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EXHIBIT 10.2
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LOAN AND SECURITY AGREEMENT
by and among
MAI SYSTEMS CORPORATION, a Delaware corporation,
GAMING SYSTEMS INTERNATIONAL, a Nevada corporation,
HOTEL INFORMATION SYSTEMS, INC., a Delaware corporation,
and
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
Dated as of April 23, 1998
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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TABLE OF CONTENTS
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Page
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1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Account Debtor . . . . . . . . . . . . . . . . . . . . . . . . . 1
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Borrower's Address . . . . . . . . . . . . . . . . . . . . . . . 1
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Change of Control . . . . . . . . . . . . . . . . . . . . . . . 1
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Coast. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Net Worth . . . . . . . . . . . . . . . . . . . . . 2
Credit Limit . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Deposit Account. . . . . . . . . . . . . . . . . . . . . . . . . 2
Dollars or $ . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Early Termination Fee. . . . . . . . . . . . . . . . . . . . . . 2
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . 2
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
General Intangibles. . . . . . . . . . . . . . . . . . . . . . . 2
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Intercreditor and Subordination Agreement. . . . . . . . . . . . 2
Licensed Software . . . . . . . . . . . . . . . . . . . . . . . 3
Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . 3
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
MAI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . 3
Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . 3
Maximum Dollar Amount . . . . . . . . . . . . . . . . . . . . . 3
Minimum Monthly Interest . . . . . . . . . . . . . . . . . . . . 3
Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . 3
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Prime Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Renewal Date . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Renewal Fee . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Solvent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Year 2000 Problem . . . . . . . . . . . . . . . . . . . . . . . 4
Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2. CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 Status of Accounts at Closing. . . . . . . . . . . . . . . . . . 5
5.2 Minimum Availability . . . . . . . . . . . . . . . . . . . . . . 5
5.3 Landlord Waivers . . . . . . . . . . . . . . . . . . . . . . . . 5
5.4 Warehouse Waivers. . . . . . . . . . . . . . . . . . . . . . . . 5
5.5 Executed Agreements. . . . . . . . . . . . . . . . . . . . . . . 5
5.6 Opinion of Borrowers' Counsel. . . . . . . . . . . . . . . . . . 6
5.7 Priority of Coast's Liens. . . . . . . . . . . . . . . . . . . . 6
5.8 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.9 Borrowers' Existence . . . . . . . . . . . . . . . . . . . . . . 6
5.10 Organizational Documents . . . . . . . . . . . . . . . . . . . . 6
5.11 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . 6
5.12 Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.14 Audited Financial Statements . . . . . . . . . . . . . . . . . . 6
5.15 Minimum Consolidated Net Worth . . . . . . . . . . . . . . . . . 6
5.16 Year 2000 Problem Assessment Certificate . . . . . . . . . . . . 6
5.17 Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.18 Other Documents and Agreements . . . . . . . . . . . . . . . . . 7
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWERS . . . . . 7
6.1 Existence and Authority. . . . . . . . . . . . . . . . . . . . . 7
6.2 Name; Trade Names and Styles . . . . . . . . . . . . . . . . . . 7
6.3 Place of Business; Location of Collateral. . . . . . . . . . . . 7
6.4 Title to Collateral; Permitted Liens . . . . . . . . . . . . . . 7
6.5 Maintenance of Collateral. . . . . . . . . . . . . . . . . . . . 8
6.6 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . 8
6.7 Financial Condition, Statements and Reports. . . . . . . . . . . 8
6.8 Tax Returns and Payments; Pension Contributions. . . . . . . . . 8
6.9 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . 8
6.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.11 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 8
6.12 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . 8
7. RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.1 Representations Relating to Receivables. . . . . . . . . . . . . 9
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7.2 Representations Relating to Documents and Legal Compliance . . . 9
7.3 Schedules and Documents relating to Receivables. . . . . . . . . 9
7.4 Collection of Receivables. . . . . . . . . . . . . . . . . . . . 9
7.5 Remittance of Proceeds . . . . . . . . . . . . . . . . . . . . . 9
7.6 Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.7 Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.8 Verification . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.9 No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8. ADDITIONAL DUTIES OF THE BORROWER. . . . . . . . . . . . . . . . . . . 10
8.1 Financial and Other Covenants. . . . . . . . . . . . . . . . . . 10
8.2 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.4 Access to Collateral, Books and Records. . . . . . . . . . . . . 10
8.5 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . 11
8.6 Litigation Cooperation . . . . . . . . . . . . . . . . . . . . . 11
8.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 12
9. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.1 Maturity Date. . . . . . . . . . . . . . . . . . . . . . . . . . 12
9.2 Early Termination. . . . . . . . . . . . . . . . . . . . . . . . 12
9.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . 12
10. EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . 12
10.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 12
10.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.3 Standards for Determining Commercial Reasonableness. . . . . . . 14
10.4 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . 15
10.5 Application of Proceeds. . . . . . . . . . . . . . . . . . . . . 16
10.6 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . 16
11. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.1 Interest Computation . . . . . . . . . . . . . . . . . . . . . . 16
11.2 Application of Payments. . . . . . . . . . . . . . . . . . . . . 17
11.3 Charges to Accounts. . . . . . . . . . . . . . . . . . . . . . . 17
11.4 Monthly Accountings. . . . . . . . . . . . . . . . . . . . . . . 17
11.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.7 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.8 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.9 No Liability for Ordinary Negligence . . . . . . . . . . . . . . 17
11.10 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.11 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . . . 18
11.12 Attorneys Fees, Costs and Charges. . . . . . . . . . . . . . . . 18
11.13 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . 18
11.14 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.15 Paragraph Headings; Construction . . . . . . . . . . . . . . . . 18
11.16 Governing Law; Jurisdiction; Venue . . . . . . . . . . . . . . . 18
11.17 Mutual Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . 19
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COAST
LOAN AND SECURITY AGREEMENT
BORROWERS: MAI SYSTEMS CORPORATION, GAMING SYSTEMS INTERNATIONAL,
A DELAWARE CORPORATION A NEVADA CORPORATION
0000 XXXXXXXX XXXX 0000 XXXX XXXXXXX XXXX
XXXXXX, XX 00000 XXXXX #0
XXX XXXXX, XX 00000
HOTEL INFORMATION SYSTEMS, INC.,
A DELAWARE CORPORATION
0000 XXXXXXXX XXXX
XXXXXX, XX 00000
DATE: AS OF APRIL 23, 1998
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date among COAST
BUSINESS CREDIT, a division of Southern Pacific Bank ("Coast"), a California
corporation, with offices at 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, and the borrowers named above (jointly and severally, the
"Borrowers"), each of whose chief executive office is located at the address
indicated above ("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 1 below.)
1. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable or General Intangible.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder holding 5% or more of the capital stock (or any warrants or options
to purchase 5% or more of the capital stock) of such Person, director or
officer of such Person, or any parent or subsidiary of such Person, or any
Person controlling, controlled by or under common control with such Person.
"Audit" means to inspect, audit and copy Borrowers' books and records and
the Collateral.
"Borrowers" has the meaning set forth in the introduction to this Agreement
(each, a "Borrower").
"Borrower's Address" has the meaning set forth in the introduction to this
Agreement.
"Business Day" means a day on which Coast is open for business.
"Change of Control" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) (other than the current holders of the
ownership interests in any Borrower) becomes the "beneficial owner" (as defined
in Rule l3d-3 under the Securities Exchange Act of 1934), directly or
indirectly, as a result of any single transaction, of more than twenty-five
percent (25%) of the total voting power of all classes of
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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stock or other ownership interests then outstanding of any Borrower normally
entitled to vote in the election of directors or analogous governing body.
"Closing Date" date of the initial funding under this Agreement.
"Coast" has the meaning set forth in the introduction to this Agreement.
"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 4 hereof.
"Consolidated Net Worth" means consolidated owner's equity, plus the amount
of the Junior Debt outstanding, calculated in accordance with GAAP.
"Credit Limit" means the maximum amount of Loans that Coast may make to
Borrowers pursuant to the terms shown on the Schedule.
"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.
"Dollars or $" means United States dollars.
"Early Termination Fee" means the amount set forth on the Schedule that
Borrowers must pay Coast if this Agreement is terminated by Borrowers or Coast
pursuant to Section 9.2 hereof.
"Equipment" means all of each Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dies, jigs, goods and
other goods (other than Inventory) of every kind and description used in such
Borrower's operations or owned by such 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 10.1 of
this Agreement.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"General Intangibles" means all general intangibles of each Borrower,
whether now owned or hereafter created or acquired by such Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, investment property, 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 each 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 each Borrower, all
rights to indemnification and all other intangible property of every kind and
nature (other than Receivables).
"Inventory" means all of each 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 such 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.
"Intercreditor and Subordination Agreement" means that certain
Intercreditor and Subordination Agreement,
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dated as of even date herewith, among the Value Realization Fund, L.P., Canyon
Value Realization Fund (Cayman), Ltd., GRS Partners II and CPI Securities L.P.,
on the one hand, and Coast, on the other hand.
"Investment Property" has the meaning set forth in Section 9115 of the Code
as in effect as of the date hereof.
"Junior Debt" has the meaning given to such term in the Intercreditor and
Subordination Agreement.
"Licensed Software" means all software in which a Borrower's interest is
that of a licensee.
"Loan Documents" means this Agreement, the agreements and documents listed
on Section 5 of the Schedule, and any other agreement, instrument or document
executed in connection herewith or therewith.
"Loans" has the meaning set forth in Section 2 hereof.
"MAI" means MAI Systems Corporation, a Delaware corporation.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, condition (financial or otherwise) or results of operations of
Borrowers and their subsidiaries taken as a whole, or of any guarantor of any of
the Obligations, (ii) the ability of Borrowers or any guarantor of any of the
Obligations to perform their obligations under this Agreement and the Loan
Documents to which they are a party (including, without limitation, repayment of
the Obligations as they come due) or (iii) the validity or enforceability of
this Agreement or any other agreement or document entered into by any party in
connection herewith, or the rights or remedies of Coast hereunder or thereunder.
"Maturity Date" means the date that this Agreement shall cease to be
effective, as set forth on the Schedule, subject to the provisions of Section
9.1 and 9.2 hereof.
"Maximum Dollar Amount" has the meaning set forth in Section 2 of the
Schedule.
"Minimum Monthly Interest" has the meaning set forth in Section 3 of the
Schedule.
"Notes" has the meaning given to such term in the Intercreditor and
Subordination Agreement.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrowers 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 any
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorneys'
fees (including attorneys' fees and expenses incurred in bankruptcy), 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 Borrowers under this Agreement or under any other
present or future instrument or agreement between any Borrower and Coast.
"Permitted Liens" means the following:
(a) purchase money security interests in specific items of Equipment;
(b) leases of specific items of Equipment;
(c) liens for taxes not yet payable or which are being contested in
good faith by appropriate proceedings and adequate reserves have been set aside
with respect thereto as required by GAAP and, by reason of nonpayment, no
material property is subject to a material risk of loss or forfeiture, or would
reasonably be likely to result in a Material Adverse Effect;
(d) additional security interests and liens consented to in writing by
Coast, which consent shall not be unreasonably withheld;
(e) security interests being terminated substantially concurrently with
this Agreement;
(f) liens of materialmen, mechanics, warehousemen, carriers, or other
similar liens arising in the ordinary course of business and securing
obligations which are not delinquent or which are being contested in good
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faith by appropriate proceedings and adequate reserves have been set aside with
respect thereto as required by GAAP and, by reason of nonpayment, no material
property is subject to a material risk of loss or forfeiture, or would
reasonably be likely to result in a Material Adverse Effect;
(g) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above in
clauses (a) or (b) 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; or
(h) 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 (d) 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 Borrowers agree
that any uncured default in any obligation secured by the subordinate security
interest shall also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, general partnership,
limited partnership, limited liability partnership, limited liability company,
joint venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Prime Rate" means the actual "Reference Rate" or the substitute therefor
of the Bank of America NT & SA whether or not that rate is the lowest interest
rate charged by said bank. If the Prime Rate, as defined, is unavailable, "Prime
Rate" shall mean the highest of the prime rates published in the Wall Street
Journal on the first business day of the applicable month, as the base rate on
corporate loans at large U.S. money center commercial banks.
"Receivables" means all of each Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents, securities accounts,
security entitlements, commodity contracts, commodity accounts, investment
property and all other forms of obligations at any time owing to such Borrower,
all guaranties and other security therefor, all merchandise returned to or
repossessed by such Borrower, and all rights of stoppage in transit and all
other rights or remedies of an unpaid vendor, lienor or secured party.
"Renewal Date" shall mean the Maturity Date if this Agreement is renewed
pursuant to Section 9.1 hereof, and each anniversary thereafter that this
Agreement is renewed pursuant to Section 9.1 hereof.
"Renewal Fee" means the fee that Borrower must pay Coast upon renewal of
this Agreement pursuant to Section 9.1 hereof, in the amount set forth on the
Schedule.
"Solvent" means, with respect to any Person on a particular date, that on
such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
"Year 2000 Problem" means the risk that computer systems, software and
applications used by a Person may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any dates after
December 31, 1999.
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"Other Terms." All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. 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.
2. CREDIT FACILITY. Coast will make loans to Borrowers (the "Loans"), jointly
and severally, in amounts and in percentages to be determined by Coast in its
good faith, commercially reasonable discretion, up to the Credit Limit, provided
no Default or Event of Default has occurred and is continuing; provided,
however, Coast may reserve against Borrowers' availability hereunder the amount
of each semi-annual payment of interest owing on the Notes. Coast may create
additional reserves against or reduce its advance rates without declaring a
Default or an Event of Default (i) until such time as Coast is satisfied that
all federal, state and local tax claims against each Borrower have been
discharged, or (ii) if it determines that there has occurred a Material Adverse
Effect.
3. INTEREST AND FEES.
3.1 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 Borrowers'
loan account when payable, 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, Borrowers shall pay Coast Minimum Monthly
Interest during the term of this Agreement with respect to the Receivable Loans
and the Inventory Loans in the amount set forth on the Schedule.
3.2 FEES. Borrowers shall pay Coast the fees shown on the Schedule, which
are in addition to all interest and other sums payable to Coast and are deemed
fully earned and are nonrefundable.
4. SECURITY INTEREST.
To secure the payment and performance of all of the Obligations when due,
each Borrower hereby grants to Coast a security interest in all of such
Borrower's interest in the following, whether now owned or hereafter acquired,
and wherever located: All Receivables, Inventory, Equipment, Investment
Property, and General Intangibles, including, without limitation, all of such
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")
5. CONDITIONS PRECEDENT.
The obligation of Coast to make the Loans is subject to the satisfaction,
in the reasonable discretion of Coast, at or prior to the first advance of funds
hereunder, of each, every and all of the following conditions:
5.1 STATUS OF ACCOUNTS AT CLOSING. After giving effect to the initial Loan,
no accounts payable shall be due and unpaid 120 days past its due date except
for such accounts payable being contested in good faith in appropriate
proceedings and for which adequate reserves have been provided.
5.2 MINIMUM AVAILABILITY. Borrowers shall have minimum availability
immediately following the initial funding in the amount set forth on the
Schedule.
5.3 LANDLORD WAIVERS. Coast shall have received duly executed landlord
waivers and access agreements in form and substance satisfactory to Coast, in
Coast's reasonable discretion, and, when deemed appropriate by Coast, in form
for recording in the appropriate recording office, with respect to all leased
locations where any Borrower maintains any inventory or equipment.
5.4 WAREHOUSE WAIVERS. Warehouse waivers in form and substance satisfactory
to Coast, in Coast's reasonable discretion, and when deemed appropriate by
Coast, in form for recording in the appropriate recording office, with respect
to all warehouse locations where Borrowers maintain any inventory or equipment.
5.5 EXECUTED AGREEMENTS. Coast shall have received this Agreement and the
Loan Documents duly executed and in form and substance satisfactory to Coast in
its reasonable discretion.
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5.6 OPINION OF BORROWERS' COUNSEL. Coast shall have received an opinion of
Borrowers' counsel, in form and substance satisfactory to Coast in its
reasonable discretion.
5.7 PRIORITY OF COAST'S LIENS. Coast shall have received the results of "of
record" searches satisfactory to Coast in its reasonable discretion, reflecting
its Uniform Commercial Code filings against Borrowers indicating that Coast has
a perfected, first priority lien in and upon all of the Collateral, subject only
to Permitted Liens.
5.8 INSURANCE. Coast shall have received copies of the insurance binders or
certificates evidencing Borrowers' compliance with Section 8.2 hereof, including
lender's loss payee endorsements.
5.9 BORROWERS' EXISTENCE. Coast shall have received copies of each
Borrower's articles or certificate of incorporation and all amendments thereto,
and a Certificate of Good Standing, each certified by the Secretary of State of
the state of such Borrower's organization, and dated a recent date prior to the
Closing Date, and Coast shall have received Certificates of Foreign
Qualification for each Borrower from the Secretary of State of each state
wherein the failure to be so qualified could have a Material Adverse Effect.
5.10 ORGANIZATIONAL DOCUMENTS. Coast shall have received copies of each
Borrower's By-laws and all amendments thereto, and Coast shall have received
copies of the resolutions of the boards of directors of each Borrower,
authorizing the execution and delivery of this Agreement and the other documents
contemplated hereby, and authorizing the transactions contemplated hereunder and
thereunder, and authorizing specific officers of such Borrower to execute the
same on behalf of such Borrower, in each case certified by the Secretary or
other acceptable officer of such Borrower as of the Closing Date.
5.11 INTELLECTUAL PROPERTY. Coast shall have received evidence satisfactory
to Coast that all of Borrowers' copyrights which are used in the operation of
Borrowers' businesses in any material respect have been registered with the
United States Copyright Office, and all of Borrowers' patents and trademarks
which are used in the operation of Borrowers' businesses in any material respect
have been filed with the United States Patent and Trademark Office.
5.12 SUBORDINATION. All Junior Debt shall be subordinated with standstill
provisions on principal and interest payments in accordance with the terms of
the Intercreditor and Subordination Agreement, which shall provide, among other
things, that MAI may: (1) make regularly scheduled semi-annual payments of
interest due on the Notes at the rate of eleven percent (11%) per annum, and
(2) on or after March 3, 2004, make the payment of the principal balance owing
on the Notes; provided, however, that on the date of the proposed payment on the
Notes, (x) all payments then due and payable on the Obligations have first been
paid in full, (y) no Default or Event of Default has occurred and is continuing,
and (z) no Default or Event of Default will result therefrom.
5.13 TAXES. Coast shall have received evidence from Borrowers that
Borrowers have complied with all tax withholding and Internal Revenue Service
regulations, in form and substance satisfactory to Coast in its reasonable
discretion, and that all applicable taxes are paid current.
5.14 AUDITED FINANCIAL STATEMENTS. Coast shall have received Borrowers'
audited consolidated financial statements for fiscal year ended December 31,
1997, and Coast shall be satisfied with same.
5.15 MINIMUM CONSOLIDATED NET WORTH. Borrowers shall have a Consolidated
Net Worth of not less than $2,250,000.
5.16 YEAR 2000 PROBLEM ASSESSMENT CERTIFICATE. Coast shall have received a
certificate from the relevant officer of each Borrower to the effect that (i)
such Borrower has no knowledge, with respect to any of such Borrower's
customers, that would cause such Borrower to reasonably believe that the Year
2000 Problem will cause a Material Adverse Effect and (ii) that as the result of
a comprehensive assessment undertaken by such Borrower of such Borrower's
computer systems, software and applications and after due inquiry made to such
Borrower's material suppliers and vendors, such Borrower knows of no facts that
would cause such Borrower to reasonably believe that the Year 2000 Problem will
cause a Material Adverse Effect.
5.17 DUE DILIGENCE. Coast shall have completed its due diligence with
respect to Borrowers (including without limitation, review of Borrowers'
maintenance support
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arrangement with Olivetti North America, Inc.), and Coast shall be satisfied
with same.
5.18 OTHER DOCUMENTS AND AGREEMENTS. Coast shall have received such other
agreements, instruments and documents as Coast may require in connection with
the transactions contemplated hereby, all in form and substance satisfactory to
Coast in Coast's reasonable discretion, and in form for filing in the
appropriate filing office, including, but not limited to, those documents listed
in Section 5 of the Schedule.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWERS.
In order to induce Coast to enter into this Agreement and to make Loans,
each Borrower represents and warrants to Coast as follows, and each Borrower
covenants that the following representations will continue to be true, and that
each Borrower will at all times comply with all of the following covenants:
6.1 EXISTENCE AND AUTHORITY. Each Borrower is and will continue to be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each 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. The execution, delivery and
performance by each Borrower of this Agreement, and all other documents
contemplated hereby (a) have been duly and validly authorized, (b) are
enforceable against such 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 (c) do not violate such Borrower's articles or
certificate of incorporation, or by-laws, or any law or any material agreement
or instrument which is binding upon such Borrower or its property, and (d) do
not constitute grounds for acceleration of any material indebtedness or
obligation under any material agreement or instrument which is binding upon such
Borrower or its property.
6.2 NAME; TRADE NAMES AND STYLES. The name of each Borrower set forth in
the heading to this Agreement is its correct name. Listed on the Schedule are
all prior names of each Borrower and all of such Borrower's present and prior
trade names. Each Borrower shall give Coast thirty (30) days' prior written
notice before changing its name or doing business under any other name, Each
Borrower has complied, and will in the future comply, with all laws relating to
the conduct of business under a fictitious business name.
6.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. Each Borrower's Address set
forth in the heading to this Agreement is such Borrower's chief executive
office. In addition, each Borrower has places of business and Collateral is
located only at the locations set forth on the Schedule. Each Borrower will give
Coast at least thirty (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 such Borrower's Address or one of the
locations set forth on the Schedule.
6.4 TITLE TO COLLATERAL; PERMITTED LIENS. Each Borrower is now, and will at
all times in the future be, the sole owner of all the Collateral, except for (i)
items of Equipment which are leased by each Borrower and (ii) the Licensed
Software. 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 each 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. No Borrower is or will 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 any 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), each Borrower shall, whenever requested by Coast, use
its best efforts to cause such third party to execute and deliver to Coast, in
form reasonably 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. Each
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.
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6.5 MAINTENANCE OF COLLATERAL. Each Borrower will maintain the Collateral
in good working condition, and no Borrower will use the Collateral for any
unlawful purpose. Borrowers will immediately advise Coast in writing of any
material loss or damage to the Collateral.
6.6 BOOKS AND RECORDS. Each Borrower has maintained and will maintain at
such Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.
6.7 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 GAAP (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 Borrowers, 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 Effect. Each Borrower is now and will continue to be Solvent.
6.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Each Borrower has
timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and each 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 such Borrower. Each
Borrower may, however, defer payment of any contested taxes, provided that such
Borrower (i) in good faith contests such 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, no Borrower is aware of any claims or
adjustments proposed for any of such Borrower's prior tax years which could
result in additional taxes becoming due and payable by such Borrower. Each
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 term, and no Borrower has or will 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 such Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental agency.
Each Borrower shall, at all times, utilize the services of an outside payroll
service providing for the automatic deposit of all payroll taxes payable by such
Borrower.
6.9 COMPLIANCE WITH LAW. Each 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 such Borrower, including, but
not limited to, the Fair Labor Standards Act, and those relating to such
Borrower's ownership of real or personal property, the conduct and licensing of
such Borrower's business, and environmental matters.
6.10 LITIGATION. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of each
Borrower's knowledge) threatened by or against or affecting such Borrower in any
court or before any governmental agency (or any basis therefor known to such
Borrower) which may result, either separately or in the aggregate, in a Material
Adverse Effect. Borrowers will promptly inform Coast in writing of any claim,
proceeding, litigation or investigation in the future threatened or instituted
by or against any Borrower involving an amount set forth on the Schedule.
6.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes. No Borrower is purchasing or carrying any "margin
stock" (as defined in Regulation U 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."
6.12 YEAR 2000 COMPLIANCE. Each Borrower has no knowledge, with respect to
any of such Borrower's customers, that would cause such Borrower to reasonably
believe that the Year 2000 problem will cause a Material Adverse Effect and,
further that as the result of a comprehensive review and assessment undertaken
by each Borrower of such Borrower's computer systems, software and applications
and after due inquiry made of such Borrower's material suppliers and vendors,
each Borrower represents and warrants that such Borrower knows of no fact or
circumstance which would reasonably be likely to cause the Year 2000 Problem to
result in a Material Adverse Effect.
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7. RECEIVABLES.
7. 1 REPRESENTATIONS RELATING TO RECEIVABLES. Each Borrower represents and
warrants to Coast as follows: Each Receivable with respect to which Loans are
requested by Borrowers 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 the applicable Borrower's
business.
7.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Each
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 each 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.
7.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrowers shall
deliver to Coast via facsimile, unless otherwise directed by Coast, at such
locations and at such intervals as Coast may reasonably request, transaction
reports and loan requests, schedules of Receivables, and schedules of
collections, all on Coast's standard forms; provided, however, that Borrowers'
failure to execute and deliver the same shall not affect or limit Coast's
security interest and other rights in all of each Borrower's Receivables, nor
shall Coast's failure to advance or lend against a specific Receivable affect or
limit Coast's security interest and other rights therein. Loan requests received
after 10:30 A.M. Los Angeles, California time, will not be considered by Coast
until the next Business Day. Together with each such schedule, or later if
requested by Coast, Borrowers shall, if requested by Coast, 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 each Borrower
warrants the genuineness of all of the foregoing. Each Borrower shall also
furnish to Coast an aged accounts receivable trial balance in such form and at
such intervals as Coast shall reasonably request. In addition, each 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. Each Borrower shall
also provide Coast with copies of all credit memos as and when reasonably
requested by Coast.
7.4 COLLECTION OF RECEIVABLES. Borrowers shall have the right to collect
all Receivables, unless and until an Event of Default has occurred and is
continuing. Borrowers shall hold all payments on, and proceeds of, Receivables
in trust for Coast, and Borrowers shall deliver all such payments and proceeds
to Coast within one (1) Business Day after receipt by the applicable 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 a proceeds of Collateral be deposited by the applicable Borrower into a
lockbox account, or such other "blocked account" as Coast may specify, pursuant
to a lockbox or 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.
7.5 REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of
any Collateral shall be delivered to Coast within one (1) Business Day after
receipt by the applicable Borrower, in their original form, duly endorsed to
Coast, to be applied to the Obligations in such order as Coast shall determine.
Each Borrower agrees that it will not commingle proceeds of Collateral with any
of such Borrower's other funds or property, but will hold such proceeds separate
and apart from such other funds and property and in an express trust for Coast.
Nothing in this Section limits the restrictions on disposition of Collateral set
forth elsewhere in this Agreement.
7.6 DISPUTES. Each Borrower shall notify Coast promptly of all disputes or
claims relating to Receivables. No Borrower shall forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except any
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Borrower may do so, provided that: (a) such 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; (b) no Default or Event of Default has occurred and is continuing; and
(c) 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 and during the continuance 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 Borrowers' Loan account with only the net amounts
received by Coast in payment of any Receivables.
7.7 RETURNS. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to any Borrower in the ordinary
course of its business, such 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 and during the continuance of any Event of Default, each Borrower
shall (a) hold the returned Inventory in trust for Coast, (b) segregate all
returned Inventory from all of such Borrower's other property, (c) conspicuously
label the returned Inventory as subject to Coast's security interest, and (d)
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.
7.8 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
the applicable Borrower or Coast or such other name as Coast may choose.
7.9 NO LIABILITY. Coast shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall Coast be deemed to be responsible for any of any 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.
8. ADDITIONAL DUTIES OF THE BORROWER.
8.1 FINANCIAL AND OTHER COVENANTS. Borrowers shall at all times comply with
the financial and other covenants set forth in the Schedule.
8.2 INSURANCE. Borrowers 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 Borrowers 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 each Borrower shall name
Coast as an additional insured, and all property casualty and related insurance
policies of each Borrower shall name Coast as a loss payee thereon and each
Borrower shall cause a lender's loss payee endorsement to be issued 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
Borrowers insurance proceeds with respect to Equipment totaling less than the
amount set forth in Section 8 of the Schedule, which shall be utilized by
Borrowers 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 Borrowers fail to provide or
pay for any insurance, Coast may, but is not obligated to, obtain the same at
Borrowers' expense. Borrowers shall promptly deliver to Coast copies of all
reports made to insurance companies.
8.3 REPORTS. Borrowers, at their expense, shall provide Coast with the
written reports set forth in Section 8 of the Schedule, and such other written
reports with respect to Borrowers (including budgets, sales projections,
operating plans and other financial documentation), as Coast shall from time to
time reasonably specify.
8.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times but not
less frequently than quarterly and
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on one (1) Business Day's notice, Coast, or its agents, shall have the right to
perform Audits. Coast shall take reasonable steps to keep confidential all
confidential information obtained in any Audit, but Coast shall have the right
to disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The Audits shall
be at Borrowers' expense and the charge for the Audits shall be Seven Hundred
Fifty Dollars ($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. Borrowers will not enter into any agreement with any
accounting firm, service bureau or third party to store Borrowers' books or
records at any location other than each 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. Borrowers shall also take all necessary steps to
assure that such accounting and software, systems and applications, and those of
its accounting firm, service bureau or any other third party vendor or supplier,
will, on a timely basis, adequately and completely address the Year 2000 Problem
in all material respects.
8.5 NEGATIVE COVENANTS. No Borrower shall, without Coast's prior written
consent, which consent shall not be unreasonably withheld, do any of the
following:
(a) merge or consolidate with another entity, except in a transaction
in which (i) the owners of the applicable Borrower hold at least fifty percent
(50%) of the ownership interest in the surviving entity immediately after such
merger or consolidation, and (ii) the applicable Borrower is the surviving
entity;
(b) acquire any assets, except (i) in the ordinary course of business,
or (ii) in a transaction or a series of transactions not involving the payment
of an aggregate amount among Borrowers in excess of $100,000 per fiscal year;
(c) enter into any other transaction outside the ordinary course of
business;
(d) sell or transfer any Collateral, except for the sale of finished
Inventory in the ordinary course of such Borrower's business, and except for the
sale of obsolete or unneeded Equipment in the ordinary course of business;
(e) store any Inventory or other Collateral with any warehouseman or
other third party;
(f) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis;
(g) make any loans of any money or other assets, except (i) advances to
customers or suppliers in the ordinary course of business, (ii) travel advances,
employee relocation loans and other employee loans and advances in the ordinary
course of business, and (iii) loans to employees, officers and directors for the
purpose of purchasing equity securities of the applicable Borrower;
(h) incur any debts, outside the ordinary course of business, which
would have a Material Adverse Effect;
(i) guarantee or otherwise become liable with respect to the
obligations of another party or entity;
(j) pay or declare any such dividends or distributions on the ownership
interests in such Borrower (except for dividends or distributions payable solely
in stock form of ownership interests in such Borrower);
(k) make any change in such Borrower's capital structure which would
have a Material Adverse Effect;
(l) enter into any transaction, including the purchase, sale, exchange
of property or rendering of any service, or lending or investing any funds or
assets, with, to or into, any Affiliate; or
(m) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default is continuing or would occur as a
result of such transaction.
8.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Coast with respect to any Collateral or relating to any
Borrower, such Borrower shall, without expense to Coast, make available such
Borrower and its officers, employees and agents and
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such 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.
8.7 FURTHER ASSURANCES. Each Borrower agrees, at its expense, on request by
Coast, to execute all documents and take all actions, as Coast, may deem
reasonably necessary 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.
9. TERM.
9.1 MATURITY DATE. This Agreement shall continue in effect until 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 (60) days prior to the Maturity Date or the next
Renewal Date, that such party elects to terminate this Agreement effective on
the Maturity Date or such next Renewal Date. If this Agreement is renewed under
this Section 9.1, Borrower shall pay to Coast a Renewal Fee in the amount shown
in Section 3 of the Schedule. The Renewal Fee shall be due and payable on the
Renewal Date and thereafter shall bear interest at a rate equal to the rate
applicable to the Loans.
9.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (a) by Borrowers, effective three (3) Business Days
after written notice of termination is given to Coast; or (b) by Coast at any
time after the occurrence and during the continuance of an Event of Default,
without notice, effective immediately. If this Agreement is terminated by
Borrowers or by Coast under this Section 9.2, Borrowers shall pay to Coast an
Early Termination Fee in the amount shown in Section 3 of 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 Loans.
9.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrowers 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.
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 Borrowers 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 Borrowers termination statements, requests for reconveyances
and such other documents as may be required to fully terminate Coast's security
interests.
10. EVENTS OF DEFAULT AND REMEDIES.
10.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrowers shall give
Coast immediate written notice thereof:
(a) Any warranty, representation, statement, report or certificate made
or delivered to Coast by any Borrower or any of any Borrower's officers,
employees or agents, now or in the future, shall be untrue or misleading and
results in a Material Adverse Effect; or
(b) Borrowers shall fail 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) Borrowers shall fail to deliver the proceeds of Collateral to Coast
as provided in Section 7.5 above, or shall fail to give Coast access to its
books and records or Collateral as provided in Section 8.4 above, or shall
breach any negative covenant set forth in Section 8.5 above; or
(e) Borrowers 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
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(f) Borrowers shall fail to perform any other non-monetary Obligation,
which failure is not cured within ten (10) 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 thirty (30) 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) any Borrower breaches any material contract or obligation, which
has or may reasonably be expected to have a Material Adverse Effect; or
(j) Dissolution, termination of existence, or insolvency of any
Borrower or any guarantor of any of the Obligations; 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 any 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; or
(k) the commencement of any proceeding against any 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 (i) not
timely controverted, or (ii) not cured by the dismissal thereof within sixty
(60) days after the date commenced; or
(l) revocation or termination of, or limitation or denial of liability
upon, any guaranty of the Obligations or any attempt to do any of the foregoing,
or commencement of proceedings by any guarantor of any of the Obligations under
any bankruptcy or insolvency law; or
(m) revocation or termination of, or limitation or denial of liability
upon, any pledge of any certificate of deposit, securities or other property or
asset of any kind pledged by any third party to Coast to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or
(n) any Borrower or any guarantor of any of the Obligations makes any
payment on account of any indebtedness or obligation which has been subordinated
to the Obligations (including without limitation, the Junior Debt), 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) Except as permitted under Section 8.5(a), any Borrower shall suffer
or experience any Change of Control without Coast's prior written consent, which
consent shall be in the discretion of Coast in the exercise of its reasonable
business judgment; or
(p) any Borrower shall generally not pay its debts as they become due,
or any 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 any Material Adverse Effect.
Coast may cease making any Loans or extending any credit hereunder during
any of the above cure periods.
10.2 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 each Borrower), may do any one or
more of the following:
(a) Cease making Loans or otherwise extending credit to Borrowers 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
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each Borrower hereby authorizes Coast without judicial process to enter onto any
of such 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, each 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 Borrowers 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 Borrowers, 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 each Borrower's premises, vehicles,
hoists, lifts, cranes, equipment and all other property without charge. Coast is
hereby granted a license or other right to use, without charge, each Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets, trade
names, trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and each Borrower's rights
under all licenses and all franchise agreements shall inure to Coast's benefit;
(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 each 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 any Borrower of any liability such 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, each Borrower
irrevocably authorizes Coast to endorse or sign such Borrower's name on all
collections, receipts, instruments and other documents, to take possession of
and open mail addressed to such 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; and
(h) Demand and receive possession of any of each Borrower's federal and
state income tax returns and the books and records utilized in the preparation
thereof or referring thereto.
All reasonable attorneys' fees, expenses, costs, liabilities and
obligations incurred by Coast (including attorneys' fees and expenses incurred
in connection with bankruptcy) with respect to the foregoing shall be due from
the Borrowers to Coast on demand. Coast may charge the same to Borrowers' loan
account, and the same shall thereafter bear interest at the same rate as is
applicable to the Loans. Without limiting any of Coast's rights and remedies,
after the occurrence and during the continuance of any Event of Default, the
interest rate applicable to the Obligations shall be increased by an additional
three percent (3%) per annum.
10.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrowers 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:
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(a) Notice of the sale is given to Borrowers at least seven (7) days
prior to the sale, and, in the case of a public sale, notice of the sale is
published at least seven (7) days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted;
(b) Notice of the sale describes the Collateral in terms sufficient for
a potential buyer to identify the type of Collateral generally;
(c) The sale is conducted at a place designated by Coast, with or
without the Collateral being present;
(d) The sale commences at any time between 8:00 a.m. and 6:00 p.m.
local time;
(e) Payment of the purchase price in cash or by cashier's check or wire
transfer is required; and
(f) 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
Borrowers 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.
10.4 POWER OF ATTORNEY. Each Borrower hereby 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 such Borrower, and at
such Borrower's expense, to do any or all of the following, in such Borrower's
name or otherwise, but Coast agrees to exercise the following powers in a
commercially reasonable manner:
(a) Execute on behalf of such 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 such
Borrower or Coast, or in order to fully consummate all the transactions
contemplated under this Agreement, and all other present and future agreements;
(b) After the occurrence and during the continuation of an Event of
Default, execute on behalf of such 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 such 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 such 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) After the occurrence and during the continuation of 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;
(g) After the occurrence and during the continuation of an Event of
Default, 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 such Borrower's taxes or to
secure the release of any liens therefor, or both, if deemed necessary by Coast
in order to prevent a Material Adverse Effect to Coast's rights and remedies
with respect to any Collateral;
(i) After the occurrence and during the continuation of an Event of
Default, 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, such Borrower to give Coast the same
rights of access and other rights with respect thereto as Coast has under this
Agreement; and
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(k) Take any action or pay any sum required of such Borrower pursuant
to this Agreement and any other present or future agreements if deemed necessary
by Coast in order to prevent a Material Adverse Effect to Coast's rights and
remedies with respect to any Collateral.
Any and all sums paid and any and all costs, expenses, liabilities,
obligations and attorneys' fees incurred by Coast (including attorneys' fees and
expenses incurred pursuant to bankruptcy) 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 Borrowers' loan account and the foregoing
shall thereafter bear interest at the same rate applicable to the 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 Borrowers. Borrowers shall
pay, indemnify, defend, and hold Coast and each of its officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them in connection with or as a result of or related
to the execution, delivery, enforcement, performance, and administration of this
Agreement and any other Loan Documents or the transactions contemplated herein,
and with respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities").
Borrowers shall have no obligation to any Indemnified Person hereunder with
respect to any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful
misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the Obligations.
10.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any
sale 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 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
Borrowers or other persons legally entitled thereto; Borrowers shall remain
liable to Coast for any deficiency. If, Coast, in the exercise of its reasonable
business judgment, 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 the exercise of its
reasonable business judgment, 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.
10.6 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 in equity, under the Code, and under all other applicable laws,
and under any other instrument or agreement now or in the future entered into
between Coast and Borrowers, 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 indefeasibly paid and
performed.
11. GENERAL PROVISIONS.
11.1 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 (3) Business Days after
receipt by Coast of immediately available funds, and, for purposes of the
foregoing, any such funds received after 10:30 AM Los Angeles, California time,
on any day shall be deemed received on the next Business Day. Coast shall be
entitled to charge Borrowers' account for such three (3) Business Days of
"clearance" or "float" at the rate(s) set forth in Section 3 of the Schedule on
all checks, wire transfers and other items received by Coast, regardless of
whether such three (3) Business Days of "clearance" or "float" actually occur,
and shall be deemed to be the equivalent of charging
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three (3) Business Days of interest on such collections. This across-the-board
three (3) Business Day clearance or float charge on all collections is
acknowledged by the parties to constitute an integral aspect of the pricing of
Coast's financing of Borrowers. Coast shall not, however, be required to credit
Borrowers' account for the amount of any item of payment which is unsatisfactory
to Coast in its sole discretion, and Coast may charge Borrowers' loan account
for the amount of any item of payment which is returned to Coast unpaid.
11.2 APPLICATION OF PAYMENTS. Subject to Sections 7.5 and 10.5 hereof, 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.
11.3 CHARGES TO ACCOUNTS. Coast may, in its discretion, require that
Borrowers pay monetary Obligations in cash to Coast, or charge them to
Borrowers' Loan account, in which event they will bear interest from the date
due to the date paid at the same rate applicable to the Loans.
11.4 MONTHLY ACCOUNTINGS. Coast shall provide Borrowers 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
Borrowers and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Coast), unless Borrowers
notify Coast in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or omissions.
11.5 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, facsimile or certified mail return
receipt requested, addressed to Coast or Borrowers 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 to Borrowers shall be directed to the attention of
Borrowers' Chief Financial Officers. All notices shall be deemed to have been
given upon delivery in the case of notices personally delivered, faxed (at time
of confirmation of transmission), or at the expiration of one (1) Business Day
following delivery to the private delivery service, or two (2) Business Days
following the deposit thereof in the United States mail, with postage prepaid.
11.6 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.
11.7 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 among Borrowers and Coast and supersede all
prior and contemporaneous negotiations and oral representations and agreements,
all of which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.
11.8 WAIVERS. The failure of Coast at any time or times to require
Borrowers to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between any 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 any 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 Borrowers. Each 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.
11.9 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
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or suffered by any 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.
11.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrowers and a duly
authorized officer of Coast.
11.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrowers of each and every obligation under this Agreement.
11.12 ATTORNEYS FEES, COSTS AND CHARGES. Borrowers shall reimburse Coast
for all reasonable attorneys' fees (including attorneys' fees and expenses
incurred pursuant to bankruptcy) and all filing, recording, search, title
insurance, appraisal, audit, and other 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 attorneys' fees and costs (including
attorneys' fees and expenses incurred pursuant to bankruptcy) 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 Borrowers; 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 Borrowers' 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 Borrowers. If either Coast or any 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 costs and
reasonable attorneys' fees (including attorneys' fees and expenses incurred
pursuant to bankruptcy), 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. Borrowers 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 (including attorneys' fees and expenses
incurred pursuant to bankruptcy) and other fees, costs and charges to which
Coast may be entitled pursuant to this Agreement may be charged by Coast to
Borrowers' loan account and shall thereafter bear interest at the same rate as
the Loans.
11.13 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 Borrowers and Coast; provided,
however, that Borrowers 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
Borrowers from their liability for the Obligations. Coast may assign its rights
and delegate its duties hereunder without the consent of Borrowers. Coast
reserves the right to syndicate all or a portion of the transaction created
herein or sell, assign, transfer, negotiate, or grant participations in all or
any part of, or any interest in Coast's rights and benefits hereunder. In
connection with any such syndication, assignment or participation, Coast may
disclose all documents and information which Coast now or hereafter may have
relating to Borrowers or any Borrower's business. To the extent that Coast
assigns its rights and obligations hereunder to a third Person, Coast thereafter
shall be released from such assigned obligations to Borrowers.
11.14 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.
11.15 PARAGRAPH HEADINGS, CONSTRUCTION. Paragraph headings are only used in
this Agreement for convenience. Borrowers 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 Borrowers under any rule
of construction or otherwise.
11.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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rights and obligations of Coast and Borrowers shall be governed by the internal
laws of the State of California, without regard to its conflicts of law
principles. As a material part of the consideration to Coast to enter into this
Agreement, each Borrower (a) 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; (b) 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 (c) waives any and
all rights such 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.
11.17 MUTUAL WAIVER OF JURY TRIAL. EACH BORROWER AND COAST 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 ANY BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF COAST OR ANY BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR ANY
BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
[Remainder of Page Intentionally Left Blank]
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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BORROWERS:
MAI SYSTEMS CORPORATION, GAMING SYSTEMS INTERNATIONAL,
a Delaware corporation a Nevada corporation
By [SIG] By
------------------------------- --------------------------------------
President or Vice President President or Vice President
By By [SIG]
------------------------------- --------------------------------------
Secretary or Ass't Secretary Secretary or Ass't Secretary
HOTEL INFORMATION SYSTEMS, INC.,
a Delaware corporation
By [SIG]
-------------------------------
President or Vice President
By [SIG]
-------------------------------
Secretary or Ass't Secretary
COAST:
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
By [SIG]
-------------------------------
Title: Vice President
----------------------------
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24
COAST
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWERS: MAI SYSTEMS CORPORATION, GAMING SYSTEMS INTERNATIONAL,
A DELAWARE CORPORATION A NEVADA CORPORATION
0000 XXXXXXXX XXXX 0000 XXXX XXXXXXX XXXX
XXXXXX, XX 00000 XXXXX #0
XXX XXXXX, XX 00000
HOTEL INFORMATION SYSTEMS, INC.,
A DELAWARE CORPORATION,
0000 XXXXXXXX XXXX
XXXXXX, XX 00000
DATE: AS OF APRIL 23, 1998
This Schedule forms an integral part of the Loan and Security Agreement between
Coast Business Credit, a division of Southern Pacific Bank, and the
above-borrower of even date.
================================================================================
SECTION 2 - CREDIT FACILITIES
SECTION 2 - CREDIT LIMIT: Loans in a total amount at any time
outstanding not to exceed the lesser of
(i) a total of Five Million Dollars
($5,000,000) (the "Maximum Dollar
Amount"), or (ii) an amount not to exceed
2 times Borrowers' aggregate monthly
collections received by Coast, measured on
a trailing 9 month average, arising out of
Receivables generated from Borrowers'
software and hardware service and
maintenance contracts, subject to audit,
appraisal and a review of such contracts.
================================================================================
SECTION 3 - INTEREST AND FEES
SECTION 3.1 - INTEREST RATE: A rate equal to the Prime Rate plus 2.25%
per annum, calculated on the basis of a
360-day year for the actual number of days
elapsed. The interest rate applicable to
all Loans shall be adjusted monthly as
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COAST BUSINESS CREDIT SCHEDULE TO LOAN AND SECURITY AGREEMENT
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of the first day of each month, and the
interest to be charged for each month
shall be based on the highest Prime Rate
in effect during the prior month, but in
no event shall the rate of interest
charged on any Loans in any month be less
than 9% per annum.
SECTION 3.1 - MINIMUM MONTHLY
INTEREST: Interest which would be due hereunder
based on daily Loans outstanding equal to
40% of the Maximum Dollar Amount.
SECTION 3.2 - LOAN FEE: $100,000, payable concurrently herewith,
plus an additional Fifty Thousand Dollars
($50,000), such amount being fully earned
on the Closing Date and payable in two
installments of Twenty-Five Thousand
Dollars ($25,000) each, the first such
installment due on the first anniversary
of the Closing Date, and the second such
installment due on the second anniversary
of the Closing Date.
SECTION 3.2 - FACILITY FEE: $2,500 per quarter, payable in advance, on
the Closing Date (pro-rated for any
partial quarter at the beginning of the
term of this Agreement) and on the first
day of each July, October, January and
April thereafter during the term of this
Agreement and any renewal term.
SECTION 9.1 - RENEWAL FEE: 0.5 % of the Maximum Dollar Amount.
SECTION 9.2 - EARLY TERMINATION
FEE: An amount equal to the greater of (i) an
amount equal to all interest due and
payable during the six (6) months
immediately preceding the effective date
of termination, or (ii) an amount equal to
the average monthly interest due and
payable hereunder based on the greater of
the six (6) month monthly interest
immediately preceding the effective date
of termination, or if the effective date
of termination is less than six (6) months
from the Closing Date, an amount equal to
the average monthly interest due hereunder
multiplied by the number of full or
partial months from the effective date of
termination to the Maturity Date, or (iii)
an amount equal to the average monthly
interest accrued during the six (6) months
immediately preceding the effective date
of termination, multiplied by the number
of full or partial months from the
effective date of termination to the
Maturity Date.
================================================================================
SECTION 5 - CONDITIONS PRECEDENT
SECTION 5.2 - MINIMUM
AVAILABILITY: $300,000
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SECTION 5.13 - OTHER DOCUMENTS
AND AGREEMENTS: 1. Joint and Several Borrower Rider;
2. UCC-1 financing statements, fixture
filings and termination statements;
3. Security Agreements (including
those covering copyrights,
patents and trademarks);
4. Intercreditor and Subordination
Agreement;
5. Lockbox Agreement;
6. Collateral Assignment of Maintenance
and License Contracts; and
7. Collateral Assignment of License
Agreement.
================================================================================
SECTION 6 - REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 6.2 - PRIOR NAMES OF
BORROWER: See Exhibit 6.2.
SECTION 6.2 - PRIOR TRADE NAMES
OF BORROWER: See Exhibit 6.2.
SECTION 6.2 - EXISTING TRADE
NAMES OF BORROWER: HIS (for Hotel Information Systems, Inc.).
See Exhibit 6.2.
SECTION 6.3 - OTHER LOCATIONS
AND ADDRESSES: See Exhibit 6.3.
SECTION 6.10 - MATERIAL ADVERSE
LITIGATION: To be provided by Borrower.
SECTION 6.10 - FUTURE CLAIMS AND
LITIGATION: 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
Fifty Thousand Dollars ($50,000) or more,
or involving One Hundred Thousand Dollars
($100,000) or more in the aggregate.
================================================================================
SECTION 8 - ADDITIONAL DUTIES OF BORROWER
SECTION 8.1 - OTHER PROVISIONS: Borrowers shall maintain availability at
times following the initial funding of not
less than $150,000 until such time as
Borrowers have demonstrated to the
satisfaction of Coast that they have
achieved a consolidated after tax
quarterly net income of not less than
$150,000, calculated in accordance with
GAAP.
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--------------------------------------------------------------------------------
Borrowers shall maintain at all times a
Consolidated Net Worth of not less than
the sum of $2,250,000 plus 100% of
Borrowers' consolidated after tax net
income, on a cumulative basis from the
Closing Date, calculated in accordance
with GAAP.
SECTION 8.2 - INSURANCE: Subject to the limitations set forth in
Section 8.2 of the Agreement, Coast shall
release to Borrower insurance proceeds
with respect to Equipment totaling less
than Fifty Thousand Dollars ($50,000).
SECTION 8.3 - REPORTING: 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 GAAP) 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, 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, as
soon as available, and in any event
within ninety (90) days following
the end of Borrowers' fiscal year,
containing the unqualified opinion
of, and certified by, an
independent certified public
accountant acceptable to Coast.
8. Breakdown or listing of all
customer deposits/prepayments on a
periodic basis as Coast shall
require.
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SECTION 9 - TERM
SECTION 9.1 - MATURITY DATE: April 23, 2001, subject to automatic
renewal as provided in Section 9.1 of the
Agreement, and early termination as
provided in Section 9.2 of the Agreement.
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