited to the Equal Employment Opportunity Commission, the Department of Fair Employment and Housing, the Department of Labor, and/or the California Labor Commissioner.  If applicable, Executive hereby withdraws any request he has made for a copy of his personnel file and/or pay records, and waives any right to request and/or receive copies of those records in the future.  

10.Executive’s Confidentiality Obligations.  

(a)The Parties agree to publicly message Executive’s departure as a “mutual decision” consistent with the representations in HGI’s 8K filed on March 24, 2021.

(b)To the extent permissible under applicable law, Executive agrees that the existence of this Agreement and the terms of this Agreement, including but not limited to the Payment and the amount of the Payment are absolutely confidential.  Executive agrees that he  will not:  (i) communicate or disclose in any way to any individual (including present and former employees of HGI) the existence of and/or the amount of the Payment made by HGI; (ii) give any 

			
	
 
	
 

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indication of the amount of the Payment; or (iii) voluntarily (where not compelled by legal process by a court or government agency) testify about the Payment.  Executive may communicate the terms and conditions of this Agreement only:  (a) to those rendering financial or legal advice to Executive and having a bona fide need to know such terms and conditions (collectively “Advisors”); or (b) to government agencies for tax purposes (such as the IRS and the Franchise Tax Board); or (c) when compelled by legal process by a court or governmental agency; or (d) to his spouse; provided, however, that he will advise any such individuals beforehand of the existence of his confidentiality obligations under this Agreement and their corresponding obligations.  Any violation of this confidentiality requirement by the individuals within groups (a) and (d) will be treated as a violation of this Agreement by Executive.  

(c)Executive understands that he is bound by the Confidentiality Agreement he signed during employment, dated, March 6, 2014.  Executive agrees to take his post separation obligations to protect HGI’s confidential information seriously.  

11.Non-Disparagement/Litigation Assistance.  

(a)Executive agrees to refrain from any disparagement of HGI, including to HGI’s shareholders, employees, members of the public, or other businesses, whether via social media or otherwise.  Executive also agrees not to post on HGI shareholder forums and not to attend live shareholder events (although he is welcome to listen to recordings).  

(b)HGI agrees to refrain from any disparagement of Executive to HGI shareholders, HGI employees, HGI Board members, members of the public or other businesses, whether via social media or otherwise.  

(c)Executive further agrees not to commence, maintain, prosecute or participate in (except as may be required by law, pursuant to court order, or in response to a valid subpoena) any action, charge, complaint, or proceeding of any kind (on his own behalf and/or on behalf of any other person or entity and/or on behalf of or as a member of any alleged class of persons) in any court, or before any administrative or investigative body or agency (whether public, quasi-public or private) against HGI or any HGI Released Party with respect to any act, omission, transaction or occurrence arising out of his employment at HGI. 

12.Cooperation.  During the six month period following the Effective Date, and for the duration of any litigation that commences during the twelve month period following the Effective Date, Executive agrees to make himself  reasonably available to and cooperate with HGI in any manner requested by HGI.  Executive understands and agrees that his cooperation would include, but not be limited to: timely responding to emails from HGI; answering questions from HGI in a timely, truthful, and complete manner; meeting with HGI representatives and agents at reasonable times and places; volunteering to HGI any pertinent information; and providing to HGI all relevant documents that are or may come into his possession or under his control.  Executive understands that in the event the Company asks for his cooperation in accordance with the terms of this paragraph, HGI will not compensate him for such cooperation beyond the Payment and will 

			
	
 
	
 

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reimburse Executive solely for reasonable and necessary expenses upon his submission of appropriate documentation.

13.Subpoenas.  In the event Executive is subpoenaed by a court or other legal tribunal to testify or provide documents regarding his role as Chief Financial Officer or any other aspect of his employment with HGI, other individuals’ employment with HGI, HGI’s practices or procedures, or any other subject matter involving, relating to or referring to HGI, he will immediately give notice to HGI by sending via email a scanned copy of such subpoenas to James Sklar (or HGI’s subsequent General Counsel), such that any such subpoenas are received within five (5) days of Executive’s receipt of such subpoena.  Executive agrees that he will take no action, direct or indirect, to encourage or suggest the issuance of such subpoenas. 

14.Arbitration.  The Parties agree to resolve any disputes that they may have with each other regarding the validity, interpretation, or effect of this Agreement or any alleged violations of it through final and binding arbitration.  The arbitration will be conducted pursuant to the employment dispute resolution rules of JAMS (https://www.jamsadr.com/rules-employment), in southern California before an experienced, neutral arbitrator licensed to practice law in California who has been selected in accordance with such rules, and who has no conflict of interest with either party or either party’s attorney.  The arbitrator may not modify or change this Agreement in any way.  All out-of-pocket costs of the arbitration, including the fees of the arbitrator, the costs of any record or transcript of the arbitration, administrative fees, and other fees and costs will be paid in equal shares by Executive and HGI prior to the arbitration.  

15.Attorneys’ Fees.  Executive and HGI agree that if any action is brought to enforce the terms, conditions and provisions of this Agreement (including the confidentiality and non-disparagement provisions above), the prevailing party will be entitled to all reasonable costs and attorneys’ fees incurred in enforcing any of the terms, conditions and provisions hereof.

16.Consideration and Revocation Period.  Executive acknowledges with his signature on this Agreement that he has had at least twenty-one (21) days within which to consider this Agreement and its consequences, or that he has been advised of his right to that 21-day period and that he has voluntarily waived that 21-day period.  Executive further acknowledges that he has been advised that he has seven (7) days after his execution of this Agreement to revoke it.  Any such revocation must be in writing and delivered by hand or email (receipt confirmed) to James Sklar (or HGI’s subsequent General Counsel).  Executive further acknowledges that he has read this Agreement in its entirety and that he fully understands all of the terms and conditions contained herein.  Executive further acknowledges that he is entering into this Agreement knowingly, voluntarily and of his own free will.  Notwithstanding any other provision of the Agreement, the parties agree that the Agreement will not be interpreted as a waiver of any claims Executive may have against HGI under the Age Discrimination in Employment Act (“ADEA”) arising after the Effective Date.  

17.Use of Agreement.  Executive and HGI agree that this Agreement may be used as evidence in a subsequent proceeding in which any of the parties allege a breach of this Agreement, notwithstanding the confidentiality and non-disparagement provisions above.

			
	
 
	
 

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18.Captions.  The captions herein have been inserted for identification and reference purposes only and shall not be used in the construction or interpretation of this Agreement.

19.Counterparts/By Electronic Signature or DocuSign.  This Agreement may be executed in counterparts by electronic copy or DocuSign, each of which shall be deemed an original, and all of which together shall constitute but one and the same instrument.

20.Severability.  If any provision or provisions of this Agreement shall be held invalid, illegal or unenforceable, the validity, legality and/or enforceability of the remaining provisions shall not in any way be affected or impaired thereby.  If any terms or sections of this Agreement are determined to be unenforceable, they shall be modified so that the unenforceable term or section is enforceable to the greatest extent possible.

21.California Law.  This Agreement will be governed by and construed under the laws of the State of California without reference to principals of choice of law thereof. 

22.Entire Agreement.  This Agreement is the entire Agreement among Executive and HGI regarding Executive’s employment, and supersedes any prior oral or written agreements or understandings.  HGI and Executive have made no promises to the other, other than those contained in this Agreement.

23.Voluntary Agreement.  Executive and HGI expressly declare and represent that they have read and understood the meaning of the terms and conditions contained in this Agreement, and that they have had the opportunity to consult with legal counsel prior to executing this Agreement.  Executive and HGI further declare and represent that they fully understand the content and effect of this Agreement and that they approve and accept the terms and conditions contained herein, and that this Agreement is executed freely and voluntarily without coercion.  

IN WITNESS WHEREOF, the parties hereto have executed this Agreement consisting of 23 paragraphs and 7 pages as of the dates listed below.

HERITAGE GLOBAL INC.

			
	
By:
	
/s/ Ross Dove           
	
 

	
 
	
Ross Dove, Chief Executive Officer
	
 

	
 
	
Dated: 3/30/2021
	
 

	
 
	
/s/ Scott A. West     
	
 

	
 
	
Scott A. West, Chief Financial Officer
	
 

	
 
	
Dated:3/30/2021
	
 

 

			
	
 
	
 

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CONFIDENTIALhgbl-ex102_185.htm

Exhibit 10.2

BUSINESS LOAN AGREEMENT

Borrower:Heritage Global Inc.Lender:C3bank, National Association

12625 High Bluff Drive, Suite 305Riverside Office

San Diego, CA 921303727 Arlington Ave

Riverside, CA 92506

THIS BUSINESS LOAN AGREEMENT dated May 5, 2021, is made and executed between Heritage Global Inc. ("Borrower") and C3bank, National Association ("Lender") on the following terms and conditions. Borrower has received prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit or schedule attached to this Agreement. Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lender is relying upon Borrower's representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender's sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement.

TERM. This Agreement shall be effective as of May 5, 2021, and shall continue in full force and effect until such time as all of Borrower's Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys' fees, and other fees and charges, or until May 7, 2023.

LINE OF CREDIT. The Indebtedness includes a revolving line of credit. Advances under the Indebtedness, as well as directions for payment from Borrower's accounts, may be requested orally by Borrower or as provided in the "Advance Authority" section below. All requests shall be confirmed in writing on the day of the request. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person as described in the "Advance Authority" section below or (B) credited to any of Borrower's accounts with Lender.

ADVANCE AUTHORITY. The following person or persons are authorized, except as provided in this paragraph, to request advances and authorize payments under the line of credit until Lender receives from Borrower, at Lender's address shown above, written notice of revocation of such authority: JAMES SKLAR, EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL & SECRETARY. FUNDS WILL BE DISBURSED AS REQUESTED BY BORROWER AND APPROVED BY A C3BANK OFFICER.

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the fulfillment to Lender's satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.

Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security interests in the Collateral; (3) financing statements and all other documents perfecting Lender's Security Interests; (4) evidence of insurance as required below; (5) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender's counsel.

Borrower's Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.

Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specified in this Agreement or any Related Document.

Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate delivered to Lender under this Agreement are true and correct.

No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under any Related Document.

REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:

Organization. Borrower is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Florida. Borrower is duly authorized to transact business in all other states in which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which  is presently engaged or presently proposes to engage. Borrower maintains an office at 12625 High Bluff Drive, San Diego, CA 92130. Unless Borrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify Lender prior to any change in the location of Borrower's state of organization or any change in Borrower's name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to Borrower and Borrower's business activities.

Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None.

Authorization. Borrower's execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower's articles of incorporation or organization, or bylaws, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower's properties.

Financial Information. Each of Borrower's financial statements supplied to Lender truly and completely disclosed Borrower's financial condition as of the date of the statement, and there has been no material adverse change in Borrower's financial condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements.

Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when

 

 

BUSINESS LOAN AGREEMENT

Loan No: 13880(Continued)Page 2

delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.

Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower's financial statements or in writing to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower's properties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All of Borrower's properties are titled in Borrower's legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.

Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During the period of Borrower's ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower's expense and for Lender's purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower's due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not be affected by Lender's acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.

Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower's financial condition or properties, other than litigation, claims, or other events,  any, that have been disclosed to and acknowledged by Lender in writing.

Taxes. To the best of Borrower's knowledge, all of Borrower's tax returns and reports that are or were required to be filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.

Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower's Loan and Note, that would be prior or that may in any way be superior to Lender's Security Interests and rights in and to such Collateral.

Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.

ADDENDUM TO REPRESENTATIONS AND WARRANTIES PARAGRAPH:. Assume Names. Certain of HGI's subsidiaries operate certain lines of business under assumed names duly filed in the respective counties as follows:

a."Heritage Zetabid Realty Services" and Heritage Zetabid Realty & Auctions Services" (San Diego County)

b."Heritage Global Patents and Trademarks" (San Diego County).

AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:

Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower's financial condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.

Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and audit Borrower's books and records at all reasonable times.

Financial Statements. Furnish Lender with the following:

Additional Requirements. Reporting Covenants 

Borrower

Borrower shall provide to Lender, in form and substance reasonably acceptable to Lender, to the extent applicable:

quarterly financial statements and operating statements, within 45 days after the end of each quarter, each report covering such quarter to date.

annual audited financial statements of Borrower within 120 days after the end of each year; 
certified quarterly reporting on all financial covenants;

(4) such other (A) information concerning Borrower’s operation and finances as Lender may reasonably request from time to time; and (B) reporting requirements in respect of the Borrower customarily found for similar financings and others appropriate to the specific transaction as may be agreed between Borrower and Lender.

On request, Borrower must promptly provide Bank, within 5-days, with any other financial or other information concerning its affairs

and

properties as Bank may reasonably request.

Any and all other information including third party reports received by Borrower related to the Property shall be made available to the Bank within 5-business days from the reasonable request thereof;

 

 

BUSINESS LOAN AGREEMENT

Loan No: 13880(Continued)Page 3

The following financial covenants to be tested quarterly:

Equity and Liquidity: Borrower to maintain Equity of at least $25,000,000 and on balance sheet Total Liquidity of at least $3,000,000.

Definitions

Total Liquidity: The sum of (a) cash, plus (b) cash equivalents, plus (c) remaining availability on the subject line of credit.

Equity: GAAP total stockholder’s equity

Debt to Equity Ratio: Borrower to maintain ratio that does not exceed .75x (defined as Total Debt  Equity).

Definitions

Total Debt: Total outstanding debt

Equity: GAAP total stockholder’s equity

Debt to Current Asset Ratio: Borrower to maintain a Total Debt to Total Current Asset ratio equal to or less than .75x.

Definitions

Total Current Assets: The sum of (a) Cash and equivalents, plus (b) Accounts Receivable, plus (c) Inventory, plus (d) Other current

assets

Total Debt: Total outstanding debt

Debt Service Coverage Ratio: Borrower to maintain DSCR of at least 1.30x (defined as trailing 12-month EBITDA  company-wide

trailing 12-month debt payments).

Definitions

EBITDA: The total Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) as reported in the borrower’s public SEC

filings (i.e., 10-Q and 10-K), unadjusted.

Debt Payments: The sum of (a) the assumed debt service on the subject line calculated at the balance of $10,000,000, at the

then-current loan rate,

and for the following amortization periods seven (7) years during year one (1), and five (5) years for the remainder of the term plus (b)

current portion of outstanding long-term Debt of Borrower

(not including that included in (a)), plus (c) Interest Expenses paid by the Borrower (not including that included in (a))

Debt to EBITDA Ratio: For year 1, Total Debt shall not exceed 2.5 times trailing 12-month EBITDA. For year 2 and each year

thereafter, Total Debt shall not exceed 2.0 times trailing 12-month EBITDA.

Definitions,

Same definitions for EBITDA and Total Debt defined previously.

Out of Debt Covenant: The outstanding balance to be paid down to $5,000,000 for at least 30 days in a calendar year (non-consecutive).

Dividends: No dividends during the life of the loan, without bank approval.

Banking Relationship: Primary (100.0%) banking relationship with C3bank required. Borrower to maintain its primary demand deposit account (the account into which substantially

all of borrower’s receipts from operations are deposited and from which substantially all of borrower’s disbursements are made) with C3bank. Unless otherwise approved by lender

(which approval lender will not unreasonably withhold, condition or delay), Borrower and its subsidiaries to maintain their primary demand deposit account relationship with C3bank.

/s/JS Initial

All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified by Borrower as being true and correct.

Additional Information. Furnish such additional information and statements, as Lender may request from time to time.

Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower's properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least thirty (30) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender's loss payable or other endorsements as Lender may require.

Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.

Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.

Loan Proceeds. Use all Loan proceeds solely for Borrower's business operations, unless specifically consented to the contrary by Lender in writing.

Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date on which penalties would attach, and all lawful claims that,  unpaid, might become a lien or charge upon any of Borrower's properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings, and (2) Borrower shall have established on Borrower's books adequate reserves with respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with GAAP.

Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related

 

 

BUSINESS LOAN AGREEMENT

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Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in writing of any default in connection with any agreement.

Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable and prudent manner.

Environmental Studies. Promptly conduct and complete, at Borrower's expense, all such investigations, studies, samplings and testings as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned, leased or used by Borrower.

Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities applicable to the conduct of Borrower's properties, businesses and operations, and to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lender's sole opinion, Lender's interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender's interest.

Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower's other properties and to examine or audit Borrower's books, accounts, and records and to make copies and memoranda of Borrower's books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide Lender with copies of any records  may request, all at Borrower's expense.

Compliance Certificates. Unless waived in writing by Lender, provide Lender at least annually, with a certificate executed by Borrower's chief financial officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate, no Event of Default exists under this Agreement.

Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrower's part or on the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower's part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.

Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loans and to perfect all Security Interests.

 
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender's interest in the Collateral or Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower's failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender:

Indebtedness and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower's assets (except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower's accounts, except to Lender.

Continuity of Operations. (1) Engage in any business activities substantially different than those in which Borrower is presently engaged, (2) cease operations, liquidate, merge or restructure as a legal entity (whether by division or otherwise), consolidate with or acquire any other entity, change its name, convert to another type of entity or redomesticate, dissolve or transfer or sell Collateral out of the ordinary course of business, or (3) pay any dividends on Borrower's stock (other than dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends,  Borrower is a "Subchapter S Corporation" (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation because of their ownership of shares of Borrower's stock, or purchase or retire any of Borrower's outstanding shares or alter or amend Borrower's capital structure.

Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2) purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor other than in the ordinary course of business.

Agreements. Enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower's obligations under this Agreement or in connection herewith.

CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any

other agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds (A) Borrower or any Guarantor is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings,

 

 

BUSINESS LOAN AGREEMENT

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or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower's financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any other loan with Lender.

DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: 
Payment Default. Borrower fails to make any payment when due under the Loan.

Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's or any Grantor's property or Borrower's or any Grantor's ability to repay the Loans or perform their respective obligations under this Agreement or any of the Related Documents.

False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason.

Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply  there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and  Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.

Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.

Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Loan is impaired.

Insecurity. Lender in good faith believes itself insecure.

Right to Cure. If any default, other than a default on Indebtedness, is curable and  Borrower or Grantor, as the case may be, has not been given a notice of a similar default within the preceding twelve (12) months,  may be cured  Borrower or Grantor, as the case may be, after Lender sends written notice to Borrower or Grantor, as the case may be, demanding cure of such default: (1) cure the default within

fifteen (15) days; or (2) the cure requires more than fifteen (15) days, immediately initiate steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continue and complete all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

ADDENDUM TO CHANGE IN OWNERSHIP PARAGRAPH:. The occurrence of either (I) a sale to all or substantially all of the assets of the Borrower, or (II) the acquisition in a single transaction, or series of related transactions, of at lest 50% or more of the outstanding capital stock of the Borrower.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender's option, all Indebtedness immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the "Insolvency" subsection above, such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender's rights and remedies shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender's right to declare a default and to exercise its rights and remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement:

Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

Attorneys' Fees; Expenses. Borrower agrees to pay upon demand all of Lender's costs and expenses, including Lender's attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may be directed by the court.

Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.

Consent to Loan Participation. Borrower agrees and consents to Lender's sale or transfer, whether now or later, of one or more participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect

 

 

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to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that  may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or such purchaser may enforce Borrower's obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender.

Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of California.

Choice of Venue. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of Riverside County, State of California.

No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender's rights or of any of Borrower's or any Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or,  mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower's current address. Unless otherwise provided or required by law,  there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given to all Borrowers.

Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that  becomes legal, valid and enforceable. If the offending provision cannot be so modified,  shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other provision of this Agreement.

Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes  appropriate, including without limitation any representation, warranty or covenant, the word "Borrower" as used in this Agreement shall include all of Borrower's subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan or other financial accommodation to any of Borrower's subsidiaries or affiliates.

Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower's successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower's rights under this Agreement or any interest therein, without the prior written consent of Lender.

Survival of Representations and Warranties. Borrower understands and agrees that in extending Loan Advances, Lender is relying on all representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations, warranties and covenants will survive the extension of Loan Advances and delivery to Lender of the Related Documents, shall be continuing in nature, shall be deemed made and redated by Borrower at the time each Loan Advance is made, and shall remain in full force and effect until such time as Borrower's Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.

Time is of the Essence. Time is of the essence in the performance of this Agreement.

ADDENDUM TO MISC CONSENT TO LOAN PARTICIPATION:. "Borrower further agrees that the purchaser of any such participation interest shall be subject to an non-disclosure agreement regarding the protection of Borrower's confidential information".

DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement:

Advance. The word "Advance" means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower's behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement.

Agreement. The word "Agreement" means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time.

Borrower. The word "Borrower" means Heritage Global Inc. and includes all co-signers and co-makers signing the Note and all their successors and assigns.

Collateral. The word "Collateral" means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.

Environmental Laws. The words "Environmental Laws" mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response,

 

 

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Loan No: 13880(Continued)Page 7

Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety Code, Section 25100, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant thereto.

Event of Default. The words "Event of Default" mean any of the events of default set forth in this Agreement in the default section of this Agreement.

GAAP. The word "GAAP" means generally accepted accounting principles.

Grantor. The word "Grantor" means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation all Borrowers granting such a Security Interest.

Guarantor. The word "Guarantor" means any guarantor, surety, or accommodation party of any or all of the Loan.

Guaranty. The word "Guaranty" means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.

Hazardous Substances. The words "Hazardous Substances" mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words "Hazardous Substances" are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term "Hazardous Substances" also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.

Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the Related Documents.

Lender. The word "Lender" means C3bank, National Association, its successors and assigns.

Loan. The word "Loan" means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement from time to time.

Note. The word "Note" means the Note dated May 5, 2021 and executed by Heritage Global Inc. in the principal amount of $10,000,000.00, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement.

Permitted Liens. The words "Permitted Liens" mean (1) liens and security interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled "Indebtedness and Liens"; (5) liens and security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens and security interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower's assets.

Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan.

Security Agreement. The words "Security Agreement" mean and include without limitation any agreements, promises, covenants, arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest.

Security Interest. The words "Security Interest" mean, without limitation, any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, or otherwise.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED MAY 5, 2021.

BORROWER:

HERITAGE GLOBAL INC. 

 

		
	
By:
	
/s/ James Sklar

	
 
	
Executive Vice President, General Counsel and Secretary of Heritage Global Inc.

 

 

BUSINESS LOAN AGREEMENT

Loan No: 13880(Continued)Page 8

LENDER:

C3BANK, NATIONAL ASSOCIATION

	
 
	
By:
	
/s/Andrew Meitzen 
Authorized Signer
Andrew Meitzen, SVP/Chief Credit & Risk Officer

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