COAST
Loan and Security Agreement
Borrower: Digital Products, Inc., a Massachusetts corporation
Address: 0000 00xx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Date: October 11, 1996
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between COAST
BUSINESS CREDIT, a division of Southern Pacific Thrift & Loan Association
("Coast"), a California corporation, with offices at 00000 Xxxxxxxx Xxxxxxxxx,
Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000, and the borrower named above
("Borrower"), whose chief executive office is located at the above address
("Borrower's Address"). The Schedule to this Agreement (the "Schedule") shall
for all purposes be deemed to be a part of this Agreement, and the same is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 LOANS. Coast will make loans to Borrower (the "Loans"),
in amounts determined by Coast in its sole discretion, up to the amounts (the
"Credit Limit") shown on the Schedule, provided no Default or Event of Default
has occurred and is continuing.
1.2 INTEREST. All Loans and all other monetary Obligations
shall bear interest at the rate shown on the Schedule, except where expressly
set forth to the contrary in this Agreement. Interest shall be payable monthly,
on the last day of the month. Interest may, in Coast's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans. Regardless of the amount of Obligations that may be
outstanding from time to time, Borrower shall pay Coast minimum monthly interest
during the term of this Agreement with respect to the Receivable Loans and the
Inventory Loans in the amount set forth on the Schedule (the "Minimum Monthly
Interest").
1.3 FEES. Borrower shall pay Coast the fee(s) shown on the
Schedule, which are in addition to all interest and other sums payable to Coast
and are not refundable.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and
performance of all of the Obligations when due, Borrower hereby grants to Coast
a security interest in all of Borrower's interest in the following, whether now
owned or hereafter acquired, and wherever located: All Receivables, Inventory,
Equipment, and General Intangibles, including, without limitation, all of
Borrower's Deposit Accounts, and all money, and all property now or at any time
in the future in Coast's possession (including claims and credit balances), and
all proceeds of any of the foregoing (including proceeds of any insurance
policies, proceeds of proceeds, and claims against third parties), all products
of any of the foregoing, and all books and records related to any of the
foregoing (all of the foregoing, together with all other property in which Coast
may now or in the future be granted a lien or security interest, is referred to
herein, collectively, as the "Collateral").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Coast to enter into this Agreement and to
make Loans, Borrower represents and
warrants to Coast as follows, and Borrower covenants that the following
representations will continue to be true, and that Borrower will at all times
comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a
corporation, is and will continue to be, duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation. Borrower
is and will continue to be qualified and licensed to do business in all
jurisdictions in which any failure to do so would have a material adverse effect
on Borrower. The execution, delivery and performance by Borrower of this
Agreement, and all other documents contemplated hereby (i) have been duly and
validly authorized, (ii) are enforceable against Borrower in accordance with
their terms (except as enforcement may be limited by equitable principles and by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
creditors' rights generally), and (iii) do not violate Borrower's articles or
certificate of incorporation, or Borrower's by-laws, or any law or any material
agreement or instrument which is binding upon Borrower or its property, and (iv)
do not constitute grounds for acceleration of any material indebtedness or
obligation under any material agreement or instrument which is binding upon
Borrower or its property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set
forth in the heading to this Agreement is its correct name. Listed on the
Schedule are all prior names of Borrower and all of Borrower's present and prior
trade names. Borrower shall give Coast 10 days' prior written notice before
changing its name or doing business under any other name. Borrower has complied,
and will in the future comply, with all laws relating to the conduct of
business under a fictitious business name.
3.3 PLACE OF BUSINESS, LOCATION OF COLLATERAL. The address
set forth in the heading to this Agreement is Borrower's chief executive office.
In addition, Borrower has places of business and Collateral is located only at
the locations set forth on the Schedule. Borrower will give Coast at least 30
days prior written notice before opening any additional place of business,
changing its chief executive office, or moving any of the Collateral to a
location other than Borrower's Address or one of the locations set forth on the
Schedule.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now,
and will at all times in the future be, the sole owner of all the Collateral,
except for items of Equipment which are leased by Borrower. The Collateral now
is and will remain free and clear of any and all liens, charges, security
interests, encumbrances and adverse claims, except for Permitted Liens. Coast
now has, and will continue to have, a first-priority perfected and enforceable
security interest in all of the Collateral, subject only to the Permitted Liens,
and Borrower will at all times defend Coast and the Collateral against all
claims of others. None of the Collateral now is or will be affixed to any real
property in such a manner, or with such intent, as to become a fixture. Borrower
is not and will not become a lessee under any real property lease pursuant to
which the lessor may obtain any rights in any of the Collateral and no such
lease now prohibits, restrains, impairs or will prohibit, restrain or impair
Borrower's right to remove any Collateral from the leased premises. Whenever any
Collateral is located upon premises in which any third party has an interest
(whether as owner, mortgagee, beneficiary under a deed of trust, lien or
otherwise), Borrower shall, whenever requested by Coast, use its best efforts to
cause such third party to execute and deliver to Coast, in form acceptable to
Coast, such waivers and subordinations as Coast shall specify, so as to ensure
that Coast's rights in the Collateral are, and will continue to be, superior to
the rights of any such third party. Borrower will keep in full force and effect,
and will comply with all the terms of, any lease of real property where any of
the Collateral now or in the future may be located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the
Collateral in good working condition, and Borrower will not use the Collateral
for any unlawful purpose. Borrower will immediately advise Coast in writing of
any material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will
maintain at Borrower's Address complete and accurate books and records,
comprising an accounting system in accordance with generally accepted accounting
principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All
financial statements now or in the future delivered by Borrower to Coast have
been, and will be, prepared in conformity with generally accepted accounting
principles (except, in the case of unaudited financial statements, for the
absence of footnotes and subject to normal year-end adjustments) and now and in
the future will fairly reflect the financial condition of Borrower, at the times
and for the periods therein stated. Between the last date covered by any such
statement provided to Coast and the date hereof, there has been no material
adverse change in the financial condition or business of Borrower. Borrower is
now and will continue to be solvent.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS.
Borrower has timely filed, and will timely file, all tax returns and reports
required by foreign, federal, state and local law, and Borrower has timely paid,
and will timely pay, all foreign, federal, state and local taxes, assessments,
deposits and contributions now or in the future owed by Borrower. Borrower may,
however, defer payment of any contested taxes, provided that Borrower (i) in
good faith contests Borrower's obligation to pay the taxes by appropriate
proceedings promptly and diligently instituted and conducted, (ii) notifies
Coast in writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral. As of the date
hereof, Borrower is unaware of any claims or adjustments proposed for any of
Borrower's prior tax years which could result in additional taxes becoming due
and payable by Borrower. Borrower has paid, and shall continue to pay all
amounts necessary to fund all present and future pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
and will not withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
such plan which could result in any liability of Borrower, including any
liability to the Pension Benefit Guaranty Corporation or its successors or any
other governmental agency.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will
comply, in all material respects, with all provisions of all material foreign,
federal, state and local laws and regulations relating to Borrower, including,
but not limited to, those relating to Borrower's ownership of real or personal
property, the conduct and licensing of Borrower's business, and environmental
matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there
is no claim, suit, litigation, proceeding or investigation pending or (to best
of Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of Borrower, or
in any material impairment in the ability of Borrower to carry on its business
in substantially the same manner as it is now being conducted. Borrower will
promptly inform Coast in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted by or against Borrower
involving any single claim of $50,000.00 or more, or involving $100,000.00 or
more in the aggregate.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be
used solely for lawful business purposes. Borrower is not purchasing or carrying
any "margin stock" (as defined in Regulation G of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of any Loan will be used to
purchase or carry any "margin stock" or to extend credit to others for the
purpose of purchasing or carrying any "margin stock."
4. RECEIVABLES.
SEE "OTHER PROVISIONS" ON SCHEDULE.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower
represents and warrants to Coast as follows: Each Receivable with respect to
which Loans are requested by Borrower shall, on the date each Loan is requested
and made, represent an undisputed bona fide existing unconditional obligation of
the Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL
COMPLIANCE. Borrower represents and warrants to Coast as follows: All statements
made and all unpaid balances appearing in all invoices, instruments and other
documents evidencing the Receivables are and shall be true and correct and all
such invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be.
All sales and other transactions underlying or giving rise to each Receivable
shall fully comply with all applicable laws and governmental rules and
regulations. All signatures and endorsements on all documents, instruments, and
agreements relating to all Receivables are and shall be genuine, and all such
documents, instruments and agreements are and shall be legally enforceable in
accordance with their
terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES.
Borrower shall deliver to Coast transaction reports and loan requests, schedules
of Receivables, and schedules of collections, all on Coast's standard forms;
provided, however, that Borrower's failure to execute and deliver the same shall
not affect or limit Coast's security interest and other rights in all of
Borrower's Receivables, nor shall Coast's failure to advance or lend against a
specific Receivable affect or limit Coast's security interest and other rights
therein. Loan requests received after 10:30 AM (Pacific Time) will not be
considered by Coast until the next Business Day. Together with each such
schedule, or later if requested by Coast, Borrower shall furnish Coast with
copies (or, at Coast's request, originals) of all contracts, orders, invoices,
and other similar documents, and all original shipping instructions, delivery
receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Receivables, and Borrower
warrants the genuineness of all of the foregoing. Borrower shall also furnish to
Coast an aged accounts receivable trial balance in such form and at such
intervals as Coast shall request. In addition, Borrower shall deliver to Coast
the originals of all instruments, chattel paper, security agreements, guarantees
and other documents and property evidencing or securing any Receivables, upon
receipt thereof and in the same form as received, with all necessary
endorsements, all of which shall be with recourse. Borrower shall also provide
Coast with copies of all credit memos as and when requested by Coast.
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the
right to collect all Receivables, unless and until an Event of Default has
occurred. Borrower shall hold all payments on, and proceeds of, Receivables in
trust for Coast, and Borrower shall deliver all such payments and proceeds to
Coast within one Business Day after receipt by Borrower, in their original form,
duly endorsed to Coast, to be applied to the Obligations in such order as Coast
shall determine. Coast may, in its discretion, require that all proceeds of
Collateral be deposited by Borrower into a lockbox account, or such other
"blocked account" as Coast may specify, pursuant to a blocked account agreement
in such form as Coast may specify. Coast or its designee may, at any time,
notify Account Debtors that Coast has been granted a security interest in the
Receivables.
4.5. REMITTANCE OF PROCEEDS. All proceeds arising from the
disposition of any Collateral shall be delivered to Coast within one Business
Day after receipt by Borrower, in their original form, duly endorsed to Coast,
to be applied to the Obligations in such order as Coast shall determine.
Borrower agrees that it will not commingle proceeds of Collateral with any of
Borrower's other funds or property, but will hold such proceeds separate and
apart from such other funds and property and in an express trust for Coast.
Nothing in this Section limits the restrictions on disposition of Collateral set
forth elsewhere in this Agreement.
4.6 DISPUTES. Borrower shall notify Coast promptly of all
material disputes or claims relating to Receivables. Borrower shall not forgive
(completely or partially), compromise or settle any Receivable for less than
payment in full, or agree to do any of the foregoing, except that Borrower may
do so, provided that: (i) Borrower does so in good faith, in a commercially
reasonable manner, in the ordinary course of business, and in arm's length
transactions, which are reported to Coast on the regular reports provided to
Coast; (ii) no Default or Event of Default has occurred and is continuing; and
(iii) taking into account all such discounts settlements and forgiveness, the
total outstanding Loans will not exceed the Credit Limit. Coast may, at any time
after the occurrence of an Event of Default, settle or adjust disputes or claims
directly with Account Debtors for amounts and upon terms which Coast considers
advisable in its reasonable credit judgment and, in all cases, Coast shall
credit Borrower's Loan account with only the net amounts received by Coast in
payment of any Receivables.
4.7 RETURNS. Provided no Event of Default has occurred and
is continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount. In the event any attempted return occurs after the
occurrence of any Event of Default, Borrower shall (i) hold the returned
Inventory in trust for Coast, (ii) segregate all returned Inventory from all of
Borrower's other property, (iii) conspicuously label the returned Inventory as
subject to Coast's security interest, and (iv) immediately notify Coast of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Coast's request deliver such
returned Inventory to Coast.
4.8 VERIFICATION. Coast may, from time to time, verify
directly with the respective Account
Debtors the validity, amount and other matters relating to the Receivables, by
means of mail, telephone or otherwise, either in the name of Borrower or Coast
or such other name as Coast may choose.
4.9 NO LIABILITY. Coast shall not under any circumstances
be responsible or liable for any shortage or discrepancy in, damage to, or loss
or destruction of, any goods, the sale or other disposition of which gives rise
to a Receivable, or for any error, act, omission, or delay of any kind occurring
in the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall Coast be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Coast from liability for its
own gross negligence or willful misconduct.
4.10 SEE SCHEDULE.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all
times comply with the financial and other covenants set forth in the Schedule.
5.2 INSURANCE. Borrower shall, at all times insure all of
the tangible personal property Collateral and carry such other business
insurance, with insurers reasonably acceptable to Coast, in such form and
amounts as Coast may reasonably require, and Borrower shall provide evidence of
such insurance to Coast, so that Coast is satisfied that such insurance is, at
all times, in full force and effect. All liability insurance policies of
Borrower shall name Coast as an additional insured, and all property casualty
and related insurance policies of Borrower shall name Coast as a loss payee
thereon and Borrower shall cause a lenders loss payee endorsement in form
reasonably acceptable to Coast. Upon receipt of the proceeds of any such
insurance, Coast shall apply such proceeds in reduction of the Obligations as
Coast shall determine in its sole discretion, except that, provided no Default
or Event of Default has occurred and is continuing, Coast shall release to
Borrower insurance proceeds with respect to Equipment totaling less than
$25,000.00, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid. Coast may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Coast may, but is
not obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Coast copies of all reports made to insurance companies.
5.3 REPORTS. Borrower, at its expense, shall provide Coast
with the written reports set forth in the Schedule, and such other written
reports with respect to Borrower (including budgets, sales projections,
operating plans and other financial documentation), as Coast shall from time to
time reasonably specify.
5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable
times, and on one Business Day's notice, Coast, or its agents, shall have the
right to inspect, audit and copy Borrower's books and records and the Collateral
(the "Audits"). Coast shall take reasonable steps to keep confidential all
confidential information obtained in any Audit, but Coast shall have the right
to disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The Audits shall
be at Borrower's expense. The charge for the Audits shall be $550.00 per person
per day (or such higher amount as shall represent Coast's then current standard
charge for the same) not to exceed $3,500 per quarter, plus reasonable out of
pocket expenses. Borrower will not enter into any agreement with any accounting
firm, service bureau or third party to store Borrower's books or records at any
location other than Borrower's Address, without first notifying Coast of the
same and obtaining the written agreement from such accounting firm, service
bureau or other third party to give Coast the same rights with respect to access
to books and records and related rights as Coast has under this Loan Agreement.
5.5 NEGATIVE COVENANTS. Borrower shall not, without Coast's
prior written consent, do any of the following:
(i) merge or consolidate with another corporation or entity, except in a
transaction in which (A) the shareholders of the Borrower hold at least 50% of
the common stock and all other capital stock of the surviving corporation
immediately after such merger or consolidation, and (B) the Borrower is the
surviving corporation;
(ii) acquire any assets, except (A) in the ordinary course of business, or
(B) in a transaction or a series of transactions not involving the payment of an
aggregate amount in excess of $100,000.00.
(iii) enter into any other transaction outside the ordinary course of
business;
(iv) sell or transfer any Collateral, except for the sale of finished
Inventory in the ordinary course of Borrower's business, and except for the sale
of obsolete or unneeded Equipment in the ordinary course of business;
(v) store any inventory or other Collateral with any warehouseman or other
third party;
(vi) sell any Inventory on a sale-or-return, guaranteed sale, consignment,
or other contingent basis; if Inventory is sold on such basis, such sales shall
be reported to Coast and the receivables therefrom shall not be deemed "Eligible
Receivables". Collection of such Inventory and Receivables shall, when
collected, be applied to the Obligations;
(vii) make any loans of any money or other assets, except (A) advances to
customers or suppliers in the ordinary course of business, (B) travel advances,
employee relocation loans and other employee loans and advances in the ordinary
course of business, and (C) loans to employees, officers and directors for the
purpose of purchasing equity securities of the Borrower in excess of
$100,000.00;
(viii) incur any debts, outside the ordinary course of business, which
would have a material, adverse effect on Borrower or on the prospect of
repayment of the Obligations;
(ix) guarantee or otherwise become liable with respect to the obligations
of another party or entity;
(x) pay or declare any dividends on Borrower's stock (except for dividends
payable solely in stock of Borrower);
(xi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Borrower's stock, except that Borrower may repurchase stock
owned by employees, directors and consultants of Borrower pursuant to terms of
employment, consulting or other stock restriction agreements at such time as any
such employee, director or consultant terminates his or her affiliation with the
Borrower, for an aggregate purchase price not to exceed $ 100,000 in any fiscal
year;
(xii) Make any change in Borrower's capital structure which would have a
material adverse effect on Borrower or on the prospect of repayment of the
Obligations; or
(xiii) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default would occur as a result of such
transaction.
5.6 LITIGATION COOPERATION. Should any third-party suit or
proceeding be instituted by or against Coast with respect to any Collateral or
relating to Borrower, Borrower shall, without expense to Coast, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Coast may deem them reasonably necessary in order to
prosecute or defend any such suit or proceeding.
5.7 INDEMNITY. Borrower hereby agrees to indemnify Coast
and hold Coast harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, reasonable costs and
expenses (including reasonable attorneys' fees), of every nature, character and
description, which Coast may sustain or incur based upon or arising out of any
of the Obligations, any actual or alleged failure to collect and pay over any
withholding or other tax relating to Borrower or its employees, any relationship
or agreement between Coast and Borrower, any actual or alleged failure of Coast
to comply with any writ of attachment or other legal process relating to
Borrower or any of its property, or any other matter, cause or thing whatsoever
occurred, done, omitted or suffered to be done by Coast relating to Borrower or
the Obligations (except any such amounts sustained or incurred as the result of
the gross negligence or willful misconduct of
Coast). Notwithstanding any provision in this Agreement to the contrary, the
indemnity agreement set forth in this Section shall survive any termination of
this Agreement and shall for all purposes continue in full force and effect.
5.8 FURTHER ASSURANCES. Borrower agrees, at its expense, on
request by Coast, to execute all documents and take all actions, as Coast, may
deem reasonably necessary or useful in order to perfect and maintain Coast's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect
until the maturity date set forth on the Schedule (the "Maiurity Date");
provided that the Maturity date shall automatically be extended, and this
Agreement shall automatically and continuously renew, for successive additional
terms of one year each, unless one party gives written notice to the other, not
less than sixty days prior to the next Maturity Date, that such party elects to
terminate this Agreement effective on the next Maturity Date.
6.2 EARLY TERMINATION. This Agreement may be terminated
prior to the Maturity Date as follows: (i) by Borrower, effective three Business
Days after written notice of termination is given to Coast; or (ii) by Coast at
any time after the occurrence of an Event of Default, effective immediately. If
this Agreement is terminated by Borrower under this Section 6.2, Borrower shall
pay to Coast a termination fee (the "Early Termination Fee") in the amount shown
on the Schedule. The Early Termination Fee shall be due and payable on the
effective date of termination.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any
earlier effective date of termination, Borrower shall pay and perform in full
all Obligations, whether evidenced by installment notes or otherwise, and
whether or not all or any part of such Obligations are otherwise then due and
payable. Without limiting the generality of the foregoing, if on the Maturity
Date, or on any earlier effective date of termination, there are any outstanding
Letters of Credit issued by Coast or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Coast,
then on such date Borrower shall provide to Coast cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Coast's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Coast's security interests in all of the Collateral and all of
the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Coast, Coast may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Coast, nor shall any such termination relieve Borrower of any
Obligation to Coast, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Coast shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be required to fully terminate Coast's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an "Event of Default" under this Agreement,
and Borrower shall give Coast immediate written notice thereof: (a) Any material
warranty, representation, statement, report or certificate made or delivered to
Coast by Borrower or any of Borrower's officers, employees or agents, now or in
the future, shall be untrue or misleading in a material respect; or (b) Borrower
shall fail to pay within 5 days after the due date of any Loan or any interest
thereon or any other monetary Obligation; or (c) the total Loans and other
Obligations outstanding at any time shall exceed the Credit Limit and such
excess is not fully paid within 5 days; or (d) Borrower shall fail to deliver
the proceeds of Collateral to Coast as provided in Section 4.5 above, or shall
fail to give Coast access to its books and records or Collateral as provided in
Section 5.4 above, or shall breach any negative covenant set forth in Section
5.5 above; or (e) Borrower shall fail to comply with the financial covenants (if
any) set forth in the Schedule or shall fail to perform any other non-monetary
Obligation which by its nature cannot be cured; or (f) Borrower shall fail to
perform any other non-monetary Obligation, which failure is not cured within 5
Business Days after the date due; or (g) Any levy, assessment, attachment,
seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within 10 days after the
occurrence of the same; or (h) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure period or waived in writing by the holder of the Permitted Lien; or (i)
Borrower breaches any material contract or obligation, which has or may
reasonably be expected to have a material adverse effect on Borrower's business
or financial condition which is not cured within any applicable cure period or
waived in writing by the other party to the contract or to whom the obligation
is owing; or (j) Dissolution, termination of existence, insolvency or business
failure of Borrower; or appointment of a receiver, trustee or custodian, for all
or any part of the property of, assignment for the benefit of creditors by, or
the commencement of any proceeding by Borrower under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect;
or (k) the commencement of any proceeding against Borrower or any guarantor of
any of the Obligations under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 30 days after the date commenced; or (l) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing, or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (m) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or (n) Borrower makes any payment on account of any indebtedness
or obligation which has been subordinated to the Obligations, other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement; or (o) there shall be a change in the record or
beneficial ownership of an aggregate of more than 20% of the outstanding shares
of stock of Borrower, in one or more transactions, compared to the ownership of
outstanding shares of stock of Borrower in effect on the date hereof, without
the prior written consent of Coast; or (p) Borrower shall generally not pay its
debts as they become due, or Borrower shall conceal, remove or transfer any part
of its property, with intent to hinder, delay or defraud its creditors, or make
or suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (q) there shall be a
material adverse change in Borrower's business or financial condition. Coast may
cease making any Loans hereunder during any of the above cure periods, and
thereafter if an Event of Default has occurred.
7.2 REMEDIES. Upon the occurrence, and during the
continuance, of any Event of Default, Coast, at its option, and without notice
or demand of any kind (all of which are hereby expressly waived by Borrower),
may do any one or more of the following: (a) Cease making Loans or otherwise
extending credit to Borrower under this Agreement or any other document or
agreement; (b) Accelerate and declare all or any part of the Obligations to be
immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation; (c) Take possession of any or all of the Collateral wherever it may
be found, and for that purpose Borrower hereby authorizes Coast without judicial
process to enter onto any of Borrower's premises without interference to search
for, take possession of, keep, store, or remove any of the Collateral, and
remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof, without charge for so long as Coast deems it
reasonably necessary in order to complete the enforcement of its rights under
this Agreement or any other agreement; provided, however, that should Coast seek
to take possession of any of the Collateral by Court process, Borrower hereby
irrevocably waives: (i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession thereof; (ii) any demand for possession prior to the commencement of
any suit or action to recover possession thereof, and (iii) any requirement that
Coast retain possession of, and not dispose of, any such Collateral until after
trial or final judgment; (d) Require Borrower to assemble any or all of the
Collateral and make it available to Coast at places designated by Coast which
are reasonably convenient to Coast and Borrower, and to remove the Collateral
to such locations as Coast may deem advisable; (e) Complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Coast shall have the right to
use Borrower's premises, vehicles, hoists, lifts, cranes, equipment and all
other property without charge; (f) Sell, lease or otherwise dispose of any of
the Collateral, in its condition at the time Coast obtains possession of it or
after further manufacturing, processing or repair, at one or more public and/or
private sales, in lots or in bulk, for cash, exchange or other property, or on
credit, and to adjourn any such sale from time to time without notice other than
oral announcement at the time scheduled for sale. Coast shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Coast deems reasonable, or on Coast's premises, or elsewhere and the
Collateral need not be located at the
place of disposition. Coast may directly or through any affiliated company
purchase or lease any Collateral at any such public disposition, and if
permissible under applicable law, at any private disposition. Any sale or other
disposition of Collateral shall not relieve Borrower of any liability Borrower
may have if any Collateral is defective as to title or physical condition or
otherwise at the time of sale; (g) Demand payment of, and collect any
Receivables and General Intangibles comprising Collateral and, in connection
therewith, Borrower irrevocably authorizes Coast to endorse or sign Borrower's
name on all collections, receipts, instruments and other documents, to take
possession of and open mail addressed to Borrower and remove therefrom payments
made with respect to any item of the Collateral or proceeds thereof, and, in
Coast's sole discretion, to grant extensions of time to pay, compromise claims
and settle Receivables and the like for less than face value; (h) Offset against
any sums in any of Borrower's general, special or other Deposit Accounts with
Coast; and (i) Demand and receive possession of any of Borrower's federal and
state income tax returns and the books and records utilized in the preparation
thereof or referring thereto. All reasonable attorneys' fees, expenses, costs,
liabilities and obligations incurred by Coast with respect to the foregoing
shall be due from the Borrower to Coast on demand. Coast may charge the same to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as is applicable to the Receivable Loans. Without limiting any of Coast's
rights and remedies, from and after the occurrence of any Event of Default, the
interest rate applicable to the Obligations shall be increased by an additional
three percent per annum.
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS.
Borrower and Coast agree that a sale or other disposition (collectively, "sale")
of any Collateral which complies with the following standards will conclusively
be deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by Coast,
with or without the Collateral being present; (iv) The sale commences at any
time between 8:00 a.m. and 6:00 p.m (the time being that of the location of the
sale); (v) Payment of the purchase price in cash or by cashier's check or wire
transfer is required; (vi) With respect to any sale of any of the Collateral,
Coast may (but is not obligated to) direct any prospective purchaser to
ascertain directly from Borrower any and all information concerning the same.
Coast shall be free to employ other methods of noticing and selling the
Collateral, in its discretion, if they are commercially reasonable.
7.4 POWER OF ATTORNEY. Upon the occurrence, and during the
continuance, of any Event of Default, without limiting Coast's other rights and
remedies, Borrower grants to Coast an irrevocable power of attorney coupled with
an interest, authorizing and permitting Coast (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise, but Coast agrees
to exercise the following powers in a commercially reasonable manner: (a)
Execute on behalf of Borrower any documents that Coast may, in its sole
discretion, deem advisable in order to perfect and maintain Coast's security
interest in the Collateral, or in order to exercise a right of Borrower or
Coast, or in order to fully consummate all the transactions contemplated under
this Agreement, and all other present and future agreements; (b) Execute on
behalf of Borrower any document exercising, transferring or assigning any option
to purchase, sell or otherwise dispose of or to lease (as lessor or lessee) any
real or personal property which is part of Coast's Collateral or in which Coast
has an interest; (c) Execute on behalf of Borrower, any invoices relating to any
Receivable, any draft against any Account Debtor and any notice to any Account
Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien; (d) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
Borrower upon any instruments, or documents, evidence of payment or Collateral
that may come into Coast's possession; (e) Endorse all checks and other forms of
remittances received by Coast; (f) Pay, contest or settle any lien, charge,
encumbrance, security interest and adverse claim in or to any of the Collateral,
or any judgment based thereon, or otherwise take any action to terminate or
discharge the same; (g) Grant extensions of time to pay, compromise claims and
settle Receivables and General Intangibles for less than face value and execute
all releases and other documents in connection therewith; (h) Pay any sums
required on account of Borrower's taxes or to secure the release of any liens
therefor, or both; (i) Settle and adjust, and give releases of, any insurance
claim that relates to any of the Collateral and obtain payment therefor; (j)
Instruct any third party having custody or control of any books or records
belonging or relating to, Borrower to give Coast the same rights of access and
other rights with respect thereto as Coast has under this Agreement; and (k)
Take any action or pay any sum required of Borrower pursuant to this Agreement
and any other present or future agreements. Any and all reasonable sums paid and
any and all reasonable costs, expenses, liabilities, obligations and attorneys'
fees incurred by Coast with respect to the foregoing shall be added to and
become part of the Obligations,
and shall be payable on demand. Coast may charge the foregoing to Borrower's
loan account and the foregoing shall thereafter bear interest at the same rate
applicable to the Receivable Loans. In no event shall Coast's rights under the
foregoing power of attorney or any of Coast's other rights under this Agreement
be deemed to indicate that Coast is in control of the business, management or
properties of Borrower.
7.5. APPLICATION OF PROCEEDS. All proceeds realized as the
result of any sale of the Collateral shall be applied by Coast first to the
reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by Coast in the exercise of its rights under this Agreement, second to
the interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Coast shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to Coast for any deficiency. If, Coast, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Coast shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the Obligations until the actual receipt by Coast of the cash
therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and
remedies set forth in this Agreement, Coast shall have all the other rights and
remedies accorded a secured party under the California Uniform Commercial Code
and under all other applicable laws, and under any other instrument or agreement
now or in the future entered into between Coast and Borrower, and all of such
rights and remedies arc cumulative and none is exclusive. Exercise or partial
exercise by Coast of one or more of its rights or remedies shall not be deemed
an election, nor bar Coast from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Coast to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
8. DEFINITIONS. AS USED IN THIS AGREEMENT, THE FOLLOHING TERMS HAVE THE FOLLOWNG
MEANINGS.
"Account Debtor" means the obligor on Receivable.
"Affiliate" means, with respect to any Person, a relative,
partner, shareholder, director, officer, or employee of such Person, or any
parent or subsidiary of such Person, or any Person controlling, controlled by or
under common control with such Person.
"Business Day" means a day on which Coast is open for business.
"Code" means the Uniform Commercial Code as adopted and in
effect in the State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"Default" means any event which with notice or passage of time
or both, would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of
the Code.
"Eligible Inventory" means Inventory which Coast, in its sole
judgment, deems eligible for borrowing, based on such considerations as Coast
may from time to time deem appropriate. Without limiting the fact that the
determination of which Inventory is eligible for borrowing is a matter of
Coast's discretion, Inventory which does not meet the following requirements
will not be deemed to be Eligible Inventory: Inventory which (i) consists of
finished goods, in good, new and salable condition which is not perishable, not
obsolete or unmerchantable, and is not comprised of raw materials, work in
process, packaging materials or supplies; (ii) meets all applicable governmental
standards; (iii) has been manufactured in compliance with the Fair Labor
Standards Act; (iv) conforms in all respects to the warranties and
representations set forth in this Agreement; (v) is at all times subject to
Coast's duly perfected, first priority security interest; and (vi) is situated
at a one of the locations set forth on the Schedule.
"Eligible Receivables" means Receivables arising in the ordinary
course of Borrower's business from the sale of goods or rendition of services,
which Coast, in its good faith business judgment, shall deem eligible for
borrowing, based on such considerations as Coast may from time to time deem
appropriate. Without limiting the generality of the foregoing, Eligible
Receivables shall exclude (a) Receivables that remain unpaid more than 90 days
past invoice date, (b) Receivables from the federal, state and local
governments, governmental agencies, governmental units, and subdivisions thereof
where the required documents and papers pursuant to applicable law, rule,
regulation or policy (including, but not limited to, the Federal Claims Act) is
not provided, (c) foreign Receivables other than foreign Receivables (i) that
are backed by letters of credit in form, content and amount and issued by
financial institutions acceptable to Coast in its sole discretion, or (ii) where
the Account Debtors have verifiable credit histories over a 6 to 12 month period
that are acceptable to Coast in its sole discretion, or (iii) where the Account
Debtors are foreign subsidiaries or divisions of U.S. companies that Coast, in
its sole discretion deems creditworthy, or (iv) where the Account Debtors have
credit insurance acceptable to Coast in its sole discretion.
"Equipment" means all of Borrower's present and hereafter
acquired machinery, molds, machine tools, motors, furniture, equipment,
furnishings, fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs,
goods and other tangible personal property (other than Inventory) of every kind
and description used in Borrower's operations or owned by Borrower and any
interest in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"Event of Default" means any of the events set forth in Section
7.1 of this Agreement.
"General Intangibles" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings, blueprints,
patents, patent applications, trademarks and the goodwill of the business
symbolized thereby, names, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against Coast, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation life
insurance, key man insurance, credit insurance, liability insurance, property
insurance and other insurance), tax refunds and claims, computer programs,
discs, tapes and tape files, claims under guaranties, security interests or
other security held by or granted to Borrower, all rights to indemnification and
all other intangible property of every kind and nature (other than Receivables)
and, without limiting the generality of the foregoing, the trademarks and
patents listed on Exhibit "A" to the Schedule.
"Inventory" means all of Borrower's now owned and hereafter
acquired goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease (including
without limitation all raw materials, work in process, finished goods and goods
in transit, and including without limitation all farm products), and all
materials and supplies of every kind, nature and description which are or might
be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.
"Maximum Dollar Amount" has the meaning set forth in Section 1
of the Schedule.
"Obligations" means the Pre-Existing Obligations, all present
and future Loans, advances, debts, liabilities, obligations, guaranties,
covenants, duties and indebtedness at any time owing by Borrower to Coast,
whether evidenced by this Agreement or any note or other instrument or document,
whether arising from an extension of credit, opening of a letter of credit,
banker's acceptance, loan, guaranty, indemnification or otherwise, whether
direct or indirect (including, without limitation, those acquired by assignment
and any participation by Coast in Borrower's debts owing to others), absolute or
contingent, due or to become due, including, without limitation, all interest,
charges, expenses, fees, attorney's fees, expert witness fees, audit fees,
letter of credit fees, collateral monitoring fees, closing fees, facility fees,
termination fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other present or future instrument or
agreement
between Borrower and Coast.
"Permitted Liens" means the following: (i) purchase money
security interests in specific items of Equipment; (ii) leases of specific items
of Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens consented to in writing by Coast, which consent shall not be
unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Coast will have the
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on Coast's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Coast, and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter
acquired accounts (whether or not earned by performance), letters of credit,
contract rights, chattel paper, instruments, securities, documents and all other
forms of obligations at any time owing to Borrower, all guaranties and other
security therefor, all merchandise returned to or repossessed by Borrower, and
all rights of stoppage in transit and all other rights or remedies of an unpaid
vendor, lienor or secured part.
Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with generally accepted accounting principles, consistently applied. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the
Obligations, all checks, wire transfers and other items of payment received by
Coast (including proceeds of Receivables and payment of the Obligations in full)
shall be deemed applied by, Coast on account of the Obligations three Business
Days after receipt by Coast of immediately available funds, and, for purposes of
the foregoing, any such funds received after 10:30 AM on any day shall be deemed
received on the next Business Day. Coast shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to Coast in its sole discretion, and Coast may charge Borrower's
loan account for the amount of any item of payment which is returned to Coast
unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to
the Obligations may be applied, and in Coast's sole discretion reversed and
re-applied, to the Obligations, in such order and manner as Coast shall
determine in its sole discretion.
9.3 CHARGES TO ACCOUNTS. Coast may, in its discretion,
require that Borrower pay monetary Obligations in cash to Coast, or charge them
to Borrower's Loan account, in which event they will bear interest at the same
rate applicable to the Loans. Coast may also, in its discretion, charge any
monetary Obligations to Borrower's Deposit Accounts maintained with Coast.
9.4 MONTHLY ACCOUNTINGS. Coast shall provide Borrower
monthly with an account of advances, charges, expenses and payments made
pursuant to this Agreement. Such account shall be deemed correct, accurate and
binding on Borrower and an account stated (except for reverses and
reapplications of
payments made and corrections of errors discovered by Coast), unless Borrower
notifies Coast in writing to the contrary within ninety days after each account
is rendered, describing the nature of any alleged errors or omissions.
9.5 NOTICES. All notices to be given under this Agreement
shall be in writing and shall be given either personally or by reputable private
delivery service or by regular first-class mail, or certified mail return
receipt requested, addressed to Coast or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. Notices to Coast shall be directed to the Commercial
Finance Division, to the attention of the Division Manager or the Division
Credit Manager. All notices shall be deemed to have been given upon delivery in
the case of notices personally delivered, or at the expiration of one Business
Day following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.
9.6 SEVERABILITY. Should any provision of this Agreement be
held by any court of competent jurisdiction to be void or unenforceable, such
defect shall not affect the remainder of this Agreement, which shall continue in
full force and effect.
9.7 INTEGRATION. This Agreement and such other written
agreements, documents and instruments as may be executed in connection herewith
are the final, entire and complete agreement between Borrower and Coast and
supersede all prior and contemporaneous negotiations and oral representations
and agreements, all of which are merged and integrated in this Agreement. There
are no oral understandings, representations or agreements between the parties
which are not set forth in this Agreement or in other written agreements signed
by the parties in connection herewith.
9.8 WAIVERS. The failure of Coast at any time or times to
require Borrower to strictly comply with any of the provisions of this Agreement
or any other present or future agreement between Borrower and Coast shall not
waive or diminish any right of Coast later to demand and receive strict
compliance therewith. Any waiver of any default shall not waive or affect any
other default, whether prior or subsequent, and whether or not similar. None of
the provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Coast shall be deemed to have been waived
by any act or knowledge of Coast or its agents or employees, but only by a
specific written waiver signed by an authorized officer of Coast and delivered
to Borrower. Borrower waives demand, protest, notice of protest and notice of
default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by Coast on which
Borrower is or may in any way be liable, and notice of any action taken by
Coast, unless expressly required by this Agreement.
9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Coast,
nor any of its Directors, officers, employees, agents, attorneys or any other
Person affiliated with or representing Coast shall be liable for any claims,
demands, losses or damages, of any kind whatsoever, made, claimed, incurred or
suffered by Borrower or any other party through the ordinary negligence of
Coast, or any of its directors, officers, employees, agents, attorneys or any
other Person affiliated with or representing Coast, but nothing herein shall
relieve Coast from liability for its own gross negligence or willful misconduct.
9.10 AMENDMENT. The terms and provisions of this Agreement
may not be waived or amended, except in a writing executed by Borrower and a
duly authorized officer of Coast.
9.11 TIME OF ESSENCE. Time is of the essence in the
performance by Borrower of each and every obligation under this Agreement.
9.12 ATTORNEYS FEES, COSTS AND CHARGES. Borrower shall
reimburse Coast for all reasonable attorneys' fees and all filing, recording,
search, title insurance, appraisal, audit, and other reasonable costs incurred
by Coast, pursuant to, or in connection with, or relating to this Agreement
(whether or not a lawsuit is filed), including, but not limited to, any
reasonable attorneys' fees and costs Coast incurs in order to do the following:
prepare and negotiate this Agreement and the documents relating to this
Agreement; obtain legal advice in connection with this Agreement or Borrower;
enforce, or seek to enforce, any of its rights; prosecute actions against, or
defend actions by, Account Debtors; commence, intervene in, or defend any action
or proceeding; initiate any complaint to be relieved
of the automatic stay in bankruptcy; file or prosecute any probate claim,
bankruptcy claim, third party claim, or other claim; examine, audit, copy, and
inspect any of the Collateral or any of Borrower's books and records; protect,
obtain possession of, lease, dispose of, or otherwise enforce Coast's security
interest in, the Collateral; and otherwise represent Coast in any litigation
relating to Borrower. If either Coast or Borrower files any lawsuit against the
other predicated on a breach of this Agreement, the prevailing party in such
action shall be entitled to recover its reasonable costs and attorneys' fees,
including (but not limited to) reasonable attorneys' fees and costs incurred in
the enforcement of, execution upon or defense of any order, decree, award or
judgment. Borrower shall also pay Coast's standard charges for returned checks
and for wire transfers, in effect from time to time. All attorneys' fees, costs
and charges to which Coast may be entitled pursuant to this Paragraph may be
charged by Coast to Borrower's loan account and shall thereafter bear interest
at the same rate as the Receivable Loans.
9.13 BENEFIT OF AGREEMENT. The provisions of this Agreeement
shall be binding upon and inure to the benefit of the respective successors,
assigns, heirs, beneficiaries and representatives of Borrower and Coast;
provided, however, that Borrower may not assign or transfer any of its rights
under this Agreement without the prior written consent of Coast, and any
prohibited assignment shall be void. No consent by Coast to any assignment shall
release Borrower from its liability for the Obligations.
9.14 PUBLICITY. Subject to Borrower's prior written consent,
Coast is hereby authorized, at its expense, to issue appropriate press releases
and to cause a tombstone to be published announcing the consummation of this
transaction and the aggregate amount thereof.
9.15 JOINT AND SEVERAL LIABILITY. If Borrower consists of
more than one Person, their liability shall be joint and several, and the
compromise of any claim with, or the release of, any Borrower shall not
constitute a compromise with, or a release of, any other Borrower.
9.16 LIMITATION OF ACTIONS. Any claim or cause of action by
Borrower against Coast, its directors, officers, employees, agents, accountants
or attorneys, based upon, arising from, or relating to this Loan Agreement, or
any other present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by Coast, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of an
action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after the first act, occurrence or omission upon which
such claim or cause of action, or any part thereof, is based, and the service of
a summons and complaint on an officer of Coast, or on any other person
authorized to accept service on behalf of Coast, within thirty (30) days
thereafter. Borrower agrees that such one-year period is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim or cause
of action. The one-year period provided herein shall not be waived, tolled, or
extended except by the written consent of Coast in its sole discretion. This
provision shall survive any termination of this Loan Agreement or any other
present or future agreement.
9.17 PARAGRAPH HEADINGS, CONSTRUCTION. Paragraph headings
are only used in this Agreement for convenience. Borrower and Coast acknowledge
that the headings may not describe completely the subject matter of the
applicable paragraph, and the headings shall not be used in any manner to
construe, limit, define or interpret any term or provision of' this Agreement.
The term "including", whenever used in this Agreement, shall mean "including
(but not limited to)". This Agreement has been fully reviewed and negotiated
between the parties and no uncertainty or ambiguity in any term or provision of
this Agreement shall be construed strictly against Coast or Borrower under any
rule of construction or otherwise.
9.18 GOVERNING LAW, JURISDICTION; VENUE. This Agreement and
all acts and transactions hereunder and all rights and obligations of Coast and
Borrower shall be governed by the laws of the State of California. As a material
part of the consideration to Coast to enter into this Agreement, Borrower (i)
agrees that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Coast's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Los Angeles County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law, and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.19 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND COAST EACH
HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT,
ACTS OR OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR
BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
BORROWER:
DIGITAL PRODUCTS, INC., A MASSACHUSETTS CORPORATION
/s/ Xxxxxxxxxxx X. Xxx
BY:___________________________
Treasurer
TITLE: _________________________
COAST:
COAST BUSINESS CREDIT, A DIVISION OF
SOUTHERN PACIFIC THRIFT & LOAN ASSOCIATION
/s/ Xxxxxxx Xxxxxx
BY: _______________________
Vice President
TITLE: _______________________
COAST
Schedule to
Loan and Security Agreement
Borrower: Digital Products, Inc., a Massachusetts corporation
Address: 0000 00xx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Date: October 11, 1996
This Schedule forms an integral part of the Loan and Security Agreement between
Coast Business Credit, a division of Southern Pacific Thrift & Loan Association,
and the above-borrower of even date.
1. CREDIT LIMIT
(Section 1.1): Loans in a total amount at any time outstanding
not to exceed the lesser of a total of $3,000,000
at any one time outstanding (the "Maximum Dollar
Amount"), or the sum of (a) and (b) below:
(a)Loans (the "Receivable Loans") in an
amount not to exceed 80% of the amount of
Borrower's Eligible Receivables (as
defined in Section 8 above), plus
(b) Loans (the "Inventory Loans") in an
amount not to exceed the lesser of:
(1) 30% of the value of
Borrower's Eligible Inventory
(as defined in Section 8 above),
calculated at the lower of cost
or market value and determined
on a first-in, first-out basis,
or
(2) $500,000.00.
2. INTEREST.
INTEREST RATE
(Section 1.2): A rate equal to the "Prime Rate" plus
2-1/2% per annum, calculated on the
basis of a 360-day year for the actual
number of days elapsed. The interest rate
applicable to all Loans shall be adjusted
monthly as of the first day of each
month, and the interest to be charged for
each month shall be based on the highest
"Prime Rate" in effect during said month,
but in no event shall the rate of
interest charged on any Loans in any
month be less than 8% per annum. "Prime
Rate" means the actual "Reference Rate"
or the substitute therefor of the Bank of
America NT & SA whether or not that rate
is the lowest interest rate charged by
said bank. If the Prime Rate, as defined,
is unavailable, "Prime Rate" shall mean
the highest of the prime rates published
in the Wall Street Journal on the first
business day of the month, as the base
rate on corporate loans at large U.S.
money center commercial banks.
MINIMUM MONTHLY
INTEREST (Section 1.2): An amount not less than the interest that would be
payable based upon a daily Loan balance of
$1,000,000.00.
3. FEES (Section 1.3):
Loan Fee: $30,000.00 -payable concurrently herewith.
Facility Fee: $ 3,500.00 -per calendar quarter, payable in advance (pro rated for
any partial month at the beginning of the term of this
Agreement).
4. MATURITY DATE
(Section 6.1): 2/l/99 subject to automatic renewal as
provided in Section 6.1 above, and early
termination as provided in Section 6.2
above.
EARLY TERMINATION FEE
(Section 6.2): An amount equal to 2% of the Maximum
Dollar Amount (as defined in the
Schedule), if termination occurs on or
before the first anniversary of the date
of this Agreement; 1% of the Maximum
Dollar Amount, if termination occurs
after the first anniversary and on or
before the second anniversary of the
date of this Agreement; and 1/2% of the
Maximum Dollar Amount, if termination
occurs after the second anniversary and
on or before the third anniversary of
the date of this Agreement.
5. REPORTING:
(Section 5.3): Borrower shall provide Coast with the following:
1. Monthly Receivable agings, aged by
invoice date, within ten days after the
end of each month. The Receivable
reports to also provide breakdown
between domestic commercial Receivables,
foreign commercial Receivables, and
government receivables (including
identity of governmental agency).
2. Monthly accounts payable agings, aged by
invoice date, and outstanding or held
check registers within ten days after
the end of each month. From and after
funding, no accounts payable shall be
over 60 days from invoice date.
3. Monthly perpetual inventory reports for
the Inventory valued on a first-in,
first-out basis at the lower of cost or
market (in accordance with generally
accepted
accounting principles) or such other
inventory reports as are reasonably
requested by Coast, all within ten days
after the end of each month. Such
inventory reports shall contain a
breakdown of raw materials, work in
process and finished goods.
4. All annual 10K'S, quarterly 10Q'S, and
all other filings, reports and notices
for Osicom Technologies, Inc., Builders
Warehouse Association, Inc. and
affiliates filed with the Securities and
Exchange Commission ("Filings"). All
Filings required by applicable law, rule
or regulation shall be made prior to
delinquency. Copies of all such Filings
shall be provided to Coast not later
than 5 days after the same are filed
with the Securities and Exchange
Commission. Internally prepared
consolidating quarterly and year end
statements shall be provided as soon as
available but in no event later than 45
days after the end of the quarter and 90
days after year end.
5. Updated lists of all of Borrower's
customers including customer names,
addresses, and phone numbers. Such lists
shall be provided to Coast within 5 days
after request is made by Coast for such
lists. If not specifically requested,
such lists shall be provided to Coast no
later than 5 days after the end of each
fiscal quarter of Borrower.
6. (A) Annual financial statements, as soon
as available, but in no event later than
90 days following the end of Borrower's
fiscal year, certified by independent
certified public accountants acceptable
to Coast.
(B) Monthly and quarterly internal
financial statements for Borrower and
its affiliates as soon as available, but
in no event later than 30 days and 45
days after the end of the applicable
monthly and quarterly accounting
periods, respectively. The monthly,
internally prepared financial statements
need only be in such form and contain
such information as is supplied to
management. The quarterly, internally
prepared financial statements shall
include or be accompanied by appropriate
disclosures of material changes in the
financial condition or financial
performance and/or explanation of
significant matters of an accounting or
management nature.
7. Proof of payment of all income taxes,
penalties and interest for fiscal years
ended April, 1993 and April, 1994.
8. The existing lockbox arrangement with
Fremont Financial to be switched to
Coast.
6. BORROWER INFORMATION:
PRIOR NAMES OF
BORROWER
(Section 3.2):
TRADE NAMES OF BORROWER
(Section 3.2): None
OTHER LOCATIONS AND
ADDRESSES (SECTION 3.3): 000 Xxxxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
WAREHOUSE LOCATIONS: 0000 Xxxxxxxxxx Xxx.
Xxxxxxxxxx Xxxxxxx X0X000
Yemns Corp.
Middebury Ind. Park
000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx XX 00000
Fleet Bank 00 Xxxxx Xxxxxx
Xxxxxxx, XX
Acct: 00-0000-0000; 00-0000-0000;
00-0000-0000; 00-0000-0000
INTELLECTUAL PROPERTY COLLATERAL:
Without limiting the generality of
the description of collateral
securing the Borrower's Obligations,
attached hereto are lists of various
intangible properties and interests
which are granted hereby to Coast. To
the extent Borrower is requested by
Coast to execute such other and
further documents as Coast deems
necessary, appropriate or desirable
in order to further perfect and
maintain perfection of its liens and
security interests in the property
and interests listed in the exhibit
attached hereto, Borrower shall
promptly take all steps reasonably
requested by Coast.
LITIGATION (Section 3.10): None.
7. OTHER PROVISIONS:
A. All Obligations of Borrower to Coast
shall be guarantied by Osicom
Technologies, Inc.
B. Concurrent with funding, Osicom shall
make a cash contribution to Borrower
of at least $750,000.00 or such
higher amount to cover the current
deficit tangible net worth of
Borrower.
C. All obligations of Borrower to
Fremont Financial and the
Massachusetts Business Development
Corporation must be fully satisfied
at funding and all liens, security
interests and other pledges granted
to Fremont and the MBDC shall be
terminated, released or otherwise
eliminated in a manner and with
evidence satisfactory to
Coast.
Borrower: Coast:
DIGITAL PRODUCTS, INC., COAST BUSINESS CREDIT, a
a Massachusetts corporation division of Southern Pacific
Thrift & Loan Association
/s/ Xxxxxxxxxxx X. Xxx /s/ Xxxxxxx Xxxxxx
BY____________________________ BY________________________
Treasurer Vice President
Title _________________________ Title _____________________
COAST
AMENDMENT #1 TO
LOAN AND SECURITY AGREEMENT
BORROWER: DIGITAL PRODUCTS, INC., A MASSACHUSETTS CORPORATION
ADDRESS: 0000 00XX XXXXXX, XXXXX 000 XXXXX XXXXXX, XXXXXXXXXX 00000
DATE: FEBRUARY 12, 1998
This Amendment #1 to Loan and Security Agreement (the "Amendment") is entered
into by and between Coast Business Credit'r', a division of Southern Pacific
Bank (fka Southern Pacific Thrift & Loan Association) ("Coast"), and the
above-referenced borrower. This Amendment principally amends the Schedule (the
"Schedule") to the Loan and Security Agreement dated October 11, 1996. The
Schedule, as modified by this Amendment, shall for all purposes be deemed to be,
and the same shall constitute an integral part of the Loan and Security
Agreement. (Definitions and certain terms used in this Amendment shall have the
meanings set forth in the Loan and Security Agreement, the Schedule and all
other documents and agreements executed in connection therewith or in
furtherance thereof).
For good and valuable consideration, receipt of which is hereby
acknowledged, the Schedule is hereby amended in the following respects by this
Amendment and by reason thereof the Loan and Security Agreement, to the extent
governed or impacted by the Schedule, is also amended to the extent that
modifications of the Schedule result in modifications to the Loan and Security
Agreement.
SECTION 1 OF THE SCHEDULE (DEALING WITH THE CREDIT LIMIT) IS AMENDED TO READ AS
FOLLOWS:
1. CREDIT LIMIT
(Section 1.1): Loans in a total amount at any time outstanding not to
exceed the lesser of a total of $5,000,000 (the
"Maximum Dollar Amount"), or the sum of (a) and (b)
below:
Except as expressly modified herein, all other terms and conditions of
Section 1 of the
Schedule remain unchanged.
SECTION 3 OF THE SCHEDULE (DEALING WITH FEES) IS AMENDED TO READ AS FOLLOWS:
3. FEES (Section 1.3):
Loan Fee: $50,000.00 - of which $30,000.00 was paid at funding,
$10,000.00 is due and payable on the date hereof, and
$10,000.00 shall be due and payable on August 11, 1998;
Facility Fee: $3,500.00 per calendar quarter for all periods prior to
the date hereof and increasing to $4,500.00 per calendar quarter for all periods
from and after the date hereof. All facility fees are payable in advance, and
prorated for any period that is less than a full calendar quarter.
Except as expressly modified herein, all other terms and conditions of
the Schedule, including the remaining provisions of Sections 1 and 3, remain
unchanged.
Borrower: Coast:
DIGITAL PRODUCTS, INC., COAST BUSINESS CREDIT, a division of
a Massachusetts corporation Southern Pacific Bank, f/k/a Southern Pacific
Thrift & Loan Association
/s/ Xxxxxxxxxxx X. Xxx /s/ Xxxxx Xxxxxxxx
By___________________________ By_____________________________
Treasurer Vice President
Title_________________________ Title___________________________
The undersigned, having executed and delivered to Coast, a Subordination
Agreement dated as of October 11, 1996, and a Continuing Guaranty also dated as
of October 11, 1996, hereby (a) consents to the foregoing Amendment #1 to Loan
and Security Agreement, (b) reaffirms that the Subordination Agreement and the
Continuing Guaranty are in full force and effect and (c) acknowledges that the
Subordination Agreement and Continuing Guaranty shall, to the extent applicable,
be deemed to include the modifications provided in Amendment #1 to Loan and
Security Agreement.
Osicom Technologies, Inc.
/s/ Xxxxxxxxxxx X. Xxx
By:_________________________
Vice President - Finance
Title:________________________
COAST
SUBORDINATION AGREEMENT
Borrower: Digital Products, Inc.,
a Massachusetts corporation
Address: 0000 00xx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Creditor/Investor: Osicom Technologies, Inc.,
a New Jersey corporation
0000 00xx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Date: October 11, 1996
THIS SUBORDINATION AGREEMENT is executed by the above-named
Subordinating Creditor. ("Subordinating Creditor") in favor of Coast Business
Credit, a division of Southern Pacific Thrift & Loan Association ("Coast"),
whose address is 00000 Xxxxxxxx Xxxx., Xxx Xxxxxxx, Xxxxxxxxxx, with respect to
the above-named Borrower ("Borrower"). In order to induce Coast to extend or
continue to extend financing to the Borrower (but without obligation on Coast's
part to do so), the Subordinating Creditor hereby agrees as follows:
1. SUBORDINATION OF DEBT AND CAPITAL Subordinating Creditor hereby subordinates
payment by the Borrower of any and all indebtedness, liabilities, guarantees and
other obligations of the Borrower to Subordinating Creditor and return of
Capital or Distributions now existing or hereafter arising (collectively, the
"Subordinated Amounts"), to the payment to Coast, in full in cash, of all
indebtedness, liabilities, guarantees and other obligations of the Borrower to
Coast, now existing or hereafter arising (including without limitation any
interest, charges and other sums accruing after the filing of a petition by or
against Borrower under the Bankruptcy Code) (the "Coast Debt").
Subordinating Creditor represents and warrants that it has not transferred or
assigned the Subordinated Amounts or given any other subordination agreement in
respect thereof, and that it will not do so without prior written notice to
Coast and without making such transfer or assignment or subordination expressly
subject to this Agreement. Subordinating Creditor agrees not to ask for, demand,
xxx for, take or receive all or any part of the Subordinated Amounts nor any
security therefor unless and until all of the Coast Debt has been paid and
performed in full, in cash; provided that, so long as no Event of Default and no
event which, with notice or passage of time or both, would constitute an Event
of Default under any present or future document, instrument or agreement
evidencing, securing or relating to the Coast Debt, both before and after giving
effect to the following payments, Subordinated Creditor may accept payment of
the following amounts on the Subordinated Amounts: Subordinating Creditor may
accept dividends declared by Borrower and repayment of all or part of the
Subordinated Amounts provided (a) such payments constitute ordinary course of
business transactions, (b) such payments would not constitute an event of
default and no event which, with notice or passage of time or both, would
constitute an event of default under any present or future document, instrument
or agreement between Borrower, Subordinating Creditor or any affiliate, on the
one hand and a party other than Coast on the other hand, (c) all such payments
are reported to Coast on a monthly basis, or more frequently if requested by
Coast, and (d) Coast has not given notice to Subordinating Creditor that Coast
has revoked
the authorization of Subordinating Creditor to accept such dividends or
repayments of the Subordinated Amounts, which revocation may be made by Coast if
Coast in good faith believes that revocation is or may be necessary to avoid or
reduce the risk of a material adverse change or impairment of Coast's rights or
financial interests. Coast may further limit or condition dividends or
repayments of the Subordinated Amounts upon such terms as Coast, in its sole
discretion, deems appropriate, including, but not limited to, imposing dollar
limits and requiring advance notice to Coast of proposed dividends and
repayments in amounts which Coast, in its sole discretion, deems material.
Notwithstanding the foregoing, no portion of the $750,000.00 or higher cash
contribution required by Section 7B of the Schedule to the Loan and Security
Agreement shall be withdrawn by or for the benefit of Subordinating Creditor
until all Obligations to Coast have been paid in full or until Coast gives its
written consent to such withdrawal, whichever first occurs.
Subordinating Creditor further agrees that upon any distribution of the assets
or readjustment of the indebtedness of the Borrower whether by reason of
liquidation, composition, bankruptcy, arrangement, receivership, assignment for
the benefit of creditors or any other action or proceeding involving the
readjustment of all or any of the Subordinated Amounts, or the application of
the assets of the Borrower to the payment or liquidation thereof, Coast shall be
entitled to receive payment in full in cash of all of the Coast Debt prior to
the payment of all or any part of the Subordinated Amounts, and in order to
enable Coast to enforce its rights hereunder in any such action or proceeding,
Coast is hereby irrevocably authorized and empowered in its discretion (but
without any obligation on its part) to make and present for and on behalf of
Subordinating Creditor such proofs of claim and proofs of interest against the
Borrower on account of the Subordinated Amounts as Coast may deem expedient or
proper and to vote such proofs of claim and proofs of interest in any such
proceeding and to receive and collcct any and all dividends or other payments or
disbursements made thereon in whatever form the same may be paid or issued and
to apply same on account of the Coast Debt. Subordinating Creditor further
agrees to execute and deliver to Coast such assignments or other instruments as
may be required by Coast in order to enable Coast to enforce any and all such
claims and to collect any and all dividends or other payments or disbursements
which may be made at any time on account of all and any of the Subordinated
Amounts. Subordinating Creditor shall endorse all notes and other written
evidence of the Subordinated Amounts with a statement that they are subordinated
to the Coast Debt pursuant to the terms of this agreement, in such form as Coast
shall require, and Subordinating Creditor will exhibit the originals of such
notes and other written evidence of the Subordinated Amounts to Coast so that
Coast can confirm that such endorsement has been made, but this Subordination
Agreement shall be fully effective, even if no such endorsement is made.
2. MODIFICATIONS TO COAST DEBT; WAIVERS. Until Coast have received payment in
full of all Coast Debt, the Subordinating Creditor agrees that, in addition to
any other rights that Coast may have at law or in equity, Coast may at any time,
and from time to time, without the Subordinating Creditor's consent and without
notice to the Subordinating Creditor, renew, extend or increase any of the Coast
Debt or that of any other person at any time directly or indirectly liable for
the payment of any Coast Debt, accept partial payments of the Coast Debt,
settle, release (by operation of law or otherwise), compound, compromise,
collect or liquidate any of the Coast Debt, make loans or advances to the
Borrower secured in whole or in part by the any present or future assets
securing any or all of the Coast Debt (the "Collateral") or refrain from making
any loans or advances to the Borrower, change, waive, alter or vary the interest
charge on, or any other terms or provisions of the Coast Debt or any present or
future instrument, document or agreement between Coast and the Borrower,
release, exchange, fail to perfect, delay the perfection of, fail to resort to,
or realize upon any Collateral, and take any other action or omit to take any
other action with respect to the Coast Debt or the Collateral as Coast deems
necessary or advisable in Coast's sole discretion. Subordinating Creditor waives
any right to require Coast to marshal any assets in favor of the Subordinating
Creditor or against or in payment of any or all of the Coast Debt. Subordinating
Creditor further waives any defense arising by reason of any claim or defense
based upon an election of remedies by Coast which in any manner impairs,
affects, reduces, releases, destroys and/or extinguishes the Subordinating
Creditor' subrogation rights, rights to proceed against the Borrower for
reimbursement, and/or any other rights of the Subordinating Creditor. In the
event of any financing of the Borrower by Coast during any bankruptcy,
arrangement, or reorganization of the Borrower, the Subordinating Creditor
agrees that the term "Coast Debt" shall include without limitation all
indebtedness, liabilities and obligations incurred in any such proceeding, and
the Subordinated Amounts shall continue to remain subordinate to the Coast Debt,
and the Subordinating Creditor agrees to take such actions and execute such
documents in such proceedings as may be required in order to continue such
subordination.
3. DEFAULT. The Subordinating Creditor shall promptly give Coast written notice
of any default or
event of default under any document, instrument or agreement evidencing,
securing or relating to any of the Subordinated Amounts, and, until the Coast
Debt has been paid and performed in full, the Subordinating Creditor shall not
exercise any rights or remedies with respect to, the Subordinated Amounts,
judicially or nonjudicially, or attempt to do any of the foregoing.
4. NO COMMITMENT. It is understood and agreed that this Agreement shall in no
way be construed as a commitment or agreement by Coast to continue financing
arrangements with the Borrower and that Coast may terminate such arrangements at
any time, in accordance with Coast's agreements with the Borrower.
5. NO CONTEST. Subordinating Creditor agrees not to contest the validity,
perfection, priority or enforceability of Coast' security interest in the
Collateral or the Coast Debt.
6. FINANCIAL CONDITION OF BORROWER. The Subordinating Creditor is presently
informed of the financial condition of the Borrower and of all other
circumstances which a diligent inquiry would reveal and which bear upon the risk
of non-payment of the Coast Debt and the Subordinated Amounts. The Subordinating
Creditor covenants that it will continue to keep itself informed as to the
Borrower's financial condition and all other circumstances which bear upon the
risk of nonpayment of the Coast Debt and the Subordinated Amounts. The
Subordinating Creditor waives any right to require Coast to disclose to it any
information which Coast may now or hereafter acquire concerning the Borrower.
7. REVIVOR. If, after payment of the Coast Debt, the Borrower thereafter becomes
liable to Coast on account of the Coast Debt, as a result of any payment made on
the Coast Debt for any reason being returned by Coast or being reversed, set
aside, or recovered by the Borrower or any trustee or assignee for the Borrower,
this Agreement shall thereupon in all respects become effective with respect to
such subsequent or reinstated Coast Debt, without the necessity of any further
act or agreement between Coast and the Subordinating Creditor.
8. GENERAL. The Subordinating Creditor agrees, upon Coast's request, to execute
all such documents and instruments and take all such actions as Coast shall deem
necessary or advisable in order to carry out the purposes of this Agreement. The
word "indebtedness" is used in this agreement in its most comprehensive sense
and includes without limitation any and all present and future loans, advances,
credit, debts, obligations, liabilities, representations, warranties, and
guarantees, of any kind and nature, absolute or contingent, liquidated or
unliquidated, and individual or joint. Subordinating Creditor represents and
warrants that it has not heretofore transferred or assigned the Subordinated
Amounts, and that it will not do so without prior written notice to Coast and
without making such transfer or assignment expressly subject to this Agreement.
This Agreement is solely for the benefit of Coast and Coast's successors and
assigns, and neither the Borrower nor any other person shall have any right,
benefit, priority or interest under, or because of the existence of, this
Agreement. All of Coast's rights and remedies hereunder and under applicable law
are cumulative and not exclusive. This Agreement sets forth in full the terms of
agreement between the parties with respect to the subject matter hereof, and may
not be modified or amended, nor may any rights hereunder be waived, except in a
writing signed by Coast and the Subordinating Creditor. The Subordinating
Creditor agrees to reimburse Coast, upon demand, for all costs and expenses
(including reasonable attorneys' fees) incurred by Coast in enforcing this
Agreement against Subordinating Creditor, whether or not suit be brought. In the
event of any litigation between the parties based upon or arising out of this
Agreement, the prevailing party shall be entitled to recover all of its costs
and expenses (including without limitation attorneys fees) from the
non-prevailing party. This Agreement shall be construed in accordance with, and
governed by, the laws of the State of California. As a material part of the
consideration to the parties for entering into this Agreement, each party (i)
agrees that all actions and proceedings based upon, arising out of or relating
in any way directly or indirectly to, this Agreement shall be litigated
exclusively in courts located within Los Angeles County, California, (ii)
consents to the jurisdiction of any such court and consents to the service of
process in any such action or proceeding by personal delivery, first-class mail,
or any other method permitted by law, and (iii) waives any and all rights to
transfer or change the venue of any such action or proceeding to any court
located outside Los Angeles County, California. This Agreement shall be binding
upon the Subordinating Creditor and its successors and assigns and shall inure
to the benefit of Coast and Coast's successors and assigns.
9. MUTUAL WAIVER OF JURY TRIAL. SUBORDINATING CREDITOR AND COAST EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; OR (ii) ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SUBORDINATING CREDITOR AND COAST; OR
(iii)
ANY CONDUCT, ACTS OR OMISSIONS OF SUBORDINATING CREDITOR OR COAST OR ANY OF
THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH SUBORDINATING CREDITOR OR COAST; IN EACH OF THE FOREGOING CASES,
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
"SUBORDINATING CREDITOR:"
OSICOM TECHNOLOGIES, INC..
/s/ Xxxxxxxxxxx X. Xxx
BY:_________________________________
Chief Financial Officer
TITLE:_______________________________
CONSENT AND AGREEMENT OF BORROWER
The undersigned Borrower hereby approves of, agrees to and
consents to all of the terms and provisions of the foregoing Subordination
Agreement and agrees to be bound thereby and further agrees that any default or
event of default by the Borrower under any present or future instrument or
agreement between the Borrower and the Subordinating Creditor shall constitute
an immediate default and event of default under all present and future
instruments and agreements between the Borrower and Coast. Borrower further
agrees that, at any time and from time to time, the foregoing Agreement may be
altered, modified or amended by Coast and the Subordinating Creditor without
notice to or the consent of Borrower.
BORROWER:
DIGITAL PRODUCTS, INC.,
A MASSACHUSETTS CORPORATION
/s/ Xxxxxxxxxxx X. Xxx
BY:_________________________________
Treasurer
TITLE:_______________________________
ACCEPTED:
COAST:
COAST BUSINESS CREDIT, A DIVISION OF
SOUTHERN PACIFIC THRIFT & LOAN ASSOCIATION
/s/ Xxxxxxx Xxxxxx
BY:_________________________________
Vice President
TITLE:_______________________________
COAST
Continuing Guaranty
Guarantor: Osicom Technologies, Inc., a New Jersey corporation
Address: 0000 00xx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Borrower: Digital Products, Inc., a Massachusetts corporation
Address: 0000 00xx Xxxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Date: October 11, 1996
THIS CONTINUING GUARANTY is executed by the above-named guarantor ("Guarantor"),
as of the above date, in favor of COAST BUSINESS CREDIT, a division of Southern
Pacific Thrift & Loan Association ("Coast"), a California corporation, with
offices at 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000,
with respect to the Indebtedness of Cray Communications, Inc., a Delaware
corporation ("Borrower").
1. CONTINUING GUARANTY. Guarantor hereby unconditionally guarantees and promises
to pay on demand to Coast, at the address indicated above, or at such other
address as Coast may direct, in lawful money of the United States, and to
perform for the benefit of Coast, all Indebtedness of Borrower now or hereafter
owing to or held by Coast. As used herein, the term "Indebtedness" is used in
its most comprehensive sense and shall mean and include without limitation: (a)
any and all debts, duties, obligations, liabilities, representations, warranties
and guaranties of Borrower or any one or more of them, heretofore, now, or
hereafter made, incurred, or created, whether directly to Coast or acquired by
Coast by assignment or otherwise, or held by Coast on behalf of others, however
arising, whether voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated, certain or uncertain, determined or
undetermined, monetary or nonmonetary, written or oral, and whether Borrower may
be liable individually or jointly with others, and regardless of whether
recovery thereon may be or hereafter become barred by any statute of
limitations, discharged or uncollectible in any bankruptcy, insolvency or other
proceeding, or otherwise unenforceable; and (b) any and all amendments,
modifications, renewals and extensions of any or all of the foregoing, including
without limitation amendments, modifications, renewals and extensions which are
evidenced by any new or additional instrument, document or agreement; and (c)
any and all attorneys' fees, court costs, and collection charges incurred in
endeavoring to collect or enforce any of the foregoing against Borrower,
Guarantor, or any other person liable thereon (whether or not suit be brought)
and any other expenses of, for or incidental to collection thereof. As used
herein, the term "Borrower" shall include any successor to the business and
assets of Borrower, and shall also include Borrower in its capacity as a debtor
or debtor in possession under the federal Bankruptcy Code, and any trustee,
custodian or receiver for Borrower or any of its assets, should Borrower
hereafter become the subject of any bankruptcy or insolvency proceeding,
voluntary or involuntary; and all indebtedness, liabilities and obligations
incurred by any such person shall be included in the Indebtedness guaranteed
hereby. This Guaranty is given in consideration for credit and other financial
accommodations which may, from time to time, be given by Coast to Borrower in
Coast's sole discretion, but Guarantor acknowledges and agrees that acceptance
by Coast of this Guaranty shall not constitute a commitment of any kind by Coast
to extend such credit or other financial accommodation to Borrower or to permit
Borrower to incur Indebtedness to Coast. All sums due under this Guaranty shall
bear interest from the date due until the date paid at the highest rate charged
with respect to any of the Indebtedness.
2. WAIVERS. Guarantor hereby waives: (a) presentment for payment, notice of
dishonor, protest, and notice
thereof as to any instrument, and all other notices and demands to which
Guarantor might be entitled, including without limitation notice of all of the
following: the acceptance hereof; the creation, existence, or acquisition of any
Indebtedness; the amount of the Indebtedness from time to time outstanding;
disposition of any property which secures any or all of the Indebtedness or
which secures the obligations of any other guarantor of any or all of the
Indebtedness; any adverse change in Borrower's financial position; any other
fact which might increase Guarantor's risk; any default, partial payment or
non-payment of all or any part of the Indebtedness; any and all agreements and
arrangements between Coast and Borrower and any changes, modifications, or
extensions thereof, and any revocation, modification or release of any guaranty
of any or all of the Indebtedness by any person (including without limitation
any other person signing this Guaranty); (b) any right to require Coast to
institute suit against, or to exhaust its rights and remedies against, Borrower
or any other person, or to proceed against any property of any kind which
secures all or any part of the Indebtedness, or to exercise any right of offset
or other right with respect to any reserves, credits or deposit accounts held by
or maintained with Coast or any indebtedness of Coast to Borrower, or to
exercise any other right or power, or pursue any other remedy Coast may have;
(c) any defense arising by reason of any disability or other defense of Borrower
or any other guarantor or any endorser, co-maker or other person, or by reason
of the cessation from any cause whatsoever of any liability of Borrower or any
other guarantor or any endorser, co-maker or other person, with respect to all
or any part of the Indebtedness, or by reason of any act or omission of Coast or
others which directly or indirectly results in the discharge or release of
Borrower or any other guarantor or any other person or any Indebtedness or any
security therefor, whether by operation of law or otherwise; (d) any defense
arising by reason of any failure of Coast to obtain, perfect, maintain or keep
in force any security interest in, or lien or encumbrance upon, any property of
Borrower or any other person; (e) any defense based upon any failure of Coast to
give Guarantor notice of any sale or other disposition of any property securing
any or all of the Indebtedness, or any defects in any such notice that may be
given, or any failure of Coast to comply with any provision of applicable law in
enforcing any security interest in or lien upon any property securing any or all
of the Indebtedness including, but not limited to, any failure by Coast to
dispose of any property securing any or all of the Indebtedness in a
commercially reasonable manner; (f) any defense based upon or arising out of any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
liquidation or dissolution proceeding commenced by or against Borrower or any
other guarantor or any endorser, co-maker or other person, including without
limitation any discharge of, or bar against collecting, any of the Indebtedness
(including without limitation any interest thereon), in or as a result of any
such proceeding; and (g) the benefit of any and all statutes of limitation with
respect to any action based upon, arising out of or related to this Guaranty.
Until all of the Indebtedness has been paid, performed, and discharged in full,
nothing shall discharge or satisfy the liability of Guarantor hereunder except
the full performance and payment of all of the Indebtedness. If any claim is
ever made upon Coast for repayment or recovery of any amount or amounts received
by Coast in payment of or on account of any of the Indebtedness, because of any
claim that any such payment constituted a preferential transfer or fraudulent
conveyance, or for any other reason whatsoever, and Coast repays all or part of
said amount by reason of any judgment, decree or order of any court or
administrative body having jurisdiction over Coast or any of its property, or by
reason of any settlement or compromise of any such claim effected by Coast with
any such claimant (including without limitation the Borrower), then and in any
such event, Guarantor agrees that any such judgment, decree, order, settlement
and compromise shall be binding upon Guarantor, notwithstanding any revocation
or release of this Guaranty or the cancellation of any note or other instrument
evidencing any of the Indebtedness, or any release of any of the Indebtedness,
and the Guarantor shall be and remain liable to Coast under this Guaranty for
the amount so repaid or recovered, to the same extent as if such amount had
never originally been received by Coast, and the provisions of this sentence
shall survive, and continue in effect, notwithstanding any revocation or release
of this Guaranty. Until all of the Indebtedness has been irrevocably paid and
performed in full, Guarantor hereby expressly and unconditionally waives all
rights of subrogation, reimbursement and indemnity of every kind against
Borrower, and all rights of recourse to any assets or property of Borrower, and
all rights to any collateral or security held for the payment and performance of
any Indebtedness, including (but not limited to) any of the foregoing rights
which Guarantor may have under any present or future document or agreement with
any Borrower or other person, and including (but not limited to) any of the
foregoing rights which Guarantor may have under any equitable doctrine of
subrogation, implied contract, or unjust enrichment, or any other equitable or
legal doctrine. Neither Coast, nor any of its directors, officers, employees,
agents, attorneys or any other person affiliated with or representing Coast
shall be liable for any claims, demands, losses or damages, of any kind
whatsoever, made, claimed, incurred or suffered by Guarantor or any other party
through the ordinary negligence of Coast, or any of its directors, officers,
employees, agents, attorneys or any other person affiliated with or representing
Coast.
3. CONSENTS. Guarantor hereby consents and agrees that, without notice to or by
Guarantor and without
affecting or impairing in any way the obligations or liability of Guarantor
hereunder, Coast may, from time to time before or after revocation of this
Guaranty, do any one or more of the following in Coast's sole and absolute
discretion: (a) accelerate, accept partial payments of, compromise or settle,
renew, extend the time for the payment, discharge, or performance of, refuse to
enforce, and release all or any parties to, any or all of the Indebtedness; (b)
grant any other indulgence to Borrower or any other person in respect of any or
all of the Indebtedness or any other matter; (c) accept, release, waive,
surrender, enforce, exchange, modify, impair, or extend the time for the
performance, discharge, or payment of, any and all property of any kind securing
any or all of the Indebtedness or any guaranty of any or all of the
Indebtedness, or on which Coast at any time may have a lien, or refuse to
enforce its rights or make any compromise or settlement or agreement therefor in
respect of any or all of such property; (d) substitute or add, or take any
action or omit to take any action which results in the release of, any one or
more endorsers or guarantors of all or any part of the Indebtedness, including,
without limitation one or more parties to this Guaranty, regardless of any
destruction or impairment of any right of contribution or other right of
Guarantor; (e) amend, alter or change in any respect whatsoever any term or
provision relating to any or all of the Indebtedness, including the rate of
interest thereon; (f) apply any sums received from Borrower, any other
guarantor, endorser, or co-signer, or from the disposition of any collateral or
security, to any indebtedness whatsoever owing from such person or secured by
such collateral or security, in such manner and order as Coast determines in its
sole discretion, and regardless of whether such indebtedness is part of the
Indebtedness, is secured, or is due and payable; (g) apply any sums received
from Guarantor or from the disposition of any collateral or security securing
the obligations of Guarantor, to any of the Indebtedness in such manner and
order as Coast determines in its sole discretion, regardless of whether or not
such Indebtedness is secured or is due and payable. Guarantor consents and
agrees that Coast shall be under no obligation to marshal any assets in favor of
Guarantor, or against or in payment of any or all of the Indebtedness. Guarantor
further consents and agrees that Coast shall have no duties or responsibilities
whatsoever with respect to any property securing any or all of the Indebtedness.
Without limiting the generality of the foregoing, Coast shall have no obligation
to monitor, verify, audit, examine, or obtain or maintain any insurance with
respect to, any property securing any or all of the Indebtedness.
4. ACCOUNT STATED. Coast's books and records showing the account between it and
the Borrower shall be admissible in evidence in any action or proceeding as
prima facie proof of the items therein set forth. Coast's monthly statements
rendered to the Borrower shall be binding upon the Guarantor (whether or not the
Guarantor receives copies thereof), and shall constitute an account stated
between Coast and the Borrower, unless Coast receives a written statement of the
Borrower's exceptions within 30 days after the statement was mailed to the
Borrower. The Guarantor assumes full responsibility for obtaining copies of such
monthly statements from the Borrower, if the Guarantor desires such copies.
5. EXERCISE OF RIGHTS AND REMEDIES; FORECLOSURE OF TRUST DEEDS. Guarantor
consents and agrees that, without notice to or by Guarantor and without
affecting or impairing in any way the obligations or liability of Guarantor
hereunder, Coast may, from time to time, before or after revocation of this
Guaranty, exercise any right or remedy it may have with respect to any or all of
the Indebtedness or any property securing any or all of the Indebtedness or any
guaranty thereof, including without limitation judicial foreclosure, nonjudicial
foreclosure, exercise of a power of sale, and taking a deed, assignment or
transfer in lieu of foreclosure as to any such property, and Guarantor expressly
waives any defense based upon the exercise of any such right or remedy,
notwithstanding the effect thereof upon any of Guarantor's rights, including
without limitation, any destruction of Guarantor's right of subrogation against
Borrower and any destruction of Guarantor's right of contribution or other right
against any other guarantor of any or all of the Indebtedness or against any
other person, whether by operation of Sections 580a, 580d or 726 of the
California Code of Civil Procedure, or any comparable provisions of the laws of
any other jurisdiction, or any other statutes or rules of law now or hereafter
in effect, or otherwise. Without limiting the generality of the foregoing, (a)
Guarantor waives all rights and defenses arising out of an election of remedies
by Coast, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for any of the Indebtedness, has destroyed
the guarantor's rights of subrogation and reimbursement against the principal by
the operation of Section 580d of the Code of Civil Procedure or otherwise. (b)
Guarantor further waives all rights and defenses arising out of an election of
remedies by Coast, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for any of the Indebtedness, has destroyed
the guarantor's rights of subrogation, reimbursement and contribution against
any other guarantor of the guaranteed obligation, by the operation of Section
580d of the Code of Civil Procedure or otherwise. (c) Guarantor understands that
if Coast forecloses any present or future trust deed, which secures any or all
of the Indebtedness or which secures any other guaranty of any or all of the
Indebtedness, by
nonjudicial foreclosure, Guarantor may, as a result, have a complete defense to
liability under this Guaranty, based on the legal doctrine of estoppel and
Sections 580a, 580d or 726 of the California Code of Civil Procedure, and
Guarantor hereby expressly waives all such defenses. (d) Guarantor understands
and agrees that, in the event Coast in its sole discretion forecloses any trust
deed now or hereafter securing any or all of the Indebtedness, by nonjudicial
foreclosure, Guarantor will remain liable to Coast for any deficiency, even
though Guarantor will lose his right of subrogation against the Borrower, and
even though Guarantor will be unable to recover from the Borrower the amount of
the deficiency for which Guarantor is liable, and even though Guarantor may have
retained his right of subrogation against Borrower if Coast had foreclosed said
trust deed by judicial foreclosure as opposed to nonjudicial foreclosure, and
even though absent the waivers set forth herein Guarantor may have had a
complete defense to any liability for any deficiency hereunder. (e) Guarantor
understands and agrees that, in the event Coast in its sole discretion
forecloses any trust deed now or hereafter securing any other guaranty of any or
all of the Indebtedness, by nonjudicial foreclosure, Guarantor will remain
liable to Coast for any deficiency, even though Guarantor will lose his right of
subrogation or contribution against the other guarantor, and even though
Guarantor will be unable to recover from the other guarantor any part of the
deficiency for which Guarantor is liable, and even though Guarantor may have
retained his right of subrogation or contribution against the other guarantor if
Coast had foreclosed said trust deed by judicial foreclosure as opposed to
nonjudicial foreclosure, and even though absent the waivers set forth herein
Guarantor may have had a complete defense to any liability for any deficiency
hereunder.
6. ACCELERATION. Notwithstanding the terms of all or any part of the
Indebtedness, the obligations of the Guarantor hereunder to pay and perform all
of the Indebtedness shall, at the option of Coast, immediately become due and
payable, without notice, and without regard to the expressed maturity of any of
the Indebtedness, in the event: (a) any warranty, representation, statement,
report, or certificate made or delivered to Coast by Borrower or Guarantor, or
any of their respective officers, partners, employees, or agents, is incorrect,
false, untrue, or misleading when given in any material respect; or (b) Borrower
or Guarantor shall fail to pay or perform when due all or any part of the
Indebtedness; or (c) Guarantor shall fail to pay or perform within 5 days after
the same is due any indebtedness or obligation of Guarantor to Coast or to any
parent, subsidiary or corporate affiliate of Coast, whether under this Guaranty
or any other instrument, document, or agreement heretofore or hereafter entered
into; or (d) there occurs in Coast's judgment a material impairment of the
prospect of payment or performance of any or all of the Indebtedness; or (e) any
event shall occur which does result in the acceleration of the maturity of any
indebtedness of Borrower or Guarantor to others (regardless of any requirement
of notice, opportunity to cure or other condition prior to the exercise of any
right of acceleration); or (f) Borrower or Guarantor shall fail promptly to
perform or comply with any term or condition of any agreement with any third
party which does or may result in a material adverse effect on the business of
Borrower or Guarantor unless timely cured or waived in writing by such third
party; or (g) there shall be made or exist any levy, assessment, attachment,
seizure, lien, or encumbrance for any cause or reason whatsoever upon all or any
part of the property of Borrower or Guarantor (unless discharged by payment,
release or bond not more than ten days after such event has occurred); or (h)
there shall occur the dissolution, termination of existence, insolvency, or
business failure of Borrower or Guarantor, or the appointment of a receivers
trustee or custodian for Borrower or Guarantor or all or any part of the
property of either of them, or the assignment for the benefit of creditors by
Borrower or Guarantor, or the commencement of any proceeding by or against
Borrower or Guarantor under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or hereafter in effect; or (i) Borrower or Guarantor shall
be deceased or declared incompetent by any court or a guardian or conservator
shall be appointed for either of them or for the property of either of them; or
(j) Guarantor or Borrower shall generally not pay their respective debts as they
become due or shall enter into any agreement (whether written or oral), or offer
to enter into any such agreement, with all or a significant number of its
creditors regarding any moratorium or other indulgence with respect to its debts
or the participation of such creditors or their representatives in the
supervision, management, or control of the business of either of them; or (k)
Borrower or Guarantor shall conceal, remove or permit to be concealed or removed
any part of its property, with intent to hinder, delay or defraud its creditors,
or make or suffer any transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law, or shall make any
transfer of its property to or for the benefit of any creditor at a time when
other creditors similarly situated have not been paid; or (l) the board of
directors or shareholders of Borrower or Guarantor shall adopt any resolution or
plan for its dissolution or the liquidation of all or substantially all of its
assets; or (m) Guarantor shall revoke this Guaranty or contest or deny liability
under this Guaranty. All of the foregoing are hereinafter referred to as "Events
of Default".
7. RIGHT TO ATTACHMENT REMEDY. Guarantor agrees that, notwithstanding the
existence of any property securing any or all of the Indebtedness, Coast shall
have all of the rights of an unsecured creditor of Guarantor,
including without limitation the right to obtain a temporary protective order
and writ of attachment against Guarantor with respect to any sums due under this
Guaranty. Guarantor further agrees that in the event any property secures the
obligations of Guarantor under this Guaranty, to the extent that Coast, in its
sole and absolute discretion, determines prior to the disposition of such
property that the amount to be realized by Coast therefrom may be less than the
indebtedness of the Guarantor under this Guaranty, Coast shall have all the
rights of an unsecured creditor against Guarantor, including without limitation
the right of Coast, prior to the disposition of said property, to obtain a
temporary protective order and writ of attachment against Guarantor. Guarantor
waives the benefit of Section 483.010(b) of the California Code of Civil
Procedure and of any and all other statutes and rules of law now or hereafter in
effect requiring Coast to first resort to or exhaust all such collateral before
seeking or obtaining any attachment remedy against Guarantor. Coast shall have
no liability to Guarantor as a result thereof, whether or not the actual
deficiency realized by Coast is less than the anticipated deficiency on the
basis of which Coast obtains a temporary protective order or writ of attachment.
8. INDEMNITY. Guarantor hereby agrees to indemnify Coast and hold Coast harmless
from and against any and all claims, debts, liabilities, demands, obligations,
actions, causes of action, penalties, costs and expenses (including without
limitation attorneys' fees), of every nature, character and description, which
Coast may sustain or incur based upon or arising out of any of the Indebtedness,
any actual or alleged failure to collect and pay over any withholding or other
tax relating to Borrower or its employees, any relationship or agreement between
Coast and Borrower, any actual or alleged failure of Coast to comply with any
writ of attachment or other legal process relating to Borrower or any of its
property, or any other matter, cause or thing whatsoever occurred, done, omitted
or suffered to be done by Coast relating in any way to Borrower or the
Indebtedness (except any such amounts sustained or incurred as the result of the
gross negligence or willful misconduct of Coast or any of its directors,
officers, employees, agents, attorneys, or any other person affiliated with or
representing Coast). Notwithstanding any provision in this Guaranty to the
contrary, the indemnity agreement set forth in this Section shall survive any
termination or revocation of this Guaranty and shall for all purposes continue
in full force and effect.
9. SUBORDINATION. Any and all debts, liabilities and obligations owing from
Borrower to Guarantor including any security for and guaranties of any such
obligations, whether now existing or hereafter arising, are hereby subordinated
in right of payment to the prior payment in full of all of the Indebtedness.
Except as permitted in that certain Subordination Agreement between Guarantor
and Coast dated as of October, 1996, and any written amendments thereto, no
payment in respect of any such subordinated obligations shall at any time be
made to or accepted by Guarantor if at the time of such payment any Indebtedness
is outstanding unless Coast, in its sole discretion, agrees to such payment in
writing. The agreement by Coast to a payment on account of subordinated debt
shall not constitute an agreement to the payment of any other subordinated. If
any Event of Default has occurred, all debts, liabilities and obligations owing
from Borrower to Guarantor shall be subordinated, Borrower and any assignee,
trustee in bankruptcy, receiver, or any other person having custody or control
over any or all of Borrower's property are hereby authorized and directed to pay
to Coast the entire unpaid balance of the Indebtedness before making any
payments whatsoever to Guarantor, whether as a creditor, shareholder, or
otherwise; and insofar as may be necessary for that purposes Guarantor hereby
assigns and transfers to Coast all rights to any and all debts, liabilities and
obligations owing from Borrower to Guarantor, including any security for and
guaranties of any such obligations, whether now existing or hereafter arising,
including without limitation any payments, dividends or distributions out of the
business or assets of Borrower. Any amounts received by Guarantor in violation
of the foregoing provisions shall be received and held as trustee for the
benefit of Coast and shall forthwith be paid over to Coast to be applied to the
Indebtedness in such order and sequence as Coast shall in its sole discretion
determine, without limiting or affecting any other right or remedy which Coast
may have hereunder or otherwise and without otherwise affecting the liability of
Guarantor hereunder. Guarantor hereby expressly waives any right to set-off or
assert any counterclaim against Borrower.
10. REVOCATION. This is a Continuing Guaranty relating to all of the
Indebtedness, including Indebtedness arising under successive transactions which
from time to time continue the Indebtedness or renew it after it has been
satisfied. Guarantor waives all benefits of California Civil Code Section 2815,
and agrees that the obligations of Guarantor hereunder may not be terminated or
revoked in any manner except by giving written notice of revocation to Coast at
its address above by registered first-class U.S. mail, postage prepaid, return
receipt requested, and only as to new loans made by Coast to Borrower after
actual receipt of such written notice by Coast. No termination or revocation of
this Guaranty shall be effective until actual receipt of said written notice of
revocation by Coast. Notwithstanding such written notice of revocation or any
other act of Guarantor or any other event or circumstance, Guarantor agrees that
this Guaranty and all consents, waivers and other provisions hereof shall
continue in full force and effect as to any and all Indebtedness which is
outstanding on or before the day following actual receipt of said written notice
of revocation by Coast, and all extensions, renewals and modifications of said
Indebtedness (including without limitation amendments, extensions, renewals and
modifications which are evidenced by new or additional instruments, documents or
agreements executed before receipt of revocation, and all attorneys' fees, court
costs and collection charges, incurred before or after receipt of revocation, in
endeavoring to collect or enforce any of the foregoing against Borrower,
Guarantor or any other person liable thereon (whether or not suit be brought)
and any other expenses of, for or incidental to collection thereof.
11. INDEPENDENT LIABILITY. Guarantor hereby agrees that one or more successive
or concurrent actions may be brought hereon against Guarantor, in the same
action in which Borrower may be sued or in separate actions, as often as deemed
advisable by Coast. The liability of Guarantor hereunder is exclusive and
independent of any other guaranty of any or all of the Indebtedness whether
executed by Guarantor or by any other guarantor (including without limitation
any other persons signing this Guaranty). The liability of Guarantor hereunder
shall not be affected, revoked, impaired, or reduced by any one or more of the
following: (a) the fact that the Indebtedness exceeds the maximum amount of
Guarantor's liability, if any, specified herein or elsewhere (and no agreement
specifying a maximum amount of Guarantor's liability shall be enforceable unless
set forth in a writing signed by Coast or set forth in this Guaranty); or (b)
any direction as to the application of payment by Borrower or by any other
party; or (c) any other continuing or restrictive guaranty or undertaking or any
limitation on the liability of any other guarantor (whether under this Guaranty
or under any other agreement); or (d) any payment on or reduction of any such
other guaranty or undertaking; or (e) any revocation, amendment, Modification or
release of any such other guaranty or undertaking; or (f) any dissolution or
termination of, or increase, decrease, or change in membership of any Guarantor
which is a partnership. Guarantor hereby expressly represents that he was not
induced to give this Guaranty by the fact that there are or may be other
guarantors either under this Guaranty or otherwise, and Guarantor agrees that
any release of any one or more of such other guarantors shall not release
Guarantor from his obligations hereunder either in full or to any lesser extent.
If Guarantor is a married person, Guarantor hereby expressly agrees that
recourse may be had against his or her separate property for all of his or her
obligations hereunder.
12. FINANCIAL CONDITION OF BORROWER. Guarantor is full aware of the financial
condition of Borrower and is executing and delivering this Guaranty at
Borrower's request and based solely upon his own independent investigation of
all matters pertinent hereto, and Guarantor is not relying in any manner upon
any representation or statement of Coast with respect thereto. Guarantor
represents and warrants that he is in a position to obtain, and Guarantor hereby
assumes full responsibility for obtaining, any additional information concerning
Borrower's financial condition and any other matter pertinent hereto as
Guarantor may desire, and Guarantor is not relying upon or expecting Coast to
furnish to him any information now or hereafter in Coast's possession concerning
the same or any other matter. By executing this Guaranty, Guarantor knowingly
accepts the full range of risks encompassed within a contract of continuing
guaranty, which risks Guarantor acknowledges include without limitation the
possibility that Borrower will incur additional Indebtedness for which Guarantor
will be liable hereunder after Borrower's financial condition or ability to pay
such Indebtedness has deteriorated and/or after bankruptcy or insolvency
proceedings have been commenced by or against Borrower. Guarantor shall have no
right to require Coast to obtain or disclose any information with respect to the
Indebtedness, the financial condition or character of Borrower, the existence of
any collateral or security for any or all of the Indebtedness, the filing by or
against Borrower of any bankruptcy or insolvency proceeding, the existence of
any other guaranties of all or any part of the Indebtedness, any action or
non-action on the part of Coast, Borrower, or any other person, or any other
matter, fact, or occurrence.
13. REPORTS AND FINANCIAL STATEMENTS OF GUARANTOR. Guarantor shall, at its sole
cost and expense, at any time and from time to time, prepare or cause to be
prepared, and provide to Coast upon Coast's request (i) such financial
statements and reports concerning Guarantor for such periods of time as Coast
may designate, (ii) any other information concerning Guarantor's business,
financial condition or affairs as Coast may request, and (iii) copies of any and
all foreign, federal, state and local tax returns and reports of or relating to
Guarantor as Coast may from time to time request. Guarantor hereby intentionally
and knowingly waives any and all rights and privileges it may have not to
divulge or deliver said tax returns, reports and other information which are
requested by Coast hereunder or in any litigation in which Coast may be involved
relating directly or indirectly to Borrower or to Guarantor. Guarantor further
agrees immediately to give written notice to Coast of any adverse change in
Guarantor's financial condition and of any condition or event which constitutes
an Event of Default under this Guaranty. All reports and information furnished
to Coast hereunder shall be complete, accurate and correct in all respects.
Whenever requested, Guarantor
shall further deliver to Coast a certificate signed by Guarantor (and, if
Guarantor is a partnership, by all general partners of Guarantor, in their
individual capacities, and, if Guarantor is a corporation, by the president and
secretary of Guarantor, in their individual capacities) warranting and
representing that all reports, financial statements and other documents and
information delivered or caused to be delivered to Coast under this Guaranty,
are complete, correct and thoroughly and accurately present the financial
condition of Guarantor, and that there exists on the date of delivery of said
certificate to Coast no condition or event which constitutes an Event of Default
under this Guaranty.
14. REPRESENTATIONS AND WARRANTIES. Guarantor hereby represents and warrants
that (i) it is in Guarantor's direct interest to assist Borrower in procuring
credit, because Borrower is an affiliate of Guarantor, furnishes goods or
services to Guarantor, purchases or acquires goods or services from Guarantor,
and/or otherwise has a direct or indirect corporate or business relationship
with Guarantor, (ii) this Guaranty has been duly and validly authorized,
executed and delivered and constitutes the valid and binding obligation of
Guarantor, enforceable in accordance with its terms, and (iii) the execution and
delivery of this Guaranty does not violate or constitute a default under (with
or without the giving of notice, the passage of time, or both) any order,
judgment, decree, instrument or agreement to which Guarantor is a party or by
which it or its assets are affected or bound.
15. COSTS. Whether or not suit be instituted, Guarantor agrees to reimburse
Coast on demand for all reasonable attorneys' fees and all other reasonable
costs and expenses incurred by Coast in enforcing this Guaranty, or arising out
of or relating in any way to this Guaranty, or in enforcing any of the
Indebtedness against Borrower, Guarantor, or any other person, or in connection
with any property of any kind securing all or any part of the Indebtedness.
Without limiting the generality of the foregoing, and in addition thereto,
Guarantor shall reimburse Coast on demand for all reasonable attorneys' fees and
costs Coast incurs in any way relating to Guarantor, Borrower or the
Indebtedness, in order to: obtain legal advice; enforce or seek to enforce any
of its rights; commence, intervene in, respond to, or defend any action or
proceeding; file, prosecute or defend any claim or cause of action in any action
or proceeding (including without limitation any probate claim, bankruptcy claim,
third-party claim, secured creditor claim, reclamation complaint, and complaint
for relief from any stay under the Bankruptcy Code or otherwise); protect,
obtain possession of, sell, lease, dispose of or otherwise enforce any security
interest ran or lien on any property of any kind securing any or all of the
Indebtedness; or represent Coast in any litigation with respect to Borrower's or
Guarantor's affairs. In the event either Coast or Guarantor files any lawsuit
against the other predicated on a breach of this Guaranty, the prevailing party
in such action shall be entitled to recover its attorneys' fees and costs of
suit from the non-prevailing party.
16. NOTICES. Any notice which a party shall be required or shall desire to give
to the other hereunder (except for notice of revocation, which shall be governed
by Section 10 of this Guaranty) shall be given by personal delivery or by
telecopier or by depositing the same in the United States mail, first class
postage prepaid, addressed to Coast at its address set forth in the heading of
this Guaranty and to Guarantor at his address set forth under his signature
hereon, and such notices shall be deemed duly given on the date of personal
delivery or one day after the date telecopied or 3 business days after the date
of mailing as aforesaid. Coast and Guarantor may change their address for
purposes of receiving notices hereunder by giving written notice thereof to the
other party in accordance herewith. Guarantor shall give Coast immediate written
notice of any change in his address.
17. CLAIMS. Guarantor agrees that any claim or cause of action by Guarantor
against Coast, or any of Coast's directors, officers, employees, agents,
accountants or attorneys, based upon, arising from, or relating to this
Guaranty, or any other present or future agreement between Coast and Guarantor
or between Coast and Borrower, or any other transaction contemplated hereby or
thereby or relating hereto or thereto, or any other matter, cause or thing
whatsoever, whether or not relating hereto or thereto, occurred, done, omitted
or suffered to be done by Coast, or by Coast's directors, officers, employees,
agents, accountants or attorneys, whether sounding in contract or in tort or
otherwise, shall be barred unless asserted by Guarantor by the commencement of
an action or proceeding in a court of competent jurisdiction within Los Angeles
County, California, by the filing of a complaint within one year after the first
act, occurrence or omission upon which such claim or cause of action, or any
part thereof, is based and service of a summons and complaint on an officer of
Coast or any other person authorized to accept service of process on behalf of
Coast, within 30 days thereafter. Guarantor agrees that such one year period is
a reasonable and sufficient time for Guarantor to investigate and act upon any
such claim or cause of action. The one year period provided herein shall not be
waived, tolled, or extended except by a specific written agreement of Coast.
This provision shall survive any termination of this Guaranty or any other
agreement.
18. CONSTRUCTION; SEVERABILITY. If more than one person has executed this
Guaranty, the term "Guarantor" as used herein shall be deemed to refer to all
and any one or more such persons and their obligations hereunder shall be joint
and several. Without limiting the generality of the foregoing, if more than one
person has executed this Guaranty, this Guaranty shall in all respects be
interpreted as though each person signing this Guaranty had signed a separate
Guaranty, and references herein to "other guarantors" or words of similar effect
shall include without limitation other persons signing this Guaranty. As used in
this Guaranty, the term "property" is used in its most comprehensive sense and
shall mean all property of every kind and nature whatsoever, including without
limitation real property, personal property, mixed property, tangible property
and intangible property. Words used herein in the masculine gender shall include
the neuter and feminine gender, words used herein in the neuter gender shall
include the masculine and feminine, words used herein in the singular shall
include the plural and words used in the plural shall include the singular,
wherever the context so reasonably requires. If any provision of this Guaranty
or the application thereof to any party or circumstance is held invalid, void,
inoperative or unenforceable, the remainder of this Guaranty and the application
of such provision to other parties or circumstances shall not be affected
thereby, the provisions of this Guaranty being severable in any such instance.
19. GENERAL PROVISIONS. Coast shall have the right to seek recourse against
Guarantor to the full extent provided for herein and in any other instrument or
agreement evidencing obligations of Guarantor to Coast, and against Borrower to
the full extent of the Indebtedness. No election in one form of action or
proceeding, or against any party, or on any obligation, shall constitute a
waiver of Coast's right to proceed in any other form of action or proceeding or
against any other party. The failure of Coast to enforce any of the provisions
of this Guaranty at any time or for any period of time shall not be construed to
be a waiver of any such provision or the right thereafter to enforce the same.
All remedies hereunder shall be cumulative and shall be in addition to all
rights, powers and remedies given to Coast by law or under any other instrument
or agreement. Time is of the essence in the performance by Guarantor of each and
every obligation under this Guaranty. If Borrower is a corporation, partnership
or other entity, Guarantor hereby agrees that Coast shall have no obligation to
inquire into the power or authority of Borrower or any of its officers,
directors, partners, or agents acting or purporting to act on its behalf, and
any Indebtedness made or created in reliance upon the professed exercise of any
such power or authority shall be included in the Indebtedness guaranteed hereby.
This Guaranty is the entire and only agreement between Guarantor and Coast with
respect to the guaranty of the Indebtedness of Borrower by Guarantor, and all
representations, warranties, agreements, or undertakings heretofore or
contemporaneously made, which are not set forth herein, are superseded hereby.
No course of dealings between the parties, no usage of the trade, and no parol
or extrinsic evidence of any nature shall be used or be relevant to supplement
or explain or modify any term or provision of this Guaranty. There are no
conditions to the full effectiveness of this Guaranty. The terms and provisions
hereof may not be waived, altered, modified, or amended except in a writing
executed by Guarantor and a duly authorized officer of Coast. All rights,
benefits and privileges hereunder shall inure to the benefit of and be
enforceable by Coast and its successors and assigns and shall be binding upon
Guarantor and his heirs, executors, administrators, personal representatives,
successors and assigns. Neither the death of Guarantor nor notice thereof to
Coast shall terminate this Guaranty as to his estate, and, notwithstanding the
death of Guarantor or notice thereof to Coast, this Guaranty shall continue in
full force and effect with respect to all Indebtedness, including without
limitation Indebtedness incurred or created after the death of Guarantor and
notice thereof to Coast. Section headings are used herein for convenience only.
Guarantor acknowledges that the same may not describe completely the subject
matter of the applicable Section, and the same shall not be used in any manner
to construe, limit, define or interpret any term or provision hereof.
20. GOVERNING LAW; VENUE AND JURISDICTION. This instrument and all acts and
transactions pursuant or relating hereto and all rights and obligations of the
parties hereto shall be governed, construed, and interpreted in accordance with
the internal laws of the State of California. In order to induce Coast to accept
this Guaranty, and as a material part of the consideration therefor, Guarantor
(i) agrees that all actions or proceedings relating directly or indirectly
hereto shall, at the option of Coast, be litigated in courts located within Los
Angeles County, California, (ii) consents to the jurisdiction of any such court
and consents to the service of process in any such action or proceeding by
personal delivery or any other method permitted by law; and (iii) waives any and
all rights Guarantor may have to transfer or change the venue of any such action
or proceeding.
21. MUTUAL WAIVER OF RIGHT TO JURY TRIAL. COAST AND GUARANTOR HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION, CLAIM, LAWSUIT OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS GUARANTEE OR ANY SUPPLEMENT
OR AMENDMENT THERETO; OR (ii) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR
AGREEMENT BETWEEN COAST AND GUARANTOR; OR (iii) ANY BREACH, CONDUCT, ACTS OR
OMISSIONS OF COAST OR GUARANTOR OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON AFFILIATED WITH OR REPRESENTING
COAST OR GUARANTOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE.
22. RECEIPT OF COPY. Guarantor acknowledges receipt of a copy of this Guaranty.
OSICOM TECHNOLOGIES, INC.,
NEW JERSEY CORPORATION
/s/ Xxxxxxxxxxx X. Xxx
BY:____________________________
Chief Financial Officer
TITLE:__________________________
STATE OF CALIFORNIA
COUNTY OF Los Angeles
On October 11,1996 before me, Xxxxxxxx Xxxxxxx, Notary Public, personally
appeared Xxxxxxxxxxx X. Xxx, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized capacity and that by his signature on the instrument the person, or
the entity upon behalf of which the person(x) acted, executed the instrument.
Witness my hand and official seal,
(Seal) ___________________________
VICTORTA JIMKOW
COMM. # 1039844
NOTARY PUBLIC - CALIFORNIA
LOS ANGELES COUNTY
MY COMM. EXPIRES SEP 26,1998
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