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LOAN AND SECURITY AGREEMENT
by and between
CENTURA SOFTWARE CORPORATION
and
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
Dated as of January 19, 1998
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TABLE OF CONTENTS
PAGE
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1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Account Debtor. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Adjusted Net Worth. . . . . . . . . . . . . . . . . . . . . . . . . .1
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Borrower. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Borrower's Address. . . . . . . . . . . . . . . . . . . . . . . . . .1
Business Day. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . .1
Closing Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Coast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Credit Limit. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Deposit Account . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Dollars or $. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Early Termination Fee . . . . . . . . . . . . . . . . . . . . . . . .2
Eligible Foreign Receivables. . . . . . . . . . . . . . . . . . . . .2
Eligible Receivables. . . . . . . . . . . . . . . . . . . . . . . . .2
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Equipment Acquisition Loans . . . . . . . . . . . . . . . . . . . . .3
Event of Default. . . . . . . . . . . . . . . . . . . . . . . . . . .3
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
General Intangibles . . . . . . . . . . . . . . . . . . . . . . . . .3
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Investment Property . . . . . . . . . . . . . . . . . . . . . . . . .4
Loan Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . .4
Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Maximum Dollar Amount . . . . . . . . . . . . . . . . . . . . . . . .4
Minimum Monthly Interest. . . . . . . . . . . . . . . . . . . . . . .4
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Permitted Liens . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Prime Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Receivable Loans. . . . . . . . . . . . . . . . . . . . . . . . . . .5
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Renewal Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Renewal Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Solvent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2. CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.1 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.2 Intentionally Deleted. . . . . . . . . . . . . . . . . . . . .6
3. INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3.2 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
4. SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . .6
5. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . .6
5.1 Status of Accounts at Closing. . . . . . . . . . . . . . . . .6
5.2 Minimum Availability . . . . . . . . . . . . . . . . . . . . .6
5.3 Landlord Waiver. . . . . . . . . . . . . . . . . . . . . . . .6
5.4 Executed Agreement . . . . . . . . . . . . . . . . . . . . . .6
5.5 Opinion of Borrower's Counsel. . . . . . . . . . . . . . . . .7
5.6 Priority of Coast's Liens. . . . . . . . . . . . . . . . . . .7
5.7 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . .7
5.8 Borrower's Existence . . . . . . . . . . . . . . . . . . . . .7
5.9 Organizational Documents . . . . . . . . . . . . . . . . . . .7
5.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
5.11 Due Diligence. . . . . . . . . . . . . . . . . . . . . . . . .7
5.12 Other Documents and Agreements . . . . . . . . . . . . . . . .7
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER . . . . . .7
6.1 Existence and Authority. . . . . . . . . . . . . . . . . . . .7
6.2 Name; Trade Names and Styles . . . . . . . . . . . . . . . . .7
6.3 Place of Business; Location of Collateral. . . . . . . . . . .8
6.4 Title to Collateral; Permitted Liens . . . . . . . . . . . . .8
6.5 Maintenance of Collateral. . . . . . . . . . . . . . . . . . .8
6.6 Books and Records. . . . . . . . . . . . . . . . . . . . . . .8
6.7 Financial Condition, Statements and Reports. . . . . . . . . .8
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TABLE OF CONTENTS
(CONTINUED)
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6.8 Tax Returns and Payments; Pension Contributions. . . . . . . .8
6.9 Compliance with Law. . . . . . . . . . . . . . . . . . . . . .9
6.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . .9
6.11 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . .9
6.12 Computer Associates. . . . . . . . . . . . . . . . . . . . . .9
7. RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
7.1 Representations Relating to Receivables. . . . . . . . . . . .9
7.2 Representations Relating to Documents and Legal Compliance . .9
7.3 Schedules and Documents relating to Receivables. . . . . . . .9
7.4 Collection of Receivables. . . . . . . . . . . . . . . . . . 10
7.5 Remittance of Proceeds . . . . . . . . . . . . . . . . . . . 10
7.6 Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.7 Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.8 Verification . . . . . . . . . . . . . . . . . . . . . . . . 10
7.9 No Liability . . . . . . . . . . . . . . . . . . . . . . . . 10
8. ADDITIONAL DUTIES OF THE BORROWER . . . . . . . . . . . . . . . . . 11
8.1 Financial and Other Covenants. . . . . . . . . . . . . . . . 11
8.2 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.4 Access to Collateral, Books and Records. . . . . . . . . . . 11
8.5 Negative Covenants . . . . . . . . . . . . . . . . . . . . . 11
8.6 Litigation Cooperation . . . . . . . . . . . . . . . . . . . 12
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. . . . . . . . . . . . . . . . . . . 13
10.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . 13
10.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.3 Standards for Determining Commercial Reasonableness. . . . . 15
10.4 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . 15
10.5 Application of Proceeds. . . . . . . . . . . . . . . . . . . 17
10.6 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . 17
11. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . 17
11.1 Interest Computation . . . . . . . . . . . . . . . . . . . . 17
11.2 Application of Payments. . . . . . . . . . . . . . . . . . . 17
11.3 Charges to Accounts. . . . . . . . . . . . . . . . . . . . . 17
11.4 Monthly Accountings. . . . . . . . . . . . . . . . . . . . . 17
11.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . 18
11.7 Integration. . . . . . . . . . . . . . . . . . . . . . . . . 18
11.8 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.9 No Liability for Ordinary Negligence . . . . . . . . . . . . 18
11.10 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . 18
11.11 Time of Essence. . . . . . . . . . . . . . . . . . . . . . . 18
11.12 Attorneys Fees, Costs and Charges. . . . . . . . . . . . . . 18
11.13 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . 19
11.14 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.15 Paragraph Headings; Construction . . . . . . . . . . . . . . 19
11.16 Governing Law; Jurisdiction; Venue . . . . . . . . . . . . . 19
11.17 Mutual Waiver of Jury Trial. . . . . . . . . . . . . . . . . 19
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COAST
LOAN AND SECURITY AGREEMENT
Borrower: Centura Software Corporation
Address: 000 Xxxxxx Xxxxx
Xxxxxxx Xxxxxx, Xxxxxxxxxx 00000
Date: January __, 1998
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
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 borrower(s) named above (the
"Borrower"), whose chief executive office is located at the above address
("Borrower's Address"). The Schedule to this Agreement (the "Schedule")
shall for all purposes be deemed to be a part of this Agreement, and the same
is an integral part of this Agreement. (Definitions of certain terms used in
this Agreement are set forth in Section 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.
"ADJUSTED NET WORTH" means consolidated owner's equity plus subordinated
debt otherwise permitted hereunder determined in accordance with GAAP.
"AFFILIATE" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"AUDIT" means to inspect, audit and copy Borrower's books and records
and the Collateral.
"BORROWER" has the meaning set forth in the
introduction to this Agreement.
"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 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, as a result of any single transaction, of more than forty nine
percent (49%) of the total voting power of all classes of 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.
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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"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.
"CREDIT LIMIT" means the maximum amount of Loans that Coast may make to
Borrower pursuant to the amounts and percentages 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
Borrower must pay Coast if this Agreement is terminated by Borrower or Coast
pursuant to Section 9.2 hereof.
"ELIGIBLE FOREIGN RECEIVABLES" means Receivables arising from Borrower's
customers located outside the United States which Coast otherwise approves
for borrowing in its sole and absolute discretion. Without limiting the
foregoing, Coast will consider the following in determining the eligibility
of such receivables: (i) whether the Borrower's goods are shipped backed by
an irrevocable letter of credit satisfactory to Coast (as to form, substance,
and issuer or domestic confirming bank) that has been delivered to Coast and
is directly drawable by Coast, or (ii) whether the Borrower's customer is a
large or rated company having a verifiable credit history, or (iii) whether
Borrower's customer is a foreign subsidiary of a customer of Borrower that is
a company that was formed and has its primary place of business within the
United States, or (iv) whether Borrower's customer is a large foreign
corporation, or (v) whether Borrower's customer is a foreign company with a
Dun & Bradstreet rating of 3A2 or better, or (vi) whether Borrower's goods
are shipped to a company that has credit insurance acceptable to Coast in its
discretion.
"ELIGIBLE RECEIVABLES" means Receivables and Eligible Foreign
Receivables arising in the ordinary course of Borrower's business from the
sale of goods or rendition of services, which Coast, in its sole judgment,
shall deem eligible for borrowing, based on such considerations as Coast may
from time to time deem appropriate. Eligible Receivables shall not include
the following:
(a) Receivables that the Account Debtor has failed to pay within 60
days of due date not to exceed 90 days of invoice date or Accounts with
selling terms of more than 60 days;
(b) Receivables owed by an Account Debtor or its Affiliates where
twenty five percent (25%) or more of all Receivables owed by that Account
Debtor (or its Affiliates) are deemed ineligible under clause (a) above;
(c) Receivables with respect to which the Account Debtor is an
employee, Affiliate, or agent of Borrower;
(d) Receivables with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, xxxx and
hold, or other terms by reason of which the payment by the Account Debtor may
be conditional;
(e) Receivables, other than Eligible Foreign Receivables, that are
not payable in Dollars or with respect to which the Account Debtor: (i) does
not maintain its chief executive office in the United States, or (ii) is not
organized under the laws of the United States or any State thereof, or (iii)
is the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof;
(f) Receivables with respect to which the Account Debtor is either
(i) the United States or any department, agency, or instrumentality of the
United States (exclusive, however, of Accounts with respect to which Borrower
has complied, to the satisfaction of Coast, with the Assignment of Claims
Act, 31 U.S.C. " 3727), or (ii) any State of the United States (exclusive,
however, of Receivables owed by any State that does not have a statutory
counterpart to the Assignment of Claims Act);
(g) Receivables with respect to which the Account Debtor is a
creditor of Borrower, has or has asserted a right of setoff, has disputed its
liability, or has made any claim with
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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respect to the Receivables or Receivables owing from Computer Associates
unless a nonoffset letter satisfactory to Coast has been obtained;
(h) Receivables with respect to an Account Debtor which is a
domestic distributor whose total obligations owing to Borrower exceed 5% of
all Eligible Receivables with a total concentration cap of 30% for domestic
Eligible Receivables for all domestic distributors, to the extent of the
obligations owing by such Account Debtor in excess of such percentage. A 25%
concentration shall apply in all other cases. In order to exceed the above
referenced limits, Borrower must obtain the prior written approval of Coast,
which approval is subject to the discretion of Coast, reasonably exercised,
on an Account Debtor by Account Debtor basis;
(i) Receivables with respect to which the Account Debtor is subject
to any reorganization, bankruptcy, insolvency, arrangement, readjustment of
debt, dissolution or liquidation proceeding, or becomes insolvent, or goes
out of business;
(j) Receivables the collection of which Coast, in its reasonable
credit judgment, believes to be doubtful by reason of the Account Debtor's
financial condition;
(k) Receivables with respect to which the goods giving rise to such
Receivable have not been shipped and billed to the Account Debtor, the
services giving rise to such Receivable have not been performed and accepted
by the Account Debtor, or the Receivable otherwise does not represent a final
sale;
(l) Receivables with respect to which the Account Debtor is located
in the states of New Jersey, Minnesota, Indiana, or West Virginia (or any
other state that requires a creditor to file a Business Activity Report or
similar document in order to bring suit or otherwise enforce its remedies
against such Account Debtor in the courts or through any judicial process of
such state), unless Borrower has qualified to do business in New Jersey,
Minnesota, Indiana, West Virginia, or such other states, or has filed a
Notice of Business Activities Report with the applicable division of
taxation, the department of revenue, or with such other state offices, as
appropriate, for the then-current year, or is exempt from such filing
requirement; and
(m) Receivables that represent progress payments or other advance
xxxxxxxx that are due prior to the completion of performance by Borrower of
the subject contract for goods or services.
"EQUIPMENT" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dies, jigs, goods and
other goods (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"EQUIPMENT ACQUISITION LOANS" means the Loans described in Section [2(d)]
of the Schedule.
"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 Borrower, whether
now owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, 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 Borrower against Coast, rights to purchase or sell real or personal
property, rights as a licensor or licensee of any kind, royalties, telephone
numbers, proprietary information, purchase orders, and all insurance policies
and claims (including without limitation life insurance, key man insurance,
credit insurance, liability insurance, property insurance and other
insurance), tax refunds and claims, computer programs, discs, tapes and tape
files, claims under guaranties, security interests or other security held by
or granted to Borrower, all rights to indemnification
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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and all other intangible property of every kind and nature (other than
Receivables).
"INVENTORY" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease (including
without limitation all raw materials, work in process, finished goods and
goods in transit, and including without limitation all farm products), and
all materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower's business or used in connection with
the manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise or other personal property, and all warehouse receipts,
documents of title and other documents representing any of the foregoing.
"INVESTMENT PROPERTY" has the meaning set forth in Section 9115 of the
Code as in effect as of the date hereof.
"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 2.1 hereof.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, assets, condition (financial or otherwise) or results of operations
of Borrower or any subsidiary of Borrower or any guarantor of any of the
Obligations, (ii) the ability of Borrower or any guarantor of any of the
Obligations to perform its obligations under this Agreement (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.
"OBLIGATIONS" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at
any time owing by Borrower to Coast, whether evidenced by this Agreement or
any note or other instrument or document, whether arising from an extension
of credit, opening of a letter of credit, banker's acceptance, loan,
guaranty, indemnification or otherwise, whether direct or indirect
(including, without limitation, those acquired by assignment and any
participation by Coast in Borrower's debts owing to others), absolute or
contingent, due or to become due, including, without limitation, all
interest, charges, expenses, fees, 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
Borrower under this Agreement or under any other present or future instrument
or agreement between 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;
(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;
(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
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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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;
(h) liens in favor of customs and revenue authorities which secure
payment of customs duties in connection with the importation of goods; or
(i) licenses or sublicenses of intellectual property granted in the
ordinary course of Borrower's business not interfering in any material
respect with the business of Borrower or of any licensor under any license
provided that such licenses or sublicenses do not prohibit the grant of the
security interest to Coast hereunder.
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 Borrower agree that any uncured default in any obligation in excess
of $100,000 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.
"RECEIVABLE LOANS" means the Loans described in Section 2(a) of the
Schedule.
"RECEIVABLES" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents, securities
accounts, security entitlements, commodity contracts, commodity accounts,
investment property and all other forms of obligations at any time owing to
Borrower, all guaranties and other security therefor, all merchandise
returned to or repossessed by Borrower, and all rights of stoppage in transit
and all other rights or remedies of an unpaid vendor, lienor or secured party.
"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.
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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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 FACILITIES.
2.1 LOANS. Coast will make loans to Borrower (the "Loans"), in amounts
and in percentages to be determined by Coast in its good faith discretion, up
to the Credit Limit, provided no Default or Event of Default has occurred and
is continuing. In addition, Coast may create reserves against or reduce its
advance rates based upon Eligible Receivables without declaring a Default or
an Event of Default if it determines that there has occurred a Material
Adverse Effect.
2.2 INTENTIONALLY DELETED.
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
Borrower's loan account, and the same shall thereafter bear interest at the
same rate as the other Loans. Regardless of the amount of Obligations that
may be outstanding from time to time, Borrower shall pay Coast Minimum
Monthly Interest during the term of this Agreement with respect to the
Receivable Loans and the Inventory Loans in the amount set forth on the
Schedule.
3.2 FEES. Borrower shall pay Coast the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to Coast and are
deemed fully earned and are nonrefundable.
4. SECURITY INTEREST.
To secure the payment and performance of all of the Obligations when
due, Borrower hereby grants to Coast a security interest in all of Borrower's
interest in the following, whether now owned or hereafter acquired, and
wherever located: All Receivables, Inventory, Equipment, Investment
Property, and General Intangibles, including, without limitation, all of
Borrower's Deposit Accounts, and all money, and all property now or at any
time in the future in Coast's possession (including claims and credit
balances), and all proceeds of any of the foregoing (including proceeds of
any insurance policies, proceeds of proceeds, and claims against third
parties), all products of any of the foregoing, and all books and records
related to any of the foregoing (all of the foregoing, together with all
other property in which Coast may now or in the future be granted a lien or
security interest, is referred to herein, collectively, as the "Collateral")
5. CONDITIONS PRECEDENT.
The obligation of Coast to make the Loans is subject to the
satisfaction, in the sole discretion of Coast, at or prior to the first
advance of funds hereunder, of each, every and all of the following
conditions:
5.1 STATUS OF ACCOUNTS AT CLOSING. No accounts payable shall be due and
unpaid 120 days past invoice 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. Borrower shall have minimum availability
immediately following the initial funding in the amount set forth on the
Schedule.
5.3 LANDLORD WAIVER. Coast shall have received duly executed
(a) landlord waivers and access agreements in form and
substance satisfactory to Coast, in Coast's sole and absolute discretion,
and, when deemed appropriate by Coast, in form for recording in the
appropriate recording office, with respect to all leased locations where
Borrower maintains any inventory or equipment.
(b) warehouse waivers in form and substance satisfactory to
Coast, in Coast's sole and absolute discretion, and when deemed appropriate
by Coast, in form for recording in the appropriate recording office, with
respect to all warehouse locations where Borrower maintains any inventory or
equipment.
5.4 EXECUTED AGREEMENT. Coast shall have received this Agreement duly
executed and in
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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form and substance satisfactory to Coast in its sole and absolute discretion.
5.5 OPINION OF BORROWER'S COUNSEL. Coast shall have received an opinion
of Borrower's counsel, in form and substance satisfactory to Coast in its
sole and absolute discretion.
5.6 PRIORITY OF COAST'S LIENS. Coast shall have received the results of
"of record" searches satisfactory to Coast in its sole and absolute
discretion, reflecting its Uniform Commercial Code filings against Borrower
indicating that Coast has a perfected, first priority lien in and upon all of
the Collateral, subject only to Permitted Liens.
5.7 INSURANCE. Coast shall have received copies of the insurance
binders or certificates evidencing Borrower's compliance with Section 8.2
hereof, including lender's loss payee endorsements.
5.8 BORROWER'S EXISTENCE. Coast shall have received copies of
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 Borrower's organization, and dated a recent date
prior to the Closing Date, and Coast shall have received Certificates of
Foreign Qualification for Borrower from the Secretary of State of each state
wherein the failure to be so qualified could have a Material Adverse Effect.
5.9 ORGANIZATIONAL DOCUMENTS. Coast shall have received copies of
Borrower's By-laws and all amendments thereto, and Coast shall have received
copies of the resolutions of the board of directors of 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 Borrower to execute the
same on behalf of Borrower, in each case certified by the Secretary or other
acceptable officer of Borrower as of the Closing Date.
5.10 TAXES. Coast shall have received evidence from Borrower that
Borrower has complied with all tax withholding and Internal Revenue Service
regulations, in form and substance satisfactory to Coast in its sole and
absolute discretion and that all taxes are current.
5.11 DUE DILIGENCE. Coast shall have completed its due diligence with
respect to Borrower.
5.12 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 sole and absolute 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 BORROWER.
In order to induce Coast to enter into this Agreement and to make Loans,
Borrower represents and warrants to Coast as follows, and Borrower covenants
that the following representations will continue to be true, and that
Borrower will at all times comply with all of the following covenants:
6.1 EXISTENCE AND AUTHORITY. Borrower is and will continue to be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. 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 Borrower of this Agreement, and all other
documents contemplated hereby (a) have been duly and validly authorized, (b)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (c) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any material agreement
or instrument which is binding upon Borrower or its property, and (d) do not
constitute grounds for acceleration of any material indebtedness or
obligation under any material agreement or instrument which is binding upon
Borrower or its property.
6.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are
all prior names of Borrower and all of Borrower's present and prior trade
names. Borrower shall give Coast thirty (30) days' prior written notice
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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before changing its name or doing business under any other name. Borrower
has complied, and will in the future comply, with all laws relating to the
conduct of business under a fictitious business name.
6.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth
in the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule. Borrower will give Coast at least 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 Borrower's Address or one of the locations set forth on the
Schedule.
6.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will
at all times in the future be, the sole owner of all the Collateral, except for
items of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Coast now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Coast and the Collateral against all claims of
others. None of the Collateral now is or will be affixed to any real property
in such a manner, or with such intent, as to become a fixture. Borrower is not
and will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises. Whenever any
Collateral is located upon premises in which any third party has an interest
(whether as owner, mortgagee, beneficiary under a deed of trust, lien or
otherwise), Borrower shall, whenever requested by Coast, use its best efforts to
cause such third party to execute and deliver to Coast, in form acceptable to
Coast, such waivers and subordinations as Coast shall specify, so as to ensure
that Coast's rights in the Collateral are, and will continue to be, superior to
the rights of any such third party. Borrower will keep in full force and
effect, and will comply with all the terms of, any lease of real property where
any of the Collateral now or in the future may be located.
6.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral
in good working condition, and Borrower will not use the Collateral for any
unlawful purpose. Borrower will immediately advise Coast in writing of any
material loss or damage to the Collateral.
6.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with 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 Borrower, at the times and for the periods therein stated. Between
the last date covered by any such statement provided to Coast and the date
hereof, there has been no Material Adverse Effect. Borrower is now and will
continue to be Solvent.
6.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has
timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and Borrower has timely paid, and will
timely pay, all foreign, federal, state and local taxes, assessments, deposits
and contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Coast in writing
of the commencement of, and any material development in, the proceedings, and
(iii) posts bonds or takes any other steps required to keep the contested taxes
from becoming a lien upon any of the Collateral. As of the date hereof,
Borrower is unaware of any claims or adjustments proposed for any of Borrower's
prior tax years which could result in additional taxes becoming due and payable
by Borrower. Borrower has paid, and shall continue to pay all amounts necessary
to fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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could result in any liability of Borrower, including any liability to the
Pension Benefit Guaranty Corporation or its successors or any other
governmental agency. Borrower shall, at all times, utilize the services of an
outside payroll service providing for the automatic deposit of all payroll
taxes payable by Borrower.
6.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in
all material respects, with all provisions of all material foreign, federal,
state and local laws and regulations relating to Borrower, including, but not
limited to, the Fair Labor Standards Act, and those relating to Borrower's
ownership of real or personal property, the conduct and licensing of
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
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which may result, either separately or in the aggregate, in a
Material Adverse Effect. 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 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. Borrower is not purchasing or carrying any
"margin stock" (as defined in Regulation G of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of any Loan will be used
to purchase or carry any "margin stock" or to extend credit to others for the
purpose of purchasing or carrying any "margin stock."
6.12 COMPUTER ASSOCIATES. The Obligations of Borrower to Coast shall at
all times constitute permitted Indebtedness as permitted in Section 7(e) of
that certain Floating Rate Convertible Subordinated Note Due 1998 ("Floating
Rate Convertible Note") in the face amount of $10,000,000 made by Borrower in
favor of Computer Associates International, Inc. dated April 3, 1995.
7. RECEIVABLES.
7.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and
warrants to Coast as follows: Each Receivable with respect to which Loans
are requested by Borrower shall, on the date each Loan is requested and made,
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business.
7.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE.
Borrower represents and warrants to Coast as follows: All statements made
and all unpaid balances appearing in all invoices, instruments and other
documents evidencing the Receivables are and shall be true and correct and
all such invoices, instruments and other documents and all of Borrower's
books and records are and shall be genuine and in all respects what they
purport to be. All sales and other transactions underlying or giving rise to
each Receivable shall fully comply with all applicable laws and governmental
rules and regulations. All signatures and indorsements 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. Borrower shall
deliver to Coast via facsimile, unless otherwise directed by Coast, at such
locations and at such intervals as Coast may request, transaction reports and
loan requests, schedules of Receivables, and schedules of collections, all on
Coast's standard forms; provided, however, that Borrower's failure to execute
and deliver the same shall not affect or limit Coast's security interest and
other rights in all of Borrower's Receivables, nor shall Coast's failure to
advance or lend against a specific Receivable affect or limit Coast's
security interest and other rights therein. Loan requests received after
10:30 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, Borrower shall furnish Coast with copies (or, at Coast's
request, originals) of all contracts, orders, invoices, and other similar
documents, and all original shipping instructions, delivery receipts, bills
of lading, and other evidence of delivery, for any
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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goods the sale or disposition of which gave rise to such Receivables, and
Borrower warrants the genuineness of all of the foregoing. Borrower shall
also furnish to Coast an aged accounts receivable trial balance in such form
and at such intervals as Coast shall request. In addition, Borrower shall
deliver to Coast the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or
securing any Receivables, upon receipt thereof and in the same form as
received, with all necessary indorsements, all of which shall be with
recourse. Borrower shall also provide Coast with copies of all credit memos
as and when requested by Coast.
7.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to
collect all Receivables, unless and until an Event of Default has occurred.
Borrower shall hold all payments on, and proceeds of, Receivables in trust
for Coast, and Borrower shall deliver all such payments and proceeds to Coast
within one (1) Business Day after receipt by Borrower, in their original
form, duly endorsed to Coast, to be applied to the Obligations in such order
as Coast shall determine. Coast may, in its discretion, require that all
proceeds of Collateral be deposited by Borrower into a lockbox account, or
such other "blocked account" as Coast may specify, pursuant to a blocked
account agreement in such form as Coast may specify. Coast or its designee
may, at any time, notify Account Debtors that Coast has been granted a
security interest in the Receivables.
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 Borrower, in their original form, duly endorsed to Coast, to
be applied to the Obligations in such order as Coast shall determine.
Borrower agrees that it will not commingle proceeds of Collateral with any of
Borrower's other funds or property, but will hold such proceeds separate and
apart from such other funds and property and in an express trust for Coast.
Nothing in this Section limits the restrictions on disposition of Collateral
set forth elsewhere in this Agreement.
7.6 DISPUTES. Borrower shall notify Coast promptly of all disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in
full, or agree to do any of the foregoing, except that Borrower may do so,
provided that: (a) 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 of an Event of Default, settle or adjust disputes
or claims directly with Account Debtors for amounts and upon terms which
Coast considers advisable in its reasonable credit judgment and, in all
cases, Coast shall credit Borrower's Loan account with only the net amounts
received by Coast in payment of any Receivables.
7.7 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor
in the appropriate amount. In the event any attempted return occurs after
the occurrence of any Event of Default, Borrower shall (a) hold the returned
Inventory in trust for Coast, (b) segregate all returned Inventory from all
of 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 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
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full amount thereof, nor shall Coast be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Coast from liability for
its own gross negligence or willful misconduct.
8. ADDITIONAL DUTIES OF THE BORROWER.
8.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply
with the financial and other covenants set forth in the Schedule.
8.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Coast, in such form and amounts as Coast
may reasonably require, and Borrower shall provide evidence of such insurance
to Coast, so that Coast is satisfied that such insurance is, at all times, in
full force and effect. All liability insurance policies of Borrower shall
name Coast as an additional insured, and all property casualty and related
insurance policies of Borrower shall name Coast as a loss payee thereon and
Borrower shall cause a lender's loss payee endorsement in form reasonably
acceptable to Coast. Upon receipt of the proceeds of any such insurance,
Coast shall apply such proceeds in reduction of the Obligations as Coast
shall determine in its sole discretion, except that, provided no Default or
Event of Default has occurred and is continuing, Coast shall release to
Borrower insurance proceeds with respect to Equipment totaling less than the
amount set forth in Section 8 of the Schedule, which shall be utilized by
Borrower for the replacement of the Equipment with respect to which the
insurance proceeds were paid. Coast may require reasonable assurance that
the insurance proceeds so released will be so used. If Borrower fails to
provide or pay for any insurance, Coast may, but is not obligated to, obtain
the same at Borrower's expense. Borrower shall promptly deliver to Coast
copies of all reports made to insurance companies.
8.3 REPORTS. Borrower, at its expense, shall provide Coast with the
written reports set forth in Section 8 of the Schedule, and such other
written reports with respect to Borrower (including budgets, sales
projections, operating plans and other financial documentation), as Coast
shall from time to time reasonably specify.
8.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times but
not less frequently than quarterly and on three (3) Business Day's notice (1
Business Day if an Event of Default has occurred and is continuing), 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 Borrower's 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.
Borrower will not enter into any agreement with any accounting firm, service
bureau or third party to store Borrower's books or records at any location
other than Borrower's Address, without first notifying Coast of the same and
obtaining the written agreement from such accounting firm, service bureau or
other third party to give Coast the same rights with respect to access to
books and records and related rights as Coast has under this Loan Agreement.
8.5 NEGATIVE COVENANTS. Borrower shall not, without Coast's prior
written consent, do any of the following:
(a) merge or consolidate with another entity, except in a transaction
in which (i) the owners of the Borrower hold at least fifty percent (50%) of
the ownership interest in the surviving entity immediately after such merger
or consolidation, and (ii) the 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 in excess of the amount set forth in Section 8
of the Schedule;
(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 Borrower's business, and except for the
sale of obsolete or unneeded Equipment in the ordinary course of business;
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(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 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 dividends or distributions on the ownership
interests in Borrower (except for dividends or distributions payable solely
in stock form of ownership interests in Borrower) provided that
notwithstanding anything to the contrary herein and so long as no Event of
Default has occurred and is continuing, Borrower may repurchase the stock of
any terminated officer, director or employee in an amount not to exceed the
then amount of Borrower's cash in banks located in the United States less the
Obligations (other than the Loans against the Eligible Foreign Receivables)
then owing to Coast;
(k) make any change in Borrower's capital structure which would have a
Material Adverse Effect; or
(l) 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 Borrower, Borrower shall, without expense to Coast, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Coast may deem them reasonably necessary in order
to prosecute or defend any such suit or proceeding.
8.7 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by
Coast, to execute all documents and take all actions, as Coast, may deem
reasonably necessary or useful in order to perfect and maintain Coast's
perfected security interest in the Collateral, and in order to fully
consummate the transactions contemplated by this Agreement.
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 120 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 Receivable Loans.
9.2 EARLY TERMINATION. This Agreement may be terminated prior to the
Maturity Date as follows: (a) by Borrower, effective three (3) Business Days
after written notice of termination is given to Coast; or (b) by Coast at any
time after the occurrence of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower or by Coast under
this Section 9.2, Borrower 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 Receivable Loans.
9.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full
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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 Borrower of any
Obligation to Coast, until all of the Obligations have been paid and
performed in full. Upon payment and performance in full of all the
Obligations and termination of this Agreement, Coast shall promptly deliver
to Borrower termination statements, requests for reconveyances and such other
documents as may be required to fully terminate Coast's security interests.
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
Borrower shall give Coast immediate written notice thereof:
(a) Any warranty, representation, statement, report or certificate made
or delivered to Coast by Borrower or any of Borrower's officers, employees or
agents, now or in the future, shall be untrue or misleading and results in a
Material Adverse Effect; or
(b) Borrower 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) Borrower 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) Borrower shall fail to comply with the financial covenants (if any)
set forth in the Schedule or shall fail to perform any other non-monetary
Obligation which by its nature cannot be cured; or
(f) Borrower shall fail to perform any other non-monetary Obligation,
which failure is not cured within five (5) Business Days after the date due;
or
(g) Any levy, assessment, attachment, seizure, lien or encumbrance
(other than a Permitted Lien) is made on all or any part of the Collateral
which is not cured within ten (10) days after the occurrence of the same; or
(h) any default or event of default occurs under any obligation in
excess of $100,000 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 if that certain Floating Rate Convertible Note is not converted to
equity within 30 days from the date hereof or if there is a declared default
or breach of the Floating Rate Convertible Note; or
(i) 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, insolvency or business
failure of 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 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 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
thirty (30) days after the date commenced; or
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(l) revocation or termination of, or limitation or denial of
liability upon, any guaranty of the Obligations or any attempt to do any of
the foregoing, or commencement of proceedings by any guarantor of any of the
Obligations under any bankruptcy or insolvency law; or
(m) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all
of the Obligations, or any attempt to do any of the foregoing, or
commencement of proceedings by or against any such third party under any
bankruptcy or insolvency law; or
(n) Borrower 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, 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), 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) Borrower shall generally not pay its debts as they become due,
or Borrower shall conceal, remove or transfer any part of its property, with
intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or
(q) there shall be 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 Borrower), may do any one
or more of the following:
(a) Cease making Loans or otherwise extending credit to Borrower
under this Agreement or any other document or agreement;
(b) Accelerate and declare all or any part of the Obligations to
be immediately due, payable and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation;
(c) Take possession of any or all of the Collateral wherever it
may be found, and for that purpose Borrower hereby authorizes Coast without
judicial process to enter onto any of Borrower's premises without
interference to search for, take possession of, keep, store or remove any of
the Collateral, and remain on the premises or cause a custodian to remain on
the premises in exclusive control thereof, without charge for so long as
Coast deems it reasonably necessary in order to complete the enforcement of
its rights under this Agreement or any other agreement; provided, however,
that should Coast seek to take possession of any of the Collateral by Court
process, Borrower hereby irrevocably waives:
(i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession;
(ii) any demand for possession prior to the commencement
of any suit or action to recover possession thereof; and
(iii) any requirement that Coast retain possession of, and
not dispose of, any such Collateral until after trial or final judgment;
(d) Require Borrower to assemble any or all of the Collateral and
make it available to Coast at places designated by Coast which are reasonably
convenient to Coast and Borrower, and to remove the Collateral to such
locations as Coast may deem advisable;
(e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Coast shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge.
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Coast is hereby granted a license or other right to use, without charge,
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 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 Borrower's premises without charge, for
such time or times as Coast deems reasonable, or on Coast's premises, or
elsewhere and the Collateral need not be located at the place of disposition.
Coast may directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and if permissible under
applicable law, at any private disposition. Any sale or other disposition of
Collateral shall not relieve Borrower of any liability Borrower may have if
any Collateral is defective as to title or physical condition or otherwise at
the time of sale;
(g) Demand payment of, and collect any Receivables and General
Intangibles comprising Collateral and, in connection therewith, Borrower
irrevocably authorizes Coast to endorse or sign Borrower's name on all
collections, receipts, instruments and other documents, to take possession of
and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof, and, in Coast's
sole discretion, to grant extensions of time to pay, compromise claims and
settle Receivables and the like for less than face value; and
(h) Demand and receive possession of any of Borrower's federal and
state income tax returns and the books and records utilized in the
preparation thereof or referring thereto.
All 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 Borrower to Coast on demand. Coast may charge the same to Borrower's loan
account, and the same shall thereafter bear interest at the same rate as is
applicable to the Receivable Loans. Without limiting any of Coast's rights
and remedies, from and after the occurrence of any Event of Default, the
interest rate applicable to the Obligations shall be increased by an
additional three percent per annum.
10.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and
Coast agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable:
(a) Notice of the sale is given to Borrower at least five (5) days
prior to the sale, and, in the case of a public sale, notice of the sale is
published at least five (5) 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 general,
non-specific terms;
(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
Los Angeles, California 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 Borrower any and all information concerning the same.
Coast shall be free to employ other methods of noticing and selling the
Collateral, in its discretion, if they are commercially reasonable.
10.4 POWER OF ATTORNEY. Borrower grants to Coast an irrevocable power of
attorney
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coupled with an interest, authorizing and permitting Coast (acting through
any of its employees, attorneys or agents) at any time, at its option, but
without obligation, with or without notice to Borrower, and at Borrower's
expense, to do any or all of the following, in Borrower's name or otherwise,
but Coast agrees to exercise the following powers in a commercially
reasonable manner:
(a) Execute on behalf of Borrower any documents that Coast may, in
its sole discretion, deem advisable in order to perfect and maintain Coast's
security interest in the Collateral, or in order to exercise a right of
Borrower or Coast, or in order to fully consummate all the transactions
contemplated under this Agreement, and all other present and future
agreements;
(b) Execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose
of or to lease (as lessor or lessee) any real or personal property which is
part of Coast's Collateral or in which Coast has an interest;
(c) Execute on behalf of Borrower, any invoices relating to any
Receivable, any draft against any Account Debtor and any notice to any
Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim
of mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien;
(d) Take control in any manner of any cash or non-cash items of
payment or proceeds of Collateral; endorse the name of Borrower upon any
instruments, or documents, evidence of payment or Collateral that may come
into Coast's possession;
(e) Endorse all checks and other forms of remittances received by
Coast;
(f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment
based thereon, or otherwise take any action to terminate or discharge the
same;
(g) Grant extensions of time to pay, compromise claims and settle
Receivables and General Intangibles for less than face value and execute all
releases and other documents in connection therewith;
(h) Pay any sums required on account of Borrower's taxes or to
secure the release of any liens therefor, or both;
(i) Settle and adjust, and give releases of, any insurance claim
that relates to any of the Collateral and obtain payment therefor;
(j) Instruct any third party having custody or control of any
books or records belonging to, or relating to, Borrower to give Coast the
same rights of access and other rights with respect thereto as Coast has
under this Agreement; and
(k) Take any action or pay any sum required of Borrower pursuant
to this Agreement and any other present or future agreements.
Any and all 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 Borrower's loan account and the
foregoing shall thereafter bear interest at the same rate applicable to the
Receivable Loans. In no event shall Coast's rights under the foregoing power
of attorney or any of Coast's other rights under this Agreement be deemed to
indicate that Coast is in control of the business, management or properties
of Borrower. Borrower 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
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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"). Borrower 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 Borrower or other persons legally entitled thereto; Borrower
shall remain liable to Coast for any deficiency. If, Coast, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Coast shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or
deferring the reduction of the Obligations until the actual receipt by Coast
of the cash therefor.
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 Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise
by Coast of one or more of its rights or remedies shall not be deemed an
election, nor bar Coast from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Coast to exercise any
rights or remedies shall not operate as a waiver thereof, but all rights and
remedies shall continue in full force and effect until all of the Obligations
have been 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 Borrower's 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 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 Borrower.
Notwithstanding the foregoing, if a lock box or blocked account is
established in form and substance acceptable in the discretion of Coast, the
float or clearance days in this Section 11.1 shall be reduced to one (1)
Business Day. Coast shall not, however, be required to credit Borrower's
account for the amount of any item of payment which is unsatisfactory to
Coast in its sole discretion, and Coast may charge Borrower's loan account
for the amount of any item of payment which is returned to Coast unpaid.
11.2 APPLICATION OF PAYMENTS. Subject to Section 7.5 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
Borrower pay monetary Obligations in cash to Coast, or charge them to
Borrower's 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 Borrower monthly with an
account of advances, charges, expenses and payments made
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pursuant to this Agreement. Such account shall be deemed correct, accurate
and binding on Borrower and an account stated (except for reverses and
reapplications of payments made and corrections of errors discovered by
Coast), unless Borrower notifies Coast in writing to the contrary within
thirty (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 Borrower at the addresses shown in
the heading to this Agreement, or at any other address designated in writing
by one party to the other party. Notices to Coast shall be directed to the
Commercial Finance Division, to the attention of the Division Manager or the
Division Credit Manager. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, 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 between Borrower and Coast and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. THERE
ARE NO ORAL UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES
WHICH ARE NOT SET FORTH IN THIS AGREEMENT OR IN OTHER WRITTEN AGREEMENTS
SIGNED BY THE PARTIES IN CONNECTION HEREWITH.
11.8 WAIVERS. The failure of Coast at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or
any other present or future agreement between Borrower and Coast shall not
waive or diminish any right of Coast later to demand and receive strict
compliance therewith. Any waiver of any Default shall not waive or affect
any other Default, whether prior or subsequent, and whether or not similar.
None of the provisions of this Agreement or any other agreement now or in the
future executed by Borrower and delivered to Coast shall be deemed to have
been waived by any act or knowledge of Coast or its agents or employees, but
only by a specific written waiver signed by an authorized officer of Coast
and delivered to Borrower. Borrower waives demand, protest, notice of
protest and notice of default or dishonor, notice of payment and nonpayment,
release, compromise, settlement, extension or renewal of any commercial
paper, instrument, account, General Intangible, document or guaranty at any
time held by Coast on which Borrower is or may in any way be liable, and
notice of any action taken by Coast, unless expressly required by this
Agreement.
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
or suffered by Borrower or any other party through the ordinary negligence of
Coast, or any of its directors, officers, employees, agents, attorneys or any
other Person affiliated with or representing Coast, but nothing herein shall
relieve Coast from liability for its own gross negligence or willful
misconduct.
11.10 AMENDMENT. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Coast.
11.11 TIME OF ESSENCE. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
11.12 ATTORNEYS FEES, COSTS AND CHARGES. Borrower shall reimburse Coast
for all 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
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following: prepare and negotiate this Agreement and the documents relating to
this Agreement; obtain legal advice in connection with this Agreement or
Borrower; enforce, or seek to enforce, any of its rights; prosecute actions
against, or defend actions by, Account Debtors; commence, intervene in, or
defend any action or proceeding; initiate any complaint to be relieved of the
automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim; examine, audit, copy, and inspect
any of the Collateral or any of Borrower's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce Coast's security
interest in, the Collateral; and otherwise represent Coast in any litigation
relating to Borrower. If either Coast or Borrower files any lawsuit against
the other predicated on a breach of this Agreement, the prevailing party in
such action shall be entitled to recover its costs and 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. Borrower shall also pay Coast's standard charges for returned
checks and for wire transfers, in effect from time to time. All attorneys'
fees, costs and charges (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 Borrower's
loan account and shall thereafter bear interest at the same rate as the
Receivable 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 Borrower and Coast; PROVIDED,
HOWEVER, that Borrower may not assign or transfer any of its rights under
this Agreement without the prior written consent of Coast, and any prohibited
assignment shall be void. No consent by Coast to any assignment shall
release Borrower from its liability for the Obligations. Coast may assign
its rights and delegate its duties hereunder by the sale of assignment or
participation interests, all without the consent of Borrower.
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. Borrower and Coast acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe,
limit, define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between
the parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Coast or Borrower under any
rule of construction or otherwise.
11.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts
and transactions hereunder and all rights and obligations of Coast and
Borrower shall be governed by the 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, 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 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. BORROWER AND COAST EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT,
ACTS OR OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR
BORROWER, IN ALL OF THE FOREGOING
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COAST BUSINESS CREDIT LOAN AND SECURITY AGREEMENT
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CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
CENTURA SOFTWARE CORPORATION
By__________________________________
President or Vice President
COAST:
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank
By__________________________________
Title:______________________________
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COAST
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: CENTURA SOFTWARE CORPORATION
ADDRESS: 000 XXXXXX XXXXX
XXXXXXX XXXXXX, XXXXXXXXXX 00000
DATE: JANUARY 19, 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.
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SECTION 2 - CREDIT FACILITIES
SECTION 2.1 - CREDIT LIMIT: Loans in a total amount at any time
outstanding not to exceed the lesser of a
total of Five Million Dollars ($5,000,000) at
any one time outstanding (the "Maximum Dollar
Amount"), or the sum of (a) and (b) below:
(a) Receivable Loans in an amount not to
exceed 70% of the amount of Borrower's
Eligible Receivables (as defined in
Section 1 of the Agreement), provided
that for Eligible Foreign Accounts, the
advance rate shall not exceed 60% and,
except as permitted in the discretion of
Coast, advances against Eligible
Receivables owing from account debtors
located in the United Kingdom shall not
exceed $1,000,000 in the aggregate
outstanding at any one time and advances
owing from account debtors located in
the European continent shall not exceed
$1,000,000 outstanding at any one time,
plus
(b) Equipment Acquisition Loans, in minimum
advances of One Hundred Thousand Dollars
($100,000), at three month interest only
followed by a 36 month amortization of
principal plus interest with the
remaining balance due on January 31,
2000, in a total amount not to exceed
the lesser of:
(1) 80% of the invoice cost of new
Equipment (after subtracting taxes
and installation charges), or 80%
of the appraised liquidation value
of used Equipment acquired by
Borrower
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(after subtracting taxes
and installation charges), in each
case to be located in the United
States, or
(2) Five Hundred Thousand Dollars
($500,000)
The Equipment Acquisition Loans shall
not be available unless Borrower has
achieved and maintained a Total Debt
Service Coverage Ratio of not less than
1.25:1, measured on a fiscal quarterly
basis.
Total Debt Service Coverage Ratio shall
mean the quotient of (x) EBITDA less all
capital expenditures permitted hereunder
and actually made, except any portion
thereof financed through indebtedness
permitted hereunder and all taxes paid
during such period, divided by (y) the
sum of all principal, interest and other
payments made or required to be made by
Borrower on indebtedness during such
period, including any fees and charges
owed by Borrower in connection with any
such indebtedness.
"EBITDA" shall mean, for any period, the
net income for such period of Borrower
determined in accordance with GAAP
(excluding any extraordinary income
items, including, without limitation,
gain on sale of assets, income relating
to foreign exchange, swap or other
derivative transactions and changes in
GAAP), plus the following items, to the
extent deducted from the revenues of
Borrower in the calculation of net
income or loss: (i) depreciation,
(ii) amortization of intangibles and any
other non-cash items, (iii) cash
interest expense (excluding any interest
paid-in-kind) and (iv) tax expense.
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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, provided that in the
event Borrower achieves and maintains a
Total Debt Service Coverage Ratio (as
defined above) of at least 1.5:1
measured on a quarterly basis following
two consecutive quarters of full
compliance with all the terms and
conditions in this Agreement and
provided no Event of Default has
occurred and is continuing, the rate
over the Prime Rate shall be reduced to
2.0%. If under the same terms and
conditions as set forth in the preceding
sentence the Total Debt Service Coverage
Ratio is at least 1.75:1, the rate over
the Prime Rate shall be reduced to
1.75%. The interest rate applicable to
all Loans shall be adjusted monthly as
of the first day of each month, and the
interest to be charged for each month
shall be based on the highest Prime Rate
in effect during 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 Based on utilization of 40% of the
INTEREST: Maximum Dollar Amount based on daily
outstandings.
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SECTION 3.2 - LOAN FEE: 2.0% of the Maximum Dollar Amount, such
amount being fully earned on the Closing
Date, and payable 1.0 of the Maximum
Dollar Amount on the Closing Date and
the balance on the first anniversary of
the Closing Date.
SECTION 3.2 - FACILITY FEE: $5,200,. per quarter, payable on the
Closing Date (prorated for any partial
quarter at the beginning of the term of
this Agreement) and continuing on the
first day of each quarter thereafter.
SECTION 9.1 - RENEWAL FEE: .5% of the Maximum Dollar Amount per
year.
SECTION 9.2 - EARLY TERMINATION An amount equal to three percent (3%) of
FEE: the Maximum Dollar Amount (as defined in
the Schedule), if termination occurs on
or before the first anniversary of the
effective date of this Agreement and two
percent (2%) of the Maximum Dollar
Amount, if termination occurs after the
first anniversary of the effective date
of this Agreement.
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SECTION 5 - CONDITIONS PRECEDENT
SECTION 5.2 - MINIMUM $500,000 at funding
AVAILABILITY:
SECTION 5.13 - OTHER DOCUMENTS 1. UCC-1 financing statements, fixture
AND AGREEMENTS: filings and termination statements;
2. Security Agreements (including
those covering copyrights, patents
and trademarks).
SECTION 5.14 - OTHER CONDITIONS: 1. Coast shall have a first priority
perfected security interest in all
the assets of Borrower.
2. All of Borrower's software shall
have been registered with the
federal copyright office together
with a first priority mortgage of
the software in favor of Coast.
3. Coast shall have obtained such
guaranties (in such form as Coast
shall request) from such of
Borrower's foreign subsidiaries as
shall be required by Coast.
4. Coast shall have reviewed and
approved in its discretion
Borrower's distributor's
agreements.
5. Coast's obligations under this
Agreement shall be subject to a
re-audit of Borrower if required by
Coast and with results satisfactory
to Coast in its discretion.
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SECTION 6 - REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 6.2 - PRIOR NAMES OF Gupta Corporation.
BORROWER:
SECTION 6.2 - PRIOR TRADE NAMES None.
OF BORROWER:
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SECTION 6.2 - EXISTING TRADE NAMES None.
OF BORROWER:
SECTION 6.3 - OTHER LOCATIONS AND 000 Xxxxxxxxx Xxxxx
XXXXXXXXX: Xxxxx Xxxxxxx, Xxxxxxxxxxxxx 00000
Sales Offices in Redwood City,
California
Los Angeles, California
Chicago, Illinois
Atlanta, Georgia
Dallas, Texas
Iselin, New Jersey
Lake Oswego, Oregon
Sterling, Colorado
SECTION 6.10 - MATERIAL ADVERSE None.
LITIGATION:
SECTION 6.10 - FUTURE CLAIMS AND Borrower will promptly inform Coast
LITIGATION: 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 1. Borrower shall at all times
AND COVENANTS: have a minimum Adjusted Net
Worth of not less than
{$8,000,000}.
2. Borrower shall at all times
maintain all original sales
documentation at its chief
executive office.
3. Without otherwise limiting the
right of Coast to create
reserves, Coast shall have the
right to create a reserve for
the Lotus Development accounts
payable past due balance.
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 One Hundred Thousand Dollars
($100,000).
SECTION 8.3 - REPORTING: Borrower shall provide Coast with
the following:
1. Monthly Receivable agings,
aged by invoice date and by
customer in alphabetical
order, within ten (10) days
after the end of each month
together with a monthly
deferred revenue listing to be
sorted by customer in
alphabetical order.
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 internally prepared
financial statements, as soon
as available, and in any event
within thirty (30) days after
the end of each month.
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4. 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.
5. Quarterly customer lists,
including customer name,
address, and phone number.
6. Annual financial statements,
as soon as available, and in
any event within ninety (90)
days following the end of
Borrower's fiscal year,
containing the unqualified
opinion of, and certified by,
an independent certified
public accountant acceptable
to Coast.
SECTION 8.5 - NEGATIVE COVENANTS One Hundred Thousand Dollars
(ACQUIRED ASSETS): ($100,000).
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SECTION 9 - TERM
SECTION 9.1 - MATURITY DATE: the last Business Day of the month
two (2) years from the Closing
Date, 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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