-------------------------------------------------------------------------------
COAST
LOAN AND SECURITY AGREEMENT
BORROWER: JORE, INC.
ADDRESS: 00000 XXXXXXX 00 XXXXX
XXXXX, XXXXXXX 00000
DATE: MAY 15, 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(s) named above (jointly and severally, the "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 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
-1-
COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
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 30 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 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
-2-
COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
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 or more, or involving
$100,000 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.
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,
-3-
COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
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 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.
Noting 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 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
-4-
COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
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.
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
$50,000, 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 Borrowers' 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 conducted every 90 days at Borrower's expense and the charge
for the Audits shall be $550 per person per day (or such higher amount as
shall represent Coast's then current standard charge for the same), 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) merger 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 $200,000;
(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;
-5-
COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
(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;
(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) except for "S Corporation Tax Distributions", declare or pay any
dividends, either in cash or property, on any shares of its capital stock of
any class (except dividends or other distributions payable solely in shares
of capital stock of the company) without first obtaining Coast's consent,
such consent shall not be unreasonably withheld;
(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 restruction 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 "Maturity 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, without notice,
effective immediately. If this Agreement is terminated by Borrower or by Coast
under this Section 6.2, Borrower shall pay to Coast a termination fee (the
-6-
COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
--------------------------------------------------------------------------------
"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
and thereafter shall bear interest at a rate equal to the rate applicable to
the Receivable Loans.
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 after five (5) days notice, to pay when due 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; or
(d) Borrower shall fail after five (5) days notice, 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 nor may reasonably be expected to have a material adverse effect on
Borrower's business or financial condition; 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 of 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
-7-
COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
------------------------------------------------------------------------------
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; or (r)
Coast, after five (5) days notice, acting in good faith and in a commercially
reasonable manner, deems itself insecure because of the occurrence of an
event prior to the effective date hereof of which Coast had no knowledge on
the effective date or because of the occurrence of an event on or subsequent
to the effective date. 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; (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
-8-
COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
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.; (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 of personal property which is
part of Coast's Collateral or in which Coast has in 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 to, 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,
-9-
COAST BUSINESS CREDIT LOAN AND SECURITY 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 are 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 FOLLOWING TERMS HAVE THE
FOLLOWING MEANINGS:
"ACCOUNT DEBTOR" means the obligor on a 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
government 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.
"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.
-10-
COAST BUSINESS CREDIT LOAN AND SECURITY 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).
"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 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 individuals, 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
-00-
XXXXX XXXXXXXX CREDIT LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
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 party.
"S CORPORATION TAX DISTRIBUTIONS" shall mean for any period after
December 31, 1993 during which the Company is an S corporation (as defined in
Section 1361 of the Code) the aggregate amount of distributions made by the
Company to all of the holders of the Company's capital stock (each such
holder being a "Shareholder") to pay federal and state income taxes on each
such Shareholder's pro rata share (a "Pro Rata Share") of the items of income
and gain, if any, less the items of losses and deductions, if any, of the
company for such period ("Net Income") required to be reported on the
individual income tax returns of the Shareholder, which taxes shall be
calculated as follows: (ii) in computing federal income taxes, the maximum
marginal federal income tax rate for an individual taxpayer for such period
shall be used, provided, that this definition shall also include any federal
and state income taxes of the Shareholder for any calendar year prior to 1994
which become due subsequent to the Closing Date.
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 11:00AM 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 thirty 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.
-00-
XXXXX XXXXXXXX CREDIT LOAN AND SECURITY AGREEMENT
-------------------------------------------------------------------------------
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 RE 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 Agreement 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.
-13-
9.14 PUBLICITY. 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.
-14-
Borrower:
JORE, INC.
By /s/ Xxxxxxx Xxxx
-----------------------------------
Xxxxxxx Xxxx
Title: President
By /s/ Xxxxxxx Xxxx
------------------------------------
Xxxxxxx Xxxx
Title: Secretary
Coast:
COAST BUSINESS CREDIT, a division of
Southern Pacific Thrift & Loan Association
By /s/ Xxxxxxx Xxxxxx
--------------------------------------
Xxxxxxx Xxxxxx
Title: Vice President
By /s/ Xxxxx X. Xxxxx
--------------------------------------
Xxxxx X. Xxxxx
Title: Vice President and Regional
Marketing Manager, Eastern
Region
-15-
COAST
AMENDMENT TO LOAN AND SECURITY AGREEMENT
On May 15, 1996, Jore, Inc. ("Borrower") and Coast Business Credit, a
division of Southern Pacific Thrift & Loan Association ("Coast") entered into
a credit facility and executed a Loan and Security Agreement ("Agreement").
The parties now desire to amend the Loan and Security Agreement and Schedule
thereto as follows:
1. LETTERS OF CREDIT (Section 1.4):
At the request of Borrower, Coast may, in its sole discretion, arrange for
the issuance of letters of credit for the account of Borrower (collectively,
"Letters of Credit"), by issuing guarantees to the issuer of the letter of
credit or by other means. All Letters of Credit shall be in form and
substance satisfactory to Coast in its sole discretion. The aggregate face
amount of all outstanding Letters of Credit from time to time shall not
exceed the amount shown on the Schedule (the "Letter of Credit Sublimit"),
and shall be reserved against Loans which would otherwise be available
hereunder. Borrower shall pay all bank charges for the issuance of Letters of
Credit. Any payment by Coast under or in connection with a Letter of Credit
shall constitute a Loan hereunder on the date such payment is made. Each
Letter of Credit shall have an expiry date no later than thirty days prior to
the Maturity Date. Borrower hereby agrees to indemnify, save, and hold Coast
harmless from any loss, cost, expense, or liability, including payments made
by Coast, expenses, and reasonable attorneys' fees incurred by Coast arising
out of or in connection with any Letters of Credit. Borrower agrees to be
bound by the regulations and interpretations of the issuer of any Letters of
Credit guarantied by Coast and opened for Borrower's account or by Coast's
interpretations of any Letter of Credit issued by Coast for Borrower's
account, and Borrower understands and agrees that Coast shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letters of Credit
or any modifications, amendments, or supplements thereto. Borrower
understands that Letters of Credit may require Coast to indemnify the issuing
bank for certain costs or liabilities arising out of claims by Borrower
against such issuing bank. Borrower hereby agrees to indemnify and hold Coast
harmless with respect to any loss, cost, expense, or liability incurred by
Coast under any Letter of Credit as a result of Coast's indemnification of
any such issuing bank. The provisions of this Loan Agreement, as it pertains
to Letters of Credit, and any other present or future documents or agreements
between Borrower and Coast relating to Letters of Credit are cumulative.
2. DEFINITIONS (Section 8):
"DILUTION" means all non-cash reductions, including, but not limited to,
credit memos, discounts and journal entries, in the total amount of
Receivables, expressed as a percentage of Receivables.
"TANGIBLE NET WORTH" means stockholders' equity plus debt subordinated to
Coast, less goodwill, patents, trademarks, copyrights, franchises, formulas,
leasehold interests and leasehold improvements, non-compete agreements,
engineering plans, deferred tax benefits, organization costs, start-up costs
and any other intangibles as defined by generally accepted accounting
principles.
3. 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 at any one time
outstanding (the "Maximum Dollar Amount"), or the sum of (a) and (b) below:
1
(a) Loans (the "Receivable Loans") in an amount not to exceed 80%
of the amount of Borrower's Eligible Receivables, no more than 90
days past invoice date and an amount not to exceed 85% of Eligible
Receivables if Dilution is less than 5%, plus
(b) A Letter of Credit Sublimit not to exceed $500,000 with 100%
against availability on standby Letters of Credit.
4. INTEREST (Section 1.2):
INTEREST RATE: A rate equal to the "Prime Rate" plus 2.0% per annum;
the Interest Rate will be reduced to Prime Rate plus
1.5% per annum upon Borrower's achieving and
maintaining Tangible Net Worth of $2,500,000 for two
consecutive quarters.
MINIMUM MONTHLY
INTEREST: Shall be based on a minimum monthly average loan
outstanding of $1,600,000 through March 31, 1999.
5. FEES (Section 1.3):
LINE INCREASE FEE: $10,000 due upon execution of this Amendment.
LETTER OF CREDIT FEE: 1/4% per month plus bank charges and fees.
The Loan and Security Agreement and the Schedule attached thereto are
incorporated herein by this reference; further, all other terms and
conditions contained in the Agreement shall remain the same.
Executed this 19th day of September, 1997.
Borrower: Coast:
JORE, INC. COAST BUSINESS CREDIT, a division of
Southern Pacific Thrift & Loan Association
By By
------------------------------- ----------------------------------
Xxxxxxx Xxxx Edit Kondorosi
Title: President Title: Senior Vice President
2
COAST---------------------------------------------------------------------------
SIXTH AMENDMENT TO THE
RESTATED AND AMENDED LOAN AND SECURITY
AGREEMENT AND SCHEDULE
BORROWER: JORE CORPORATION
ADDRESS: 00000 XXXXXXX 00 XXXXX
XXXXX, XXXXXXX 00000
DATE: MAY 12, 1999
This Sixth Amendment to the Loan and Security Agreement and Schedule dated
February 16, 1998 and as amended June 3, 1998, June 29, 1998, September 25,
1998, November 25, 1998 and January 12, 1999 ("Agreement") between Coast
Business Credit-Registered Trademark-, a division of Southern Pacific Bank
formerly Southern Pacific Thrift & Loan Association ("Coast") and Jore
Corporation formerly Jore, Inc. ("Borrower") is entered into the date set
forth above. Coast and Borrower desire to amend the Agreement as set forth
herein ("Amendment"). All other terms and conditions of the Agreement shall
remain the same.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE TO THE LOAN AND SECURITY AGREEMENT
SECTION 2 - CREDIT FACILITIES
SECTION 2.1 - CREDIT LIMIT: Loans in a total asmount at any time
outstanding not to exceed the lesser of a
total of Twenty-Five Million Dollars
($25,000,000) at any one time outstanding
(the "Maximum Dollar Amount"), or the sum
of (a), (b), (c), (d) and (e) below:
(a) Receivable Loans in an amount not to
exceed the lesser of:
(1) Eighty-five (85%) percent of the
amount of Borrower's Eligible
Receivables (as defined in Section 1
of the Agreement) provided that
Dilution does not exceed five
percent (5%) at which time the advance
rate may be reduced by Coast in its
reasonable judgment, OR
(2) Twenty-Five Million Dollars
($25,000,000), plus
(b) Inventory Loans in an amount not to
exceed the lesser of:
(1) An amount up to sixty percent (60%)
of the value of Borrower's Eligible
Inventory (as defined in Section 1
of the Agreement) consisting of raw
materials and component parts;
1
Coast Business Credit Sixth Amendment to the Restated
and Amended Loan and Security
Agreement and Schedule
--------------------------------------------------------------------------------
and an amount up to sixty-five
percent (65%) of the value of
Borrower's Eligible Inventory (as
defined in Section 1 of the
Agreement) consisting of packaged
and unpackaged finished goods,
subject to an appraisal by an
appraisal firm acceptable to Coast,
with all Inventory calculated at
the lower of cost or market value and
determined on a first-in,
first-out basis, or
(2) Four Million Five Hundred Thousand
Dollars ($4,500,000), or
(3) Forty-five percent (45%) of total
Inventory, PLUS
(c) A Senior Term Loan in the original
principal amount of Six Million Five
Hundred Thousand Dollars ($6,500,000),
subject to an appraisal acceptable to
Coast of existing Real Estate and
Equipment by an appraisal firm approved
by Coast, and amortized over eighty-four
(84) months, all due and payable in
five (5) years, PLUS
(d) Equipment Acquisition Loans, in
minimum advances of One Hundred
Thousand Dollars ($100,000), amortized
over sixty (60) months in a total
amount not to exceed the lesser of:
(1) Eighty percent (80%) of the cost
of new Equipment (after subtracting
taxes and installation charges),
PLUS up to eighty percent (80%) of
the appraised forced liquidation
value of used Equipment acquired by
Borrower (after subtracting taxes
and installation charges); or
(2) Four Million Five Hundred Thousand
Dollars ($4,500,000); PLUS
(e) Overadvance Loans not to exceed One
Million Five Hundred Thousand Dollars
($1,500,000) all due and payable July
31, 1999, to be repaid from the
proceeds of an Initial Public Offering,
Private Placement, Bridge Loan,
Collection of Receivables or any other
source.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECTION 3- INTEREST AND FEES
SECTION 3.1 - INTEREST RATE: A rate equal to the Prime Rate plus 1.00%
per annum, calculated on the basis of a
360-day year for the actual number of days
elapsed for the Receivable Loans, Inventory
Loans, Equipment Acquisition Loans and the
Overadvance Loan. The Senior Term Loan
Interest Rate shall be based upon the
highest yield for Seven (7) year Treasury
Notes as published in the Wall Street
Journal on the first Business Day
proceeding the Closing Date plus 350 Basis
Points. The interest rate applicable to
all Loans, except for the Senior Term
Loan, shall be adjusted monthly as of the
first day of each month, and the interest to
be
2
Coast Business Credit Sixth Amendment to the Restated
and Amended Loan and Security
Agreement and Schedule
--------------------------------------------------------------------------------
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 nine (9.00%) percent per annum.
SECTION 3.1 - MINIMUM MONTHLY
INTEREST: An amount not less than the interest
payable based upon a minimum daily loan
balance of $10,000,000.
SECTION 3.2 - OVERADVANCE FEE: $75,000 fully earned concurrently herewith
and payable $25,000 upon execution of this
Agreement, $25,000 due on June 1, 1999, and
$25,000 due on July 1, 1999.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This Amendment may be executed in counterparts and a facsimile of this
Amendment may be used as an original.
Borrower: Coast:
JORE CORPORATION COAST BUSINESS CREDIT-Registered
formerly Jore, Inc. Trademark-, a division of Southern
Pacific Bank formerly Southern
Pacific Thrift and Loan Association
By: /s/ Xxxxxxx X. Xxxx By: /s/ Xxxxx Xxxxxx
------------------------------------ --------------------------------
Xxxxxxx X. Xxxx Xxxxx Xxxxxx
Title: President Title: Vice President
3
