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Exhibit 10.49
COAST
LOAN AND SECURITY AGREEMENT
BORROWER: CATALYST SEMICONDUCTOR, INC.,
A DELAWARE CORPORATION
ADDRESS: 0000 XXXXXXXX XXXXXX
XXXXXXXXX, XXXXXXXXXX 00000
DATE: JUNE 19, 1997
THIS LOAN AND SECURITY AGREEMENT ("Loan Agreement"), dated the above date, is
entered into at Los Angeles, California, 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").
1. LOANS.
1.1 LOANS, COLLATERAL AGREEMENTS. Borrower has requested and may
hereafter request that Coast advance funds or otherwise extend credit to or for
the benefit of Borrower ("Loan(s)") in accordance with the terms and provisions
of this Loan Agreement and other written agreements ("Collateral Agreement(s)"),
including, but not limited to, any one or more of the following described
security agreements now or hereafter entered into between Borrower and Coast:
(a) Accounts Collateral Security Agreement; (b) Inventory Collateral Security
Agreement; (c) Intellectual Property Collateral Security Agreement; and (d) any
promissory notes or guaranties. The amount and terms of payment of any Loans by
Coast to Borrower shall be determined in accordance with the terms and
provisions of this Loan Agreement and of any executed Collateral Agreements.
Notwithstanding anything herein or in any Collateral Agreement to the contrary,
in no event shall the Borrower permit the total balance of all Loans and all
other Obligations (including without limitation the Obligations under and as
defined in the CEFO Agreement, as defined below) outstanding at any one time to
exceed $13,500,000 ("Maximum Dollar Amount"); and, if for any reason they do,
Borrower shall immediately pay the amount of such excess to Coast in immediately
available funds.
1.2 INTEREST. Unless specifically provided to the contrary in any
Collateral Agreement, all Loans shall bear interest at a rate equal to the
"Prime Rate" (as hereinafter defined), plus 2.25% per annum, calculated on the
basis of a 360-day year for the actual number of days elapsed provided, however,
all Loans shall bear interest at a rate equal to the Prime Rate plus 1.75% per
annum upon receipt of evidence acceptable to Coast in its sole and absolute
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discretion that Borrower has achieved for a period of two consecutive quarters
and thereafter maintained a Tangible Net Worth (as that term is defined herein)
of no less than $17,000,000. 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 that 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" is defined as the
actual "Reference Rate" or the substitute therefor of the Bank of America NT &
SA ("B of A") whether or not that rate is the lowest interest rate charged by B
of A. 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. Regardless of the amount of Obligations that may
be outstanding from time to time, Borrower shall pay Coast minimum monthly
interest during the of this Agreement with respect to the Loans the amount of
Fifty Thousand Dollars ($50,000) per quarter (prorated for any partial quarter
at the beginning of the term of this Agreement).
1.3 FEES. Borrower shall pay to Coast a loan origination fee in the
amount of $101,250 concurrently herewith, and an annual loan fee of n/a on each
anniversary of the date hereof during the term of this Loan Agreement. Borrower
shall pay to Coast a facility fee of Two Thousand Eight Hundred Dollars ($2,800)
per quarter (prorated for any partial quarter at the beginning of the term of
this Agreement). Borrower shall pay to Coast a letter of credit fee of 0.45% per
annum of the aggregate face amount of all outstanding letters of credit plus
Coast's expenses, payable at funding and thereafter payable each year in advance
(prorated for any partial year at the beginning of the term of this Agreement).
Said fees are in addition to all other sums payable to Coast, are not refundable
for any reason, and shall bear interest from the date due to the date paid at
the highest interest rate applicable to any of the Obligations.
1.4 LETTERS OF CREDIT. 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 $7,500,000 (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 (30) days prior to the initial renewal date set
forth in Section 8 and thereafter each subsequent renewal 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.
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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.
1.5 CONDITIONS PRECEDENT. The obligation of Coast to make the Loans is
subject to the satisfaction, in the sole discretion of Coast, at or prior to the
first advance of fluids hereunder, of each, every and all of the following
conditions:
1. STATUS OF ACCOUNTS AT CLOSING. No accounts payable shall be
due and unpaid ninety (90) days past its due date;
2. RENEW OF BORROWER'S FORECASTS. Coast shall have received,
reviewed, and accepted Borrower's financial forecasts;
3. MINIMUM AVAILABILITY. Borrower shall have minimum
availability immediately following the initial funding of the Loans of Two
Hundred Thousand Dollars ($200,000);
4. LANDLORD WAIVER. Coast shall have received duly executed
landlord waivers in form an substance satisfactory to Coast, in Coast's sole and
absolute discretion, and in form for recording in the appropriate recording
office, with respect to all locations where Borrower maintains any inventory or
equipment;
5. EXECUTED LOAN DOCUMENTS. Coast shall have received the
Collateral Agreements duly executed and in form and substance satisfactory to
Coast in its sole and absolute discretion;
6. DAILY REMITTANCE. Coast shall have received evidence that
Borrower has established a procedure for (and Borrower shall provide for) the
daily remittance to be collected either by payment in kind, blocked account, or
lockbox basis;
7. SUBORDINATION. Borrower's sub-debt, if any, shall be
subordinated to Coast in a form and substance acceptable to Coast in its sole
and absolute discretion; and
8. PRIORITY OF COAST'S LIENS. Coast shall have received the
results of "of record" searches satisfactory to Coast in its sole and absolute
discretion, reflecting its Uniform Commercial Code filings against Borrower
indicating that Coast has a perfected, first priority lien in and upon all of
the Collateral, subject only to Permitted Liens.
1.6 CONDITION SUBSEQUENT. The obligations of Coast to make the Loans is
subject to the receipt by Coast from Borrower, as soon as practicable from
Borrower's best efforts but no
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later than sixty (60) days from the date hereof, of a perfected security
interest on all of the Inventory located in Thailand.
2. DEFINITIONS OF OBLIGATIONS AND COLLATERAL; GRANT OF SECURITY INTEREST.
2.1 OBLIGATIONS. Coast and the Borrower are also parties to that
certain Loan and Security Agreement dated June 19, 1997 (the "CEFO Agreement")
and the agreements referred to therein. Both this Agreement and the CEFO
Agreement and such other agreements shall continue in full force and effect, and
all rights and remedies of Coast hereunder and thereunder are cumulative. The
term "Obligations" as used in this Loan Agreement, and any and all Collateral
Agreements, shall mean and include each and all of the following: the obligation
to pay all Loans and all interest thereon when due and to pay and perform when
due all other indebtedness, liabilities, obligations, guarantees, covenants,
agreements, warranties and representations of Borrower to Coast, whether
heretofore, now or hereafter existing, owing or arising; whether primary,
secondary, direct, acquired from a third party, absolute, contingent, fixed,
secured or unsecured; joint or several, written or oral, monetary or
non-monetary; and whether created pursuant to, or caused by Borrower's breach
of, this Loan Agreement, a Collateral Agreement or any other present or future
agreement or instrument, or created by operation of law or otherwise (including
without limitation the Obligations under and as defined in the CEFO Agreement).
2.2 COLLATERAL. As security and collateral for all Obligations,
Borrower hereby grants to Coast a continuing security interest in, and assigns
to Coast, all of Borrower's interest in the types of property described below,
whether now owned or hereafter acquired and wherever located, together with all
proceeds (including insurance proceeds), substitutions, accessions and products
thereof (collectively referred to as "Collateral"):
2.2(a) ACCOUNTS. All accounts, contract rights, chattel paper,
and instruments, and all other obligations now or hereafter owing to Borrower
(hereinafter sometimes collectively referred to as "Accounts"), including, but
not limited to, those described in any Accounts Collateral Security Agreement
executed by Borrower, and all right, title and interest of Borrower in, and all
of Borrower's rights and remedies with respect to, all goods, the sale or other
disposition of which gives rise to any Account, including, without limitation,
all returned, reclaimed and repossessed goods and all rights of stoppage in
transit, replevin, reclamation, and all rights as an unpaid vendor; and
2.2(b) INVENTORY. All inventory, goods, merchandise,
materials, raw materials, work in process, finished goods, advertising,
packaging and shipping materials, supplies, and all other tangible personal
property which is held for sale or lease or furnished under contracts of service
or consumed in Borrower's business, including, without limitation, any and all
of the foregoing which are returned, repossessed, reclaimed or stopped in
transit, and including, but not limited to, those described in any Inventory
Collateral Security Agreement executed by Borrower, and all warehouse receipts
and other documents or instruments now or hereafter issued with respect to any
of the foregoing; and
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2.2(c) EQUIPMENT. All equipment, goods (other than inventory),
machinery, fixtures, trade fixtures, vehicles, furnishings, furniture, supplies,
materials, tools, machine tools, office equipment, appliances, apparatus, parts,
dies, jigs, and chattels, including, but not limited to, those described in any
Equipment Collateral Security Agreement executed by Borrower except for
equipment acquired by purchase money financing under agreements expressly
prohibiting junior liens on such equipment; and
2.2(d) INTANGIBLES. All deposit accounts and general
intangibles (including, but not limited to, tax refunds, goodwill, name,
drawings, trademarks, blueprints, trade names, trade secrets, customer lists,
patents, patent applications, copyrights, security deposits, loan commitment
fees, royalties, licenses, processes, and all other rights, privileges and
franchises); and
2.2(e) INVESTMENT PROPERTY. All investment property as defined
by Section 9115 of the California Commercial Code in effect on the date hereof;
and
All personal property of Borrower which comes into Coast's
possession, custody or control; and all tangible and intangible personal
property in which Coast now has or hereafter acquires a security interest to
secure any or all of the Obligations; and all substitutions, additions and
accessions to any or all of the foregoing items of Collateral; and all
guaranties of and security for any and all of the foregoing; and all books and
records relating to any and all of the foregoing and the equipment containing
said books and records. Payment and performance of the Obligations are
collateralized by the Collateral and by any security interest created in any
other agreement now or hereafter existing between Coast and Borrower unless such
other agreement is a deed of trust or other security instrument having real
property or rents from real property as its subject matter and expressly
provides to the contrary.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER
To induce Coast to enter into this Loan Agreement and now and hereafter
to enter into any Collateral Agreement, Borrower represents and warrants that
each of the following representations and warranties now is and hereafter will
continue to be true and correct in all respects and Borrower has and will timely
perform each of the following covenants:
3.1 CORPORATE EXISTENCE AND POWER. Borrower, if a corporation,
is and will continue to be, duly authorized, 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 the nature of the business transacted by it, or the
ownership or leasing of its property, makes such qualification or licensing
necessary and where the failure to be so qualified would have a material adverse
effect on the Borrower, and Borrower has and will continue to have all requisite
power and authority to carry on its business as it is now, or may hereafter be,
conducted.
3.2 AUTHORITY. Borrower is, and will continue to be,
authorized to enter into, to grant security interests in its property pursuant
to, and to perform its obligations under, this Loan Agreement, any Collateral
Agreement and all other instruments and transactions
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contemplated herein. The execution, delivery and performance by Borrower of this
Loan Agreement, any Collateral Agreement and all other instruments and
transactions contemplated herein have been validly authorized, are enforceable
against the Borrower in accordance with their terms, and do not violate any law
or any provision of Borrower's Articles of Incorporation, By-Laws and any
Shareholder Agreements nor do they violate any material provision of, nor will
they result in acceleration under, any material agreement, indenture, note or
instrument which is binding upon Borrower, or any of its property.
3.3 Name; Trade Names and Styles. Borrower has set forth above
its correct name. Listed on the Schedule hereto are all prior names of Borrower
and each fictitious name, trade name and trade style by which Borrower has been,
or is now, known. Borrower shall provide Coast with fifteen (15) days' advance
written notice prior to doing business under any other name, fictitious name,
trade name or trade style. Borrower has complied, and will hereafter comply,
with all laws relating to the conduct of business under, the ownership of
property in, and the renewal or continuation of the right to use, a corporate,
fictitious or trade name or trade style.
3.4 PLACE OF BUSINESS; LOCATION OF COLLATERAL. Borrower's sole
place of business; or, if Borrower has more than one place of business,
Borrower's chief executive office; or, if Borrower is an individual and does not
have a separate place of business, Borrower's residence is, and will continue to
be, located at Borrower's Address and all of Borrower's books and records,
including, but not limited to, the books and records relating to Borrower's
Accounts, are and will be maintained at Borrower's Address unless and until
Coast shall otherwise consent in writing. In addition to Borrower's Address,
Borrower has places of business and Collateral is located only at the locations
shown on the Schedule hereto. Borrower will provide Coast with at least fifteen
(15) days advance written notice if Borrower moves any of the Collateral to any
new location not previously reported to Coast, or obtains any additional sites
for the conduct of Borrower's business or the location of any Collateral.
3.5 TITLE TO COLLATERAL; LIENS. Borrower is now, and will at
all times hereafter be, the lawful and sole owner of all the Collateral. With
the exception of the security interest granted Coast, the Collateral now is and
will remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims ("Liens"), other than Permitted Liens. As used
herein, "Permitted Liens" means (i) any Liens existing as of the date hereof and
disclosed in Schedule A hereto; (ii) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings, provided the same have no priority over any of
Coast's security interests; (iii) Liens of materialmen, mechanics, warehousemen,
carriers, or employees or other like Liens arising in the ordinary course of
business and securing obligations either not delinquent more than 45 days or
being contested in good faith by appropriate proceedings; (iv) any judgment,
attachment or similar lien, unless the judgment it secures is not fully covered
by insurance and has not been discharged or execution thereof effectively stayed
and bonded against pending appeal within 30 days of the entry thereof provided
that, if the judgment is not fully covered by insurance or execution thereof has
not been so stayed and bonded, Coast shall not be required to make any Loans or
otherwise extend credit to or for the benefit of Borrower; (v) Liens (i) upon or
in any equipment acquired or to be acquired, held or leased by the Borrower to
secure the purchase
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price of such equipment or indebtedness incurred solely for the purpose of
financing the acquisition of such equipment or (ii) existing on such equipment
at the time of its acquisition or lease, provided that the Lien is confined
solely to the equipment so acquired and improvements thereon; (vi) Leases or
subleases and licenses or sublicenses granted to others not interfering in any
material respect with the business of Borrower; (vii) Encumbrances securing
reimbursement obligations of Borrower with respect to commercial letters of
credit, provided that such encumbrances shall attach only to documents or other
property relating to such letters of credit and products and proceeds thereof
that are not Collateral under this Agreement or any of the Collateral Agreements
subsequent to the delivery of such property to Borrower; (viii) Liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clauses (i) and (v) above, provided
that any extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase; (ix) Liens securing
debt junior in perfection and priority to the lien of Coast which are expressly
subordinated to Coast on terms satisfactory to Coast (including a provision
stating that the secured party shall not take action to enforce its lien so long
as any of the Obligations remain outstanding); (x) Liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with
the importation of goods; (xi) Liens which constitute rights of set-off of a
customary nature or bankers' liens on amounts on deposit, whether arising by
contract or by operation of law, in connection with arrangements entered into
with depository institutions in the ordinary course of business; and (xii) other
Liens in existence on the date hereof and listed on Schedule A hereto. Without
limiting any of Coast's other rights and remedies, if Borrower grants any third
party a lien or encumbrance on or security interest (other than a Permitted
Lien) in any of the Collateral, Coast, in its sole discretion, shall have the
right to treat such action as a notice of termination by Borrower to Coast under
Paragraph 8(d) hereof, as of any date subsequent to such grant selected by
Coast, in its sole discretion, and to charge Borrower the termination fee
therein provide Coast now has, and will have, a perfected and enforceable first
priority security interest in all of the Collateral (other than Collateral
subject to a Permitted Lien) to the extent that such security interest can be
perfected by the filing of financing statements, and Borrower will at all times
defend Coast and the Collateral against all claims of others. 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 except for leases of
sales offices at which not more than $200,000 in Collateral is located. 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, whatever waivers and subordinations that Coast specifies, 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.
3.6 MAINTENANCE OF COLLATERAL. Borrower has maintained and
will maintain the Collateral and all of its assets in good working condition, at
Borrower's expense. Borrower
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will not use the Collateral or any of its other properties for any unlawful
purpose and will not secrete or abandon the Collateral except for the
abandonment of worn-out or obsolete equipment or inventory in the ordinary
course of business. Borrower will immediately advise Coast in writing of any
material loss or depreciation of the Collateral.
3.7 BOOKS AND RECORDS. Borrower has maintained and will
maintain at Borrower's Address books and records which are complete and accurate
in all material respects and which comprise an accounting system in accordance
with generally accepted accounting principles. Borrower has not and will not in
the future enter into any agreement with any accounting firm, service bureau or
third party to prepare or store Borrower's books and records at any location
other than Borrower's Address, without first obtaining Coast's written consent,
which may be conditioned upon such accounting firm, service bureau or other
third party agreeing to give Coast the same rights with respect to access to
books and records and related rights as Coast has under Paragraph 4.3 of this
Loan Agreement.
3.8 FINANCIAL CONDITION AND STATEMENTS. All financial
statements now or hereafter delivered to Coast have been, and will be, prepared
in conformity with generally accepted accounting principles and now and
hereafter will fairly reflect the financial condition of Borrower, at the times
and for the periods therein stated. Since the last date covered by any such
statement, there has been no material adverse change in the financial condition,
operations or any other status of the Borrower. Borrower is now and will
continue to be solvent in both the "equity" and "bankruptcy" sense. Borrower
will deliver to Coast a copy of all reports and financial statements in
accordance with Schedule 4.2.
3.9 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower
has timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state or local law. Borrower has timely paid, and will timely
pay, all foreign, federal, state and local taxes, assessments, deposits and
contributions now or hereafter owed by Borrower. Borrower may defer payment of
any contested taxes provided that Borrower (i) in good faith contests Borrower's
obligation to pay such taxes by appropriate proceedings promptly and diligently
instituted and conducted, (ii) notifies Coast in writing of the commencement of
and any material development in such proceedings, and (iii) posts bonds or takes
any other steps required to keep such contested taxes from becoming a lien
(other than Permitted Liens) against or charge upon any of the Collateral or
other properties of Borrower. Borrower shall, at all times, utilize the services
of an outside payroll service providing for the automatic deposit of all payroll
taxes payable by Borrower. 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, without limitation, any liability to the Pension Benefit Guaranty
Corporation or its successors or any other governmental agency. When requested,
Borrower will furnish Coast with proof satisfactory to Coast of Borrower's
making the payment or deposit of all such taxes and contributions, such proof to
be delivered
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within five (5) days after the due date established by law for each such payment
or deposit. If Borrower fails or is unable to pay or deposit such taxes or
contributions, Coast may, but is not obligated to, pay the same and treat all
such advances as additional Obligations of Borrower. Such advances shall bear
interest at the highest interest rate applicable to any of the Obligations.
3.10 COMPLIANCE WITH LAW. Unless noncompliance would not
materially adversely affect (i) Borrower's financial condition as reflected in
its financial statements previously delivered to Coast; (ii) Borrower's
operations; or (iii) Borrower's business, Borrower has complied, and will
comply, with all provisions of all 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, conduct and licensing of
Borrower's business and employment of Borrower's personnel.
3.11 LITIGATION. There is no claim, suit, litigation, proceeding or
investigation pending or threatened by or against or affecting Borrower in any
court or before any regulatory commission, xxxxx or other governmental agency
(or any basis therefor known to Borrower) which is reasonably likely to result,
either separately or in the aggregate, in any material adverse change in the
business or condition of Borrower, or in any impairment in the ability of
Borrower to carry on its business in substantially the same manner as it is now
being conducted. Borrower will immediately inform Coast in writing of any claim,
proceeding, litigation or investigation hereafter 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.
3.12 USE OF PROCEEDS. 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." All proceeds of all Loans
shall be used solely for lawful business purposes.
3.13 CONTINUING EFFECT. All representations, warranties and covenants
of Borrower contained in this Loan Agreement and any Collateral Agreement and
any other agreement with Coast shall be true and correct at the time of the
effective date of each such agreement and shall be deemed continuing and shall
remain true, correct and in full force and effect until payment and satisfaction
in full of all of the Obligations, and Borrower acknowledges that Coast is and
will be expressly relying on such representations, warranties and covenants in
making Loans to Borrower.
4. ADDITIONAL DUTIES OF BORROWER.
4.1 INSURANCE. Borrower shall, at all times, at Borrower's
expense, insure all of the Collateral and carry such other business insurance
with insurers reasonably acceptable to Coast, in such form and amounts as Coast
may reasonably require. All such insurance policies shall name Coast as an
additional loss payee, shall provide that proceeds payable thereunder be payable
directly to Coast unless written authority to the contrary is obtained, and
shall also provide that no act or default of Borrower or any other person shall
affect the right of Coast to recover thereunder and shall contain a lenders loss
payee endorsement in form acceptable to
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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 and absolute discretion provided that if no Event of Default has occurred
and is continuing, and the proceeds are less than $250,000 Coast shall release
the same to the Borrower for the repair or replacement of the property affected.
If Borrower fails to provide or pay for any such insurance, Coast may, but is
not obligated to, procure the same at Borrower's expense. Borrower agrees to
deliver to Coast, promptly as rendered, copies of all material reports made to
all insurance companies.
4.2 REPORTS. At its expense, Borrower shall report, in form
satisfactory to Coast, such information as Coast may from time to time
reasonably specify regarding Borrower or the Collateral including, without
limitation, the written reports set forth in Schedule 4.2 hereto; such reports
shall be rendered with such frequency as Coast may reasonably specify. All
reports furnished Coast shall be complete and accurate in all material respects.
4.3 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At any time (but
in no event less than quarterly) Coast, or its agents, shall have immediate
access to the Collateral and any other property of Borrower, wherever located
provided that if no Event of Default has occurred and is continuing, such access
shall be on one business days notice and during normal business hours. Coast
shall have the right to audit and copy Borrower's books and records and accounts
including accountants' reports wherever located ("hereinafter collectively the
"Records"). Such audits shall be at Borrower's expense and the charge for the
audits shall be $750 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. Borrower hereby irrevocably authorizes and directs any of the
officers, agents, accountants and attorneys having possession or control of any
of the Records (including computer records) to physically deliver or make same
available to Coast upon Coast's request. Coast shall have the right to
possession of, or to move to the premises of Coast or any agent of Coast, for so
long as Coast may desire, all or any part of the Records. All of the rights of
Coast under this Section 4.3 shall be subject to the provisions of Section 14.11
of this Agreement.
4.4 PROHIBITED TRANSACTIONS. Borrower shall not without
Coast's prior written consent: merge, consolidate, dissolve, acquire any other
corporation; enter into any transaction not in its usual course of business;
guarantee or otherwise become in any way liable with respect to the obligations
of another party or entity (except by endorsements of instruments or items of
payment for deposit to the general account of Borrower or which are transmitted
or turned over to Coast on account of the Obligations); pay or declare any
dividends upon Borrower's stock except that that Borrower may repurchase or
redeem shares of its capital stock pursuant to employee option plans for an
aggregate purchase price not to exceed $100,000 per fiscal year, on a
non~umulative basis; redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Borrower's stock; make any change in Borrower's name,
identity, corporate or capital structure (except that Borrower may issue common
stock upon exercise of stock options,
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sell shares of its capital stock for cash, and issue convertible debentures
subordinate in all respects to the Obligations pursuant to subordination
provisions acceptable to Coast in its discretion); sell or transfer any
Collateral, except for the sale of finished inventory in the ordinary course of
Borrower's business and except that, provided no Event of Default has occurred
and is continuing, Borrower may sell excess equipment in the ordinary course of
business in good faith arm's length transactions, and retain the proceeds
thereof for use in its business; lend or distribute any of Borrower's property
or assets, or incur any debts, outside of the ordinary course of Borrower's
business.
4.5 NOTIFICATION OF CHANGES. Borrower will promptly notify
Coast in writing of any change of its officers, directors, the death of any
partner or joint venturer, any purchase in excess of $50,000 out of the regular
course of Borrower's business without Coast's consent and any adverse or
material change in the business or financial affairs of Borrower.
4.6 CHARGES. Borrower shall pay all charges assessed by Coast,
in accordance with Coast's schedule of charges in effect from time to time, and
such charges shall be part of the Obligations and shall be payable on demand.
4.7 LITIGATION COOPERATION. Should any suit or proceeding be
instituted by or against Coast with respect to any Collateral or for the
collection or enforcement of any Account, or in any manner relating to Borrower,
Borrower shall, without expense to Coast, and wherever and whenever designated
by Coast, make available Borrower and its officers, employees and agents and
Borrower's Records to the extent that Coast may deem necessary in order to
prosecute or defend any such suit or proceeding.
4.8 REMITTANCE OF PROCEEDS. All proceeds arising from the
disposition of the Collateral shall be delivered, in kind, by Borrower to Coast
in the original form in which received by Borrower not later than the following
business day alter receipt by Borrower except (I) wire transfer remittances
received by Borrower shall be transmitted to Coast in total the day following
posting to Borrower's bank account. Borrower agrees that it will not commingle
proceeds of Collateral with any of Borrower's other fluids or property, but will
hold such proceeds separate and apart from such other fluids and property and in
an express trust for Coast. Coast may from time to time verify directly with the
respective account debtors the validity, amount and any other matters relating
to the Accounts 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 EXECUTE ADDITIONAL DOCUMENTATION. Borrower agrees, at its
expense, on demand by Coast, to execute all documents in form satisfactory to
Coast, as Coast, in its sole discretion, may deem reasonably necessary or useful
in order to perfect and maintain Coast's perfected first-priority or any other
security interest in the Collateral, and in order to fully consummate all of the
transactions contemplated under this Loan Agreement and under any Collateral
Agreement.
4.10 TANGIBLE NET WORTH. Borrower shall maintain, at all time
at which any Obligations remain outstanding, a minimum Tangible Net Worth of
Eleven Million Dollars ($11,000,000) where "Tangible Net Worth" means
consolidated stockholders' equity, less,
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goodwill, patents, trademarks, copyrights, franchises, formulas, leasehold
interests, leasehold improvements, non-compete agreements, engineering plans,
deferred tax benefits and organization costs.
5. APPLICATION OF PAYMENTS.
All forms of payments delivered to Coast on account of the Obligations
constitute conditional payment only until such items are actually paid in cash
to Coast; solely for the purpose of computing interest earned by Coast, credit
therefor and for bank wire transfers shall be given as of the first fifth
business day alter receipt by Coast as to uncollected ands and zero days alter
receipt of collected (goods) funds in order to allow for clearance, bookkeeping
and computer entries. All payments made by Borrower may be applied, and in
Coast's sole discretion reversed and re-applied, in whole or in part to any of
the Obligations, in such order and manner as Coast shall determine in its sole
discretion.
6. EVENTS OF DEFAULT AND REMEDIES.
6.1 EVENTS OF DEFAULT. If any of the following events shall occur, such
an occurrence shall constitute an "Event of Default" and Borrower shall provide
Coast with immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Coast by Borrower or any
of Borrower's officers, employees or agents now or hereafter shall be incorrect
false, untrue or misleading in any material respect; or (b) Borrower shall fail
to repay when due part or all of any Loan or to pay any interest thereon when
due; or (c) Borrower shall fail to perform when due any term or condition
contained in this Loan Agreement or in any Collateral Agreement, or any other
agreement between Coast and Borrower; or (d) Borrower shall fail to pay or
perform any other Obligation when due; or (e) Any loss, theft, or substantial
damage to, or destruction of; any or all of the Collateral (unless within five
(5) days after the occurrence of any such event, Borrower furnishes Coast with
evidence satisfactory to Coast that the amount of any such loss, theft, damage
to or destruction of the Collateral is fully insured under policies designating
Coast as the exclusive additional named insured other than lessors of real
property to Borrower); or (f) A material impairment of the prospect of payment
or performance of the Obligations or a material impairment of the value of the
Collateral or any impairment in the priority of Coast's security interest; or
(g) Any event shall arise which may result or actually results in the
acceleration of the maturity of the indebtedness of Borrower to others under any
loan or other agreement or undertaking; or (h) Any levy, assessment, attachment,
seizure, lien or encumbrance (other than Permitted Liens) for any cause or
reason whatsoever, upon all or any pert of the Collateral or any other asset of
Borrower (unless discharged by payment, release or fully bonded against not more
than ten (10) days after such event has occurred); or (i) 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 or against, Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or hereafter in effect; or entry of a court or
governmental order which enjoins, restrains or in any way prevents Borrower from
conducting all or any part of its business; or failure to pay any foreign,
federal, state or local
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tax or other debt of Borrower unless, with respect to any such tax, Borrower
complies with the provisions of Paragraphs 3.9 (1), (ii), and (iii); or (j) A
notice of lien (other than Permitted Liens) levy or assessment is filed of
record with respect to any of Borrower's assets by the United States or any
department, agency or instrumentality thereof, or by any state, county,
municipal or other governmental agency, or if any taxes or debts now or
hereafter owing to any one or more of them becomes a lien (other than Permitted
Liens) upon all or any of the Collateral or any other assets of Borrower (other
than a lien for real property taxes which are not yet due and payable); or (k)
Death, insolvency or incompetency of any guarantor of the Obligations;
appointment of a conservator or guardian of the person of any such guarantor;
appointment of a conservator, guardian, trustee, custodian or receiver of all or
any part of the assets, property or estate of, any such guarantor; revocation or
termination of, or limitation of liability upon, any guaranty of the
Obligations; or commencement of proceedings by or against any guarantor or
surety for Borrower under any bankruptcy or insolvency law; or (1) Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations in violation of 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 (m) Borrower
shall generally not pay its 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 Borrower; 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 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 (except for individually
negotiated extensions of trade debt, leases or other obligations); or (n) Coast
at any time, acting in good faith and in a commercially reasonable manner, deems
itself insecure because of (i) the occurrence of an event prior to the effective
date hereof of which Coast had no knowledge on the effective date or (ii) the
occurrence of an event on or subsequent to the effective date.
6.2 REMEDIES. Upon the occurrence of any Event of Default, and
at any time thereafter, Coast, at its option, and without notice or demand of
any kind (all of which are hereby expressly waived by Borrower) (except that,
prior to or concurrently with the taking of the first of any of the following
actions, Coast shall give Borrower one general written notice stating that Coast
is "proceeding to exercise its rights and remedies" or words to that effect),
may do any one or more of the following: (a) Cease advancing money or extending
credit to or for the benefit of Borrower under this Loan Agreement, any
Collateral Agreement, and 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 the
Borrower's premises without hindrance to search for, take possession of, keep,
store, or remove any of the Collateral and remain on such premises or cause a
custodian to remain thereon in exclusive control thereof without charge for so
long as Coast deems necessary in order to complete the enforcement of its rights
under this Loan
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Agreement or any Collateral Agreement, or any other agreement; provided,
however, that should Coast seek to take possession of any or all 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 a place
or places to be 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 processing, manufacturing or repair of all or any
portion of the 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. Without limiting any security interest granted Coast in other
provisions of this Loan Agreement or in any Collateral Agreement or other
agreement, for the purpose of completing manufacturing, processing or repair of
Collateral and the disposition thereof, Coast is hereby granted a security
interest in, and Coast and any purchaser from Coast may use without charge, all
of the Borrower's plant, machinery, equipment, labels, licenses, processes,
patents, patent applications, copyrights, names, trade names, trademarks, trade
secrets, logos, advertising material and all other assets, and may also utilize
all of Borrower's rights under any license or franchise agreement; (f) Sell,
ship, reclaim, lease or otherwise dispose of all or any portion of the
Collateral in its condition at the time Coast obtains possession or after
further manufacturing, processing or repair, at any one or more public and/or
private sales (including execution 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 fit, 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 Accounts and general
intangibles comprising part or all of the 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 Accounts and the like for less than face value; (h) Demand and
receive possession of any of Borrower's federal and state income tax returns and
the Records utilized in the preparation thereof or referring thereto. All
attorneys' fees, expenses, costs, liabilities and obligations incurred by Coast
with respect to the foregoing shall be added to and become part of the
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations. 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.
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6.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS.
Borrower and Coast agree that the following conduct by Coast with respect to any
disposition of Collateral shall conclusively be deemed commercially reasonable
(but other conduct by Coast, including, but not limited to, Coast's use in its
sole discretion of other or different times, places and manners of noticing and
conducting any disposition of Collateral shall not be deemed unreasonable): Any
public or private disposition as to which no later than the tenth calendar day
prior thereto written notice thereof is mailed or personally delivered to
(Borrower and, with respect to any public disposition, on no later than the
tenth calendar day prior thereto notice thereof describing in general
non-specific terms, then Collateral to be disposed of is published once in a
newspaper of general circulation in the county where the sale is to be
conducted, at any place designated by Coast, with or without the Collateral
being present, and which commences at any time between 8:00 a.m. and 5:00 p.m.
Without limiting the generality of the foregoing, Borrower expressly agrees
that, with respect to any disposition of Accounts, instruments and general
intangibles (collectively "Receivables"), it shall be commercially reasonable
for Coast to direct any prospective acquirer thereof to ascertain directly from
Borrower any and all information (and Coast shall not be required to maintain
records of, or answer any inquires) concerning the Receivables offered for
disposition, including, but not limited to, the terms of payment, aging and
delinquency, if any, of the Receivables, the financial condition of any obligor
or account debtor thereon or guarantor thereof, any collateral therefor and the
condition and location of the goods, if any, that are the subject of any of the
Receivables.
6.4 APPLICATION OF PROCEEDS. All proceeds realized as the
result of any disposition of the Collateral shall be applied by Coast first to
the costs, expenses, liabilities, obligations and attorneys' fees incurred by
Coast in the exercise of its rights under this Loan Agreement and any Collateral
Agreement, second to the interest due upon any of the Obligations and third to
the principal of the Obligations in any order determined by Coast in its sole
discretion. The surplus, if any, shall be paid to Borrower; if any deficiency
shall arise, Borrower shall remain liable to Coast therefor. If, as a result of
the disposition of any of the Collateral, Coast directly or indirectly enters
into a credit transaction with any third party, Coast shall have the option,
exercisable at any time, in its sole discretion, of either reducing the
Obligations by the principal amount of such credit transaction or deferring the
reduction thereof until the actual receipt by Coast of cash therefor from such
third party.
6.5 REMEDIES CUMULATIVE. In addition to the rights and
remedies set forth in this Loan Agreement and any Collateral Agreement, Coast
shall have all the other rights and remedies accorded a secured party under the
California Uniform Commercial Code and under any and all other applicable laws
and in any other instrument or agreement now or hereafter 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.
7. POWER OF ATTORNEY.
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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: (a) Execute on
behalf of Borrower any documents that Coast may, in its sole and absolute
discretion, deem advisable in order to perfect, maintain or improve Coast's
security interest in the Collateral or other real or personal property intended
to constitute Collateral, or in order to exercise a right of Borrower or Coast,
or in order to fully consummate all the transactions contemplated under this
Loan Agreement, any Collateral Agreement and all other present and future
agreements; (b) At any time after the occurrence of an Event of Default, to
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 Account, 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) subject to the terms of this
Agreement and the Collateral Agreements 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) Upon the occurrence of any Event of
Default, to receive and open all mail addressed to Borrower; (f) Endorse all
checks and other forms of remittances received by Coast "Pay to the Order of
Coast Business Credit Corporation," or in such other manner as Coast may
designate; (g) after an Event of Default 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; (h) after an Event of Default Grant extensions
of time to pay, compromise claims and settle Accounts and the like for less than
face value and execute all releases and other documents in connection therewith;
(i) Pay any sums required on account of Borrower's taxes or to secure the
release of any liens therefor, or both; (j) Settle and adjust, and give releases
of, any insurance claim that relates to any of the Collateral and obtain payment
therefor; (k) 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 Paragraph 4.3 of
this Loan Agreement; and (l) Take any action or pay any sum required of Borrower
pursuant to this Loan Agreement, any Collateral Agreement and any other present
or future agreements. Any and all sums paid and any and all 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, shall be
payable on demand, and shall bear interest at a rate equal to the highest
interest rate applicable to any of the Obligations. In no event shall Coast's
rights under the foregoing power of attorney or any of Coast's other rights
under this Loan Agreement or any Collateral Agreement be deemed to indicate that
Coast is in control of the business, management or properties of Borrower.
8. TERMINATION.
This Loan Agreement and all Collateral Agreement(s) shall continue in
effect until June 19, 1998 (the "initial renewal date") and shall thereafter
automatically and continuously
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renew for successive additional terms of one year(s) each unless terminated as
to future transactions as--hereinafter provided so long as Borrower pays a
renewal fee of 0.5% of the Maximum Dollar Amount to Coast prior to the initial
renewal date and thereafter each subsequent anniversary thereof. (The initial
renewal date and each subsequent date on which the terms of this Loan Agreement
and the Collateral Agreement(s) automatically renew are hereinafter referred to
as "renewal dates.") This Loan Agreement and any Collateral Agreement may be
terminated, as to future transactions only, as follows: (a) By written notice
from either Coast or Borrower to the other, not less than one hundred twenty
(120) days prior to the next renewal date, in which event termination shall be
effective on the next renewal date; or ) By Coast at any tune after the
occurrence of an Event of Default, without notice, in which event termination
shall be effective immediately; or (c) By one hundred twenty (120) days' prior
written notice from Borrower to Coast, in which event, termination shall be
effective on the one hundred twentieth day after such notice is given; or (d) By
the grant by Borrower to any third party of a lien or encumbrance on, or
security interest in, any of the Collateral, as provided in Paragraph 3.5, in
which event termination shall be effective on the date selected by. Coast
pursuant to Paragraph 3.5. On the effective date of termination, Borrower shall
pay and perform in fill 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. If Borrower attempts to terminate this Loan
Agreement under subparagraph (a) or (c) above, but does not pay and perform all
Obligations in fill on the effective date of termination, then this Loan
Agreement and all Collateral Agreement(s) shall not be terminated and shall
continue in full force and effect until the next renewal date and shall
automatically renew thereafter as provided above. If termination occurs under
subparagraph (b), (c) or (d) above, Borrower shall pay to Coast a termination
fee in an amount equal to (ii) two percent (2%) of the Maximum Dollar Amount.
Said termination fee shall be included in the Obligations, shall be payable on
the effective date of termination, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations. Without limiting
the generality of the foregoing, if on the initial renewal date or thereafter
any subsequent renewal 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. Further, notwithstanding any
termination of this Loan Agreement or any Collateral Agreement, all of Coast's
security interest in all of the Collateral and all of the terms and provisions
of this Loan Agreement and all Collateral Agreement(s) shall continue in full
force and effect until all Obligations have been paid and performed in full, and
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. Without limiting
the fact that all Loans are discretionary on the part of Coast, Coast may, in
its sole discretion, refuse to make any further Loans after termination. Upon
payment and performance in fill of all the Obligations, Coast shall promptly
deliver to Borrower termination statements, request for reconveyances and such
other documents as may be required to fully terminate any of Coast's security
interests. Notwithstanding the foregoing,
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Borrower may not terminate this Agreement under subparagraph (a), (c) or (d)
above, unless Borrower also concurrently terminates the CEFO Agreement.
9. NOTICES.
All notices to be given hereunder shall be in writing and shall be
served either personally or by Federal Express or other recognized private
delivery service ("Private Delivery") or by depositing the same in the United
States mail, postage prepaid, by regular first-class mail, or by certified mail,
return receipt requested, addressed to Coast or Borrower at the addresses shown
above, or at any other address as shall be designated by one party in a written
notice to the other party. Any such notice shall be deemed to have been given
upon delivery in the case of notices personally delivered to Borrower or to an
officer of Coast, or at the expiration of one (1) business day after the date
sent by Private Delivery ,or at the expiration of or at the expiration of one
(1) business day after the date sent by Private Delivery, three (3) business
days following the deposit thereof in the United States mail, with postage
prepaid (except that any notice of disposition referred to in Paragraph 6.3
hereof that is mailed shall be deemed given at the time of deposit thereof in
the United States mail, with postage prepaid). If there is more than one
Borrower, notice to any Borrower shall constitute notice to all; if Borrower is
a corporation, the service upon any member of the Board of Directors, officer,
employee or agent shall constitute service upon the corporation.
10. GENERAL WAIVERS.
The failure of Coast at any time or times hereafter to require Borrower
to strictly comply with any of the provisions of this Loan Agreement or any
Collateral Agreement or any other present or future agreement between Borrower
and Coast shall not waive or diminish any right of Coast thereafter to demand
and receive strict compliance therewith. Any waiver of any default shall not
waive or affect any other default, whether prior or subsequent thereto. None of
the provisions of this Loan Agreement or any Collateral Agreement or other
agreement now or hereafter 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 officer of Coast
and delivered to Borrower. Borrower waives the benefit of all statute(s) of
limitations in any action or proceeding based upon or arising out of this Loan
Agreement or any Collateral Agreement or any other present or future instrument
or agreement between Coast and Borrower. Borrower waives any and all notices or
demands which Borrower might be entitled to receive with respect to this Loan
Agreement, any Collateral Agreement, or any other agreement by virtue of any
applicable law. Borrower hereby 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 Loan Agreement or any
Collateral Agreement. Borrower hereby ratifies and confirms whatever Coast may
do in a commercially reasonable manner pursuant to this Loan Agreement and any
Collateral Agreement and agrees that Coast shall not be liable for (a) the
safekeeping of the Collateral or any loss or damage thereto, or diminution in
value thereof, from any cause
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whatsoever unless any damage thereto is caused by Coast's gross negligence or
willful misconduct, or (b) any act or omission of any carrier, warehouseman,
bailee, forwarding agent or other person, or (c) any act of commission or any
omission by Coast or its officers, employees, agents, or attorneys, or any of
its or their errors of judgment or mistakes of fact or law except for Coast's
gross negligence or willful misconduct.
11. ATTACHMENT WAIVERS.
To the extent that Coast, in its sole and absolute discretion,
determines, prior to the disposition of all of the Collateral, that the amount
to be realized by Coast from the disposition of all of the Collateral may be
less than the amount of the Obligations, and to the full extent of any such
anticipated deficiency, Borrower waives the benefit of Section 483.010(b) of the
California Code of Civil Procedure and of any and all other statutes requiring
Coast to first resort to and exhaust all of the Collateral before seeking or
obtaining any attachment remedy against Borrower, and Borrower expressly agrees
that, to the extent of such anticipated deficiency, Coast shall have all of the
rights of an unsecured creditor, including, but not limited to, the right of
Coast, prior to the disposition of all of the Collateral, to obtain a temporary
protective order and writ of attachment or other available remedy. Coast shall
have no liability to Borrower if the actual deficiency realized by Coast is less
than the anticipated deficiency on the basis of which Coast obtained a temporary
protective order or writ of attachment. In the event Coast should seek a
temporary protective order, or writ of attachment, or both, Borrower hereby
irrevocably waives any bond and any surety or security relating thereto required
by any statute, court rule or otherwise as an incident or condition precedent to
the issuance of any temporary protective order or writ of attachment.
12. ATTORNEYS' FEES AND COSTS.
Borrower shall forthwith pay to Coast the amount of all reasonable
attorneys' fees and all filing, recording, publication, search and other costs
incurred by Coast pursuant to this Loan Agreement, any Collateral Agreement or
any other present or future agreement or in connection with any transaction
contemplated hereby, or with respect to the Collateral or the defense or
enforcement of its interests (whether or not Coast files a lawsuit against
Borrower)**. Without limiting the generality of the foregoing, Borrower shall,
with respect to each and all of the foregoing, pay all attorneys' fees and costs
Coast incurs in order to: obtain legal advice; enforce, or seek to enforce, any
of its rights; prosecute actions against, or defend actions by, Account debtors;
commence, intervene in, respond to, or defend any action or proceeding; initiate
any complaint to be relieved of the effect of the automatic stay in bankruptcy
in order to commence or continue any foreclosure or other disposition of the
Collateral or to commence, defend or continue any action or other proceeding in
or out of bankruptcy against Borrower or relating to the Collateral; file or
prosecute a claim or right in any action or proceeding, including, but not
limited to, any probate claim, bankruptcy claim, third party claim, secured
creditor claim or reclamation complaint; examine, audit, count, test, copy, or
otherwise inspect any of the Collateral or any of Borrower's books and records;
or protect, obtain possession of lease, dispose of, or otherwise enforce any
security interest in or lien on, the Collateral or represent Coast in any
litigation with respect to Borrower's affairs. If either Coast or Borrower files
any lawsuit
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against the other predicated on a breach of this Loan Agreement or any
Collateral Agreement, the prevailing party in such action shall be entitled to
recover its costs and attorneys' fees, including, but not limited to, attorneys'
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. All attorneys' fees and costs to which Coast
may be entitled pursuant to this Paragraph shall immediately become part of
Borrower's Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.
13. DESTRUCTION OF BORROWER'S DOCUMENTS; LIMITATION OF ACTIONS.
Any documents, schedules, invoices or other papers delivered to Coast
may be destroyed or otherwise disposed of by Coast six (6) months after they are
delivered to Coast unless Borrower makes written request therefor and pays all
expenses attendant to their return, in which event, Coast shall return same when
Coast's actual or anticipated need therefor has terminated. Borrower agrees that
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 Collateral Agreement, or any other
present or future 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, relating in
any way to Borrower, shall be barred unless asserted by Borrower by the delivery
of a specific written claim setting forth in reasonably specific detail the
Borrower's claim or cause of action within one year after the first act,
occurrence or commission upon which such claim or cause of action, or any part
thereof, is based. Borrower agrees that such one-year period of time is a
reasonable and sufficient time for Borrower to investigate and act upon any such
claim or cause of action. The six-month period provided herein shall not be
waived, tolled, or extended except by the written consent of Coast in its sole
and absolute discretion. This provision shall survive any termination, however
arising, of this Loan Agreement, any Collateral Agreement, and any other present
or future agreement.
14. GENERAL PROVISIONS.
14.1 SEVERABILITY. Should any provision, clause or condition
of this Loan Agreement or any Collateral Agreement be held by any court of
competent jurisdiction to be void or unenforceable, such defect shall not affect
the remainder of this Loan Agreement or any Collateral Agreement.
14.2 INTEGRATION. This Loan Agreement and any Collateral
Agreements and such other agreements, documents and instruments as may be
executed in connection herewith shall be construed as the entire and complete
agreement between Borrower and Coast and shall supersede all prior negotiations,
all of which are merged and integrated herein.
14.3 AMENDMENT. The terms and provisions of this Loan
Agreement and any Collateral Agreement may not be waived or amended except in a
writing executed by Borrower and a duly authorized officer of Coast.
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14.4 TIME OF ESSENCE. Time is of the essence in the
performance by Borrower of each and every obligation under this Loan Agreement
and any Collateral Agreement.
14.5 BENEFIT OF AGREEMENT. The provisions of this Loan
Agreement and any Collateral Agreement shall be binding upon and inure to the
benefit of the respective successors, assigns, heirs, beneficiaries and
representatives of the parties hereto; provided, however, that Borrower may not
assign or transfer any of its rights under this Loan Agreement or any Collateral
Agreement without the prior written consent of Coast, and any prohibited
assignment shall be void. No consent by Coast to any assignment shall relieve
Borrower or any guarantor from its liability for the Obligations.
14.6 JOINT AND SEVERAL LIABILITY. The liability of each
Borrower 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.
14.7 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are
used herein for convenience only. Borrower acknowledges that the same may not
describe completely the subject matter of the applicable paragraph, and the same
shall not be used in any manner to construe, limit, define or interpret any term
or provision hereof. This Loan Agreement and the Collateral Agreements have been
fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Loan Agreement or any Collateral
Agreement shall he construed strictly against Coast or Borrower under any rule
of construction or otherwise.
14.8 GOVERNING LAW; JURISDICTION; VENUE. This Loan Agreement
and any Collateral Agreement and all acts and transactions hereunder and all
rights and obligations of Coast and Borrower shall be governed by and in
accordance with the laws of the State of California. Any undefined term used in
this Loan Agreement or in any Collateral Agreement that is defined in the
California Uniform Commercial Code shall have the meaning therein assigned to
that term. 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 hereto 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.
14.9 EXECUTION BY COAST. This Loan Agreement and any
Collateral Agreement which has been executed and delivered by Borrower to Coast
shall not become effective unless and until executed by a duly authorized
officer of Coast.
14.10 MUTUAL WAIVE, 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 LOAN AGREEMENT OR ANY COLLATERAL
AGREEMENT OR ANY OTHER PRESENT OR
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FUTURE INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT, ACTS
OR OMISSIONS OF COAST OR BORROWER ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR BORROWER.
14.11 CONFIDENTIALITY. Coast covenants and agrees, on a
continuing basis, to use reasonable efforts (but in no event less than the same
degree of care that it exercises with respect to its own proprietary information
of the same types) to maintain the confidentiality of and not to disclose to any
person other than its officers, directors, attorneys and accountants and
affiliates, and such other persons to whom Coast shall at any time be required
to make such disclosure in accordance with applicable law, any and all
proprietary, trade secret or confidential information provided to or received by
Coast from or on account of Borrower or any affiliate of Borrower, including
business plans and forecasts, non-public financial information, confidential or
secret processes, formulae, devices or contractual information, customer lists,
employee relation matters, and any other information the disclosure of which
could reasonably be expected to have a material adverse impact on the business,
finances or operations of Borrower or its affiliates, provided however the
foregoing provisions shall not be effective regarding the disposition of
Collateral after an Event of Default
BORROWER:
CATALYST SEMICONDUCTOR, INC.,
a Delaware corporation
By: /s/ C. Xxxxxxx Xxxxxx
-------------------------------------
President
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------
Assistant Secretary
COAST:
COAST BUSINESS CREDIT, a division of Southern Pacific Thrift & Loan
Association, a California corporation
By: /s/ Xxxx X. Xxxxxxx
-------------------------------------
Title: Vice President
-----------------------------------
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Schedule to Loan and Security Agreement
Prior Names (Section 3.3):
None
FICTITIOUS NAMES, TRADE NAMES, TRADE STYLES (SECTION 3.3):
CAT FLASH
OTHER ADDRESSES (SECTION 3.4):
SEE ATTACHED LIST
REPORTS (SECTION 4.2)
Borrower shall provide Coast with the following:
(1) Monthly Receivable agings, aged by invoice date, within ten (10)
days after the end of each month.
(2) Monthly accounts payable agings, aged by invoice date, and
outstanding or held check registers within ten (10) days after the end of each
month.
(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 (10) days after the end of each
month.
(4) Monthly internally prepared financial statements, as soon as
available, and in any event within thirty (30) days after the end of each month.
(5) Quarterly internally prepared financial statements (l0Qs), as soon
as available, and in any event within forty-five (45) days after the end of each
fiscal quarter of Borrower.
(6) Quarterly customer lists, including customer name, address, and
phone number.
(7) Annual financial statements (10Ks) as soon as available, and in any
event within ninety (90) days following the end of Borrower's fiscal year,
certified by independent certified public accountants acceptable to Coast.
