COAST
LOAN AND SECURITY AGREEMENT
Borrower: Delphi Information Systems, Inc.
Address: 3501 Algonquin Road, Suite 500
Rolling Meadows, Illinois 60008
Date: January __, 1997
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between COAST
BUSINESS CREDIT, a division of Southern Pacific Thrift & Loan Association
("Coast"), a California corporation, with offices at 12121 Wilshire Boulevard,
Suite 1111, Los Angeles, California 90025, and the borrower(s) named above
(jointly and severally, the "Borrower"), whose chief executive office is located
at the above address ("Borrower's Address"). The Schedule to this Agreement
(the "Schedule") shall for all purposes be deemed to be a part of this
Agreement, and the same is an integral part of this Agreement. (Definitions of
certain terms used in this Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 LOANS. Coast will make loans to Borrower (the "Loans"), in amounts
determined by Coast in its discretion, reasonably exercised, up to the amounts
(the "Credit Limit") shown on the Schedule, provided no Default or Event of
Default has occurred and is continuing.
1.2 INTEREST. All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule, except where expressly set forth to the
contrary in this Agreement. Interest shall be payable monthly, on the last day
of the month. Interest may, in Coast's discretion, be charged to Borrower's
loan account, and the same shall thereafter bear interest at the same rate as
the other Loans. Regardless of the amount of Obligations that may be
outstanding from time to time, Borrower shall pay Coast minimum monthly interest
during the term of this Agreement with respect to all of the Loans based upon
the minimum daily loan balance set forth on the Schedule (the "Minimum Monthly
Interest").
1.3 FEES. Borrower shall pay Coast the fee(s) shown on the Schedule, which are
in addition to all interest and other sums payable to Coast and are not
refundable.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Coast a security interest in all
of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located: All Receivables, Inventory, Equipment, and
General Intangibles, including, without limitation, all of Borrower's Deposit
Accounts, and all money, and all property now or at any time in the future in
Coast's possession (including claims and credit balances), and all proceeds of
any of the foregoing (including proceeds of any insurance policies, proceeds of
proceeds, and claims against third parties), all products of any of the
foregoing, and all books and records related to any of the foregoing (all of the
foregoing, together with all other property in which Coast may now or in the
future be granted a lien or security interest, is referred to herein,
collectively, as the "Collateral").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Coast to enter into this Agreement and to make Loans,
Borrower represents and warrants to Coast as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation, is and will
continue to be, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Borrower is and will continue to
be qualified and licensed to do business in all jurisdictions in which any
failure to do so would have a material adverse effect on Borrower. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (iii) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or
obligation under any material agreement or instrument which is binding upon
Borrower or its property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Coast 30 days' prior written notice before changing its name
or doing business under any other name. Borrower has complied, and will in the
future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Coast at least 30 days prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Coast now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Coast and the Collateral against all claims of
others. None of the Collateral now is or will be affixed to any real property
in such a manner, or with such intent, as to become a fixture. Borrower is not
and will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises. Whenever any
Collateral is located upon premises in which any third party has an interest
(whether as owner, mortgagee, beneficiary under a deed of trust, lien or
otherwise), Borrower shall, whenever requested by Coast, use its best efforts to
cause such third party to execute and deliver to Coast, in form acceptable to
Coast, such waivers and subordinations as Coast shall specify, so as to ensure
that Coast's rights in the Collateral are, and will continue to be, superior to
the rights of any such third party. Borrower will keep in full force and
effect, and will comply with all the terms of, any lease of real property where
any of the Collateral now or in the future may be located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in good
working condition, and Borrower will not use the Collateral for any unlawful
purpose. Borrower will immediately advise Coast in writing of any material loss
or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at Borrower's
Address complete and accurate books and records, comprising an accounting system
in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements now
or in the future delivered to Coast have been, and will be, prepared in
conformity with generally accepted accounting principles (except, in the case of
unaudited financial statements, for the absence of footnotes and subject to
normal year-end adjustments) and now and in the future will fairly reflect the
financial condition of Borrower, at the times and for the periods therein
stated. Between the last date covered by any such statement provided to Coast
and the date hereof, there has been no material adverse change in the financial
condition or business of Borrower. Borrower is now and will continue to be
solvent.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Coast in writing
of the commencement of, and any material development in, the proceedings, and
(iii) posts bonds or takes any other steps required to keep the contested taxes
from becoming a lien upon any of the Collateral. As of the date hereof,
Borrower is unaware of any claims or adjustments proposed for any of Borrower's
prior tax years which could result in additional taxes becoming due and payable
by Borrower. Borrower has paid, and shall continue to pay all amounts necessary
to fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll
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service providing for the automatic deposit of all payroll taxes payable by
Borrower.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all material foreign, federal, state
and local laws and regulations relating to Borrower, including, but not limited
to, those relating to Borrower's ownership of real or personal property, the
conduct and licensing of Borrower's business, and environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim, suit,
litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Coast in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of
$50,000 or more, or involving $100,000 or more in the aggregate.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for lawful
business purposes. Borrower is not purchasing or carrying any "margin stock"
(as defined in Regulation G of the Board of Governors of the Federal Reserve
System) and no part of the proceeds of any Loan will be used to purchase or
carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. RECEIVABLES.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and warrants
to Coast as follows: Each Receivable with respect to which Loans are requested
by Borrower shall, on the date each Loan is requested and made, represent an
undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods or the rendition of
services in the ordinary course of Borrower's business.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Coast as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Receivables are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all respects what they purport to be. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and 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.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall deliver to
Coast transaction reports and loan requests, schedules of Receivables, and
schedules of collections, all on Coast's standard forms; provided, however, that
Borrower's failure to execute and deliver the same shall not affect or limit
Coast's security interest and other rights in all of Borrower's Receivables, nor
shall Coast's failure to advance or lend against a specific Receivable affect or
limit Coast's security interest and other rights therein. Loan requests
received after 10:30 AM will not be considered by Coast until the next Business
Day. Together with each such schedule, or later if requested by Coast, Borrower
shall furnish Coast with copies (or, at Coast's request, originals) of all
contracts, orders, invoices, and other similar documents, and all original
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Receivables, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Coast an aged accounts receivable trial balance
in such form and at such intervals as Coast shall request. In addition,
Borrower shall deliver to Coast the originals of all instruments, chattel paper,
security agreements, guarantees and other documents and property evidencing or
securing any Receivables, upon receipt thereof and in the same form as received,
with all necessary 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.
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect all
Receivables, unless and until an Event of Default has occurred. Borrower shall
hold all payments on, and proceeds of, Receivables in trust for Coast, and
Borrower shall deliver all such payments and proceeds to Coast within one
Business Day after receipt by Borrower, in their original form, duly endorsed to
Coast, to be applied to the Obligations in such order as Coast shall determine;
provided if Borrower receives checks or other payments in sums less than $5,000,
Borrower shall have 5 days to remit same to Coast. 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.
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Coast or its designee may, at any time, notify Account Debtors that Coast has
been granted a security interest in the Receivables.
4.5 REMITTANCE OF PROCEEDS. All proceeds arising from the disposition of any
Collateral shall be delivered to Coast within one Business Day after receipt by
Borrower, in their original form, duly endorsed to Coast, to be applied to the
Obligations in such order as Coast shall determine. Borrower agrees that it
will not commingle proceeds of Collateral with any of Borrower's other funds or
property, but will hold such proceeds separate and apart from such other funds
and property and in an express trust for Coast. Nothing in this Section limits
the restrictions on disposition of Collateral set forth elsewhere in this
Agreement.
4.6 DISPUTES. Borrower shall notify Coast promptly of all disputes or claims
relating to Receivables. Borrower shall not forgive (completely or partially),
compromise or settle any Receivable for less than payment in full, or agree to
do any of the foregoing, except that Borrower may do so, provided that: (i)
Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to Coast on the regular reports provided to Coast; (ii) no Default or
Event of Default has occurred and is continuing; and (iii) taking into account
all such discounts settlements and forgiveness, the total outstanding Loans will
not exceed the Credit Limit. Coast may, at any time after the occurrence of an
Event of Default, settle or adjust disputes or claims directly with Account
Debtors for amounts and upon terms which Coast considers advisable in its
reasonable credit judgment and, in all cases, Coast shall credit Borrower's Loan
account with only the net amounts received by Coast in payment of any
Receivables.
4.7 RETURNS. Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower in the ordinary course of
its business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the Account Debtor in the appropriate
amount. In the event any attempted return occurs after the occurrence of any
Event of Default, Borrower shall (i) hold the returned Inventory in trust for
Coast, (ii) segregate all returned Inventory from all of Borrower's other
property, (iii) conspicuously label the returned Inventory as subject to Coast's
security interest, and (iv) immediately notify Coast of the return of any
Inventory, specifying the reason for such return, the location and condition of
the returned Inventory, and on Coast's request deliver such returned Inventory
to Coast.
4.8 VERIFICATION. Coast may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Coast or such other name as Coast may choose.
4.9 NO LIABILITY. Coast shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall Coast be deemed to be responsible for any of Borrower's obligations under
any contract or agreement giving rise to a Receivable. Nothing herein shall,
however, relieve Coast from liability for its own gross negligence or willful
misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply with the
financial and other covenants set forth in the Schedule.
5.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Coast, in such form and amounts as Coast may
reasonably require, and Borrower shall provide evidence of such insurance to
Coast, so that Coast is satisfied that such insurance is, at all times, in full
force and effect. All liability insurance policies of Borrower shall name Coast
as an additional insured, and all property casualty and related insurance
policies of Borrower shall name Coast as a loss payee thereon and Borrower shall
cause a lenders loss payee endorsement in form reasonably acceptable to Coast.
Upon receipt of the proceeds of any such insurance, Coast shall apply such
proceeds in reduction of the Obligations as Coast shall determine in its sole
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, Coast shall release to Borrower insurance proceeds with
respect to Equipment totaling less than $50,000, which shall be utilized by
Borrower for the replacement of the Equipment with respect to which the
insurance proceeds were paid. Coast may require reasonable assurance that the
insurance proceeds so released will be so used. If Borrower fails to provide or
pay for any insurance, Coast may, but is not obligated to, obtain the same at
Borrower's expense. Borrower shall promptly deliver to Coast copies of all
reports made to insurance companies.
5.3 REPORTS. Borrower, at its expense, shall provide Coast with the written
reports set forth in the Schedule,
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and such other written reports with respect to Borrower (including budgets,
sales projections, operating plans and other financial documentation), as
Coast shall from time to time reasonably specify.
5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on one
Business Day's notice, Coast, or its agents, shall have the right to inspect,
audit and copy Borrower's books and records and the Collateral (the "Audits").
Coast shall take reasonable steps to keep confidential all confidential
information obtained in any Audit, but Coast shall have the right to disclose
any such information to its auditors, regulatory agencies, and attorneys, and
pursuant to any subpoena or other legal process. The Audits shall be at
Borrower's expense and the charge for the Audits shall be $750 per person per
day (or such higher amount as shall represent Coast's then current standard
charge for the same), plus reasonable out of pocket expenses. Borrower will not
enter into any agreement with any accounting firm, service bureau or third party
to store Borrower's books or records at any location other than Borrower's
Address, without first notifying Coast of the same and obtaining the written
agreement from such accounting firm, service bureau or other third party to give
Coast the same rights with respect to access to books and records and related
rights as Coast has under this Loan Agreement.
5.5 NEGATIVE COVENANTS. Borrower shall not, without Coast's prior written
consent, do any of the following:
(i) merge or consolidate with another corporation or entity, except in a
transaction in which (A) the shareholders of the Borrower hold at least 50% of
the common stock and all other capital stock of the surviving corporation
immediately after such merger or consolidation, and (B) the Borrower is the
surviving corporation;
(ii) acquire any assets, except (A) in the ordinary course of business,
or (B) in a transaction or a series of transactions not involving the payment
of an aggregate amount in excess of $50,000;
(iii) enter into any other transaction outside the ordinary course of
business;
(iv) sell or transfer any Collateral, except for the sale of finished
Inventory in the ordinary course of Borrower's business, and except for the sale
of obsolete or unneeded Equipment in the ordinary course of business;
(v) store any Inventory or other Collateral with any warehouseman or
other third party;
(vi) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis;
(vii) make any loans of any money or other assets, except (A) advances to
customers or suppliers in the ordinary course of business, (B) travel advances,
employee relocation loans and other employee loans and advances in the ordinary
course of business, and (C) loans to employees, officers and directors for the
purpose of purchasing equity securities of the Borrower;
(viii) incur any debts, outside the ordinary course of business, which
would have a material, adverse effect on Borrower or on the prospect of
repayment of the Obligations;
(ix) guarantee or otherwise become liable with respect to the obligations
of another party or entity;
(x) pay or declare any dividends on Borrower's stock (except for
dividends payable solely in stock of Borrower);
(xi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Borrower's stock, except that Borrower may repurchase stock
owned by employees, directors and consultants of Borrower pursuant to terms of
employment, consulting or other stock restriction agreements at such time as any
such employee, director or consultant terminates his or her affiliation with the
Borrower, for an aggregate purchase price not to exceed $100,000 in any fiscal
year;
(xii) make any change in Borrower's capital structure which would have a
material adverse effect on Borrower or on the prospect of repayment of the
Obligations; or
(xiii) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default would occur as a result of such
transaction.
5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Coast with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Coast, make available Borrower and
its officers, employees and agents and Borrower's books and records, to the
extent that Coast may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
5.7 INDEMNITY. Borrower hereby agrees to indemnify Coast and hold Coast
harmless from and against any and
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all claims, debts, liabilities, demands, obligations, actions, causes of
action, penalties, reasonable costs and expenses (including reasonable
attorneys' fees), of every nature, character and description, which Coast may
sustain or incur based upon or arising out of any of the Obligations, any
actual or alleged failure to collect and pay over any withholding or other
tax relating to Borrower or its employees, any relationship or agreement
between Coast and Borrower, any actual or alleged failure of Coast to comply
with any writ of attachment or other legal process relating to Borrower or
any of its property, or any other matter, cause or thing whatsoever occurred,
done, omitted or suffered to be done by Coast relating to Borrower or the
Obligations (except any such amounts sustained or incurred as the result of
the gross negligence or willful misconduct of Coast). Notwithstanding any
provision in this Agreement to the contrary, the indemnity agreement set
forth in this Section shall survive any termination of this Agreement and
shall for all purposes continue in full force and effect.
5.8 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by Coast,
to execute all documents and take all actions, as Coast, may deem reasonably
necessary or useful in order to perfect and maintain Coast's perfected security
interest in the Collateral, and in order to fully consummate the transactions
contemplated by this Agreement.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the "Maturity Date"); provided that the Maturity
date shall automatically be extended, and this Agreement shall automatically and
continuously renew, for successive additional terms of one year each, unless one
party gives written notice to the other, not less than sixty days prior to the
next Maturity Date, that such party elects to terminate this Agreement effective
on the next Maturity Date.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrower, effective three Business Days after written
notice of termination is given to Coast; or (ii) by Coast at any time after the
occurrence of an Event of Default, without notice, effective immediately. If
this Agreement is terminated by Borrower or by Coast under this Section 6.2,
Borrower shall pay to Coast a termination fee (the "Early Termination Fee") in
the amount shown on the Schedule. The Early Termination Fee shall be due and
payable on the effective date of termination and thereafter shall bear interest
at a rate equal to the rate applicable to the Receivable Loans.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding Letters of
Credit issued by Coast or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Coast,
then on such date Borrower shall provide to Coast cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Coast's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Coast's security interests in all of the Collateral and all of
the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Coast, Coast may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Coast, nor shall any such termination relieve Borrower of any
Obligation to Coast, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Coast shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be required to fully terminate Coast's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Coast immediate written notice thereof:
(a) Any material warranty, representation, statement, report or
certificate made or delivered to Coast by Borrower or any of Borrower's
officers, employees or agents, now or in the future, shall be untrue or
misleading in a material respect; or
(b) Borrower shall fail 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
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(d) Borrower shall fail to deliver the proceeds of Collateral to Coast as
provided in Section 4.5 above, or shall fail to give Coast access to its books
and records or Collateral as provided in Section 5.4 above, or shall breach any
negative covenant set forth in Section 5.5 above; or
(e) Borrower shall fail to comply with the financial covenants (if any)
set forth in the Schedule or shall fail to perform any other non-monetary
Obligation which by its nature cannot be cured; or
(f) Borrower shall fail to perform any other non-monetary Obligation,
which failure is not cured within 5 Business Days after the date due; or
(g) Any levy, assessment, attachment, seizure, lien or encumbrance (other
than a Permitted Lien) is made on all or any part of the Collateral which is not
cured within 10 days after the occurrence of the same; or
(h) any default or event of default occurs under any obligation secured by
a Permitted Lien, which is not cured within any applicable cure period or waived
in writing by the holder of the Permitted Lien; or
(i) Borrower breaches any material contract or obligation, which has or
may reasonably be expected to have a material adverse effect on Borrower's
business or financial condition; or
(j) Dissolution, termination of existence, insolvency or business failure
of Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or
(k) the commencement of any proceeding against Borrower or any guarantor
of any of the Obligations under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 30 days after the date commenced; or
(l) revocation or termination of, or limitation or denial of liability
upon, any guaranty of the Obligations or any attempt to do any of the foregoing,
or commencement of proceedings by any guarantor of any of the Obligations under
any bankruptcy or insolvency law; or
(m) revocation or termination of, or limitation or denial of liability
upon, any pledge of any certificate of deposit, securities or other property or
asset of any kind pledged by any third party to secure any or all of the
Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or
(n) Borrower makes any payment on account of any indebtedness or
obligation which has been subordinated to the Obligations, other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement; or
(o) 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
(p) there shall be a material adverse change in Borrower's business or
financial condition.
Coast may cease making any Loans hereunder during any of the above cure periods,
and thereafter if an Event of Default has occurred.
7.2 REMEDIES. Upon the occurrence, and during the continuance, of any Event of
Default, Coast, at its option, and without notice or demand of any kind (all of
which are hereby expressly waived by Borrower), may do any one or more of the
following: (a) Cease making Loans or otherwise extending credit to Borrower
under this Agreement or any other document or agreement; (b) Accelerate and
declare all or any part of the Obligations to be immediately due, payable, and
performable, notwithstanding any deferred or installment payments allowed by any
instrument evidencing or relating to any Obligation; (c) Take possession of any
or all of the Collateral wherever it may be found, and for that purpose Borrower
hereby authorizes Coast without judicial process to enter onto any of Borrower's
premises without interference to search for, take possession of, keep, store, or
remove any of the Collateral, and remain on the premises or cause a custodian to
remain on the premises in exclusive control thereof, without charge for so long
as Coast deems it reasonably necessary in order to complete the enforcement of
its rights under this Agreement or any other agreement; provided, however, that
should Coast seek to take possession of any of the Collateral by Court process,
Borrower hereby irrevocably waives: (i) any bond and any surety or security
relating thereto required by any statute, court rule or otherwise as an incident
to such possession; (ii) any demand for possession prior to the
7
commencement of any suit or action to recover possession thereof; and (iii)
any requirement that Coast retain possession of, and not dispose of, any such
Collateral until after trial or final judgment; (d) Require Borrower to
assemble any or all of the Collateral and make it available to Coast at
places designated by Coast which are reasonably convenient to Coast and
Borrower, and to remove the Collateral to such locations as Coast may deem
advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Coast shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time Coast obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private
sales, in lots or in bulk, for cash, exchange or other property, or on
credit, and to adjourn any such sale from time to time without notice other
than oral announcement at the time scheduled for sale. Coast shall have the
right to conduct such disposition on Borrower's premises without charge, for
such time or times as Coast deems reasonable, or on Coast's premises, or
elsewhere and the Collateral need not be located at the place of disposition.
Coast may directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and if permissible under
applicable law, at any private disposition. Any sale or other disposition of
Collateral shall not relieve Borrower of any liability Borrower may have if
any Collateral is defective as to title or physical condition or otherwise at
the time of sale; (g) Demand payment of, and collect any Receivables and
General Intangibles comprising Collateral and, in connection therewith,
Borrower irrevocably authorizes Coast to endorse or sign Borrower's name on
all collections, receipts, instruments and other documents, to take
possession of and open mail addressed to Borrower and remove therefrom
payments made with respect to any item of the Collateral or proceeds thereof,
and, in Coast's sole discretion, to grant extensions of time to pay,
compromise claims and settle Receivables and the like for less than face
value; (h) Offset against any sums in any of Borrower's general, special or
other Deposit Accounts with Coast; and (i) Demand and receive possession of
any of Borrower's federal and state income tax returns and the books and
records utilized in the preparation thereof or referring thereto. All
reasonable attorneys' fees, expenses, costs, liabilities and obligations
incurred by Coast with respect to the foregoing shall be due from the
Borrower to Coast on demand. Coast may charge the same to Borrower's loan
account, and the same shall thereafter bear interest at the same rate as is
applicable to the Receivable Loans. Without limiting any of Coast's rights
and remedies, from and after the occurrence of any Event of Default, the
interest rate applicable to the Obligations shall be increased by an
additional three percent per annum.
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and Coast
agree that a sale or other disposition (collectively, "sale") of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Borrower at least
seven days prior to the sale, and, in the case of a public sale, notice of the
sale is published at least seven days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, non-specific terms; (iii) The sale is
conducted at a place designated by Coast, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m;
(v) Payment of the purchase price in cash or by cashier's check or wire transfer
is required; (vi) With respect to any sale of any of the Collateral, Coast may
(but is not obligated to) direct any prospective purchaser to ascertain directly
from Borrower any and all information concerning the same. Coast shall be free
to employ other methods of noticing and selling the Collateral, in its
discretion, if they are commercially reasonable.
7.4 POWER OF ATTORNEY. Upon the occurrence, and during the continuance, of any
Event of Default, without limiting Coast's other rights and remedies, Borrower
grants to Coast an irrevocable power of attorney coupled with an interest,
authorizing and permitting Coast (acting through any of its employees, attorneys
or agents) at any time, at its option, but without obligation, with or without
notice to Borrower, and at Borrower's expense, to do any or all of the
following, in Borrower's name or otherwise, but Coast agrees to exercise the
following powers in a commercially reasonable manner: (a) Execute on behalf of
Borrower any documents that Coast may, in its sole discretion, deem advisable in
order to perfect and maintain Coast's security interest in the Collateral, or in
order to exercise a right of Borrower or Coast, or in order to fully consummate
all the transactions contemplated under this Agreement, and all other present
and future agreements; (b) Execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of Coast's Collateral or in which Coast has an interest; (c) Execute on
behalf of Borrower, any invoices relating to any Receivable, any draft against
any Account Debtor and any notice to any Account Debtor, any proof of claim in
bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or other
lien, or assignment or satisfaction of mechanic's, materialman's or other lien;
(d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral;
8
endorse the name of Borrower upon any instruments, or documents, evidence of
payment or Collateral that may come into Coast's possession; (e) Endorse all
checks and other forms of remittances received by Coast; (f) Pay, contest or
settle any lien, charge, encumbrance, security interest and adverse claim in
or to any of the Collateral, or any judgment based thereon, or otherwise take
any action to terminate or discharge the same; (g) Grant extensions of time
to pay, compromise claims and settle Receivables and General Intangibles for
less than face value and execute all releases and other documents in
connection therewith; (h) Pay any sums required on account of Borrower's
taxes or to secure the release of any liens therefor, or both; (i) Settle and
adjust, and give releases of, any insurance claim that relates to any of the
Collateral and obtain payment therefor; (j) Instruct any third party having
custody or control of any books or records belonging to, or relating to,
Borrower to give Coast the same rights of access and other rights with
respect thereto as Coast has under this Agreement; and (k) Take any action or
pay any sum required of Borrower pursuant to this Agreement and any other
present or future agreements. Any and all reasonable sums paid and any and
all reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by Coast with respect to the foregoing shall be added to and become
part of the Obligations, and shall be payable on demand. Coast may charge
the foregoing to Borrower's loan account and the foregoing shall thereafter
bear interest at the same rate applicable to the Receivable Loans. In no
event shall Coast's rights under the foregoing power of attorney or any of
Coast's other rights under this Agreement be deemed to indicate that Coast is
in control of the business, management or properties of Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any sale
of the Collateral shall be applied by Coast first to the reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred by Coast in the
exercise of its rights under this Agreement, second to the interest due upon any
of the Obligations, and third to the principal of the Obligations, in such order
as Coast shall determine in its sole discretion. Any surplus shall be paid to
Borrower or other persons legally entitled thereto; Borrower shall remain liable
to Coast for any deficiency. If, Coast, in its sole discretion, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Coast shall have the option, exercisable at
any time, in its sole discretion, of either reducing the Obligations by the
principal amount of purchase price or deferring the reduction of the Obligations
until the actual receipt by Coast of the cash therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth in
this Agreement, Coast shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Coast and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Coast of one or more of its rights or remedies shall not be deemed an election,
nor bar Coast from subsequent exercise or partial exercise of any other rights
or remedies. The failure or delay of Coast to exercise any rights or remedies
shall not operate as a waiver thereof, but all rights and remedies shall
continue in full force and effect until all of the Obligations have been fully
paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"ACCOUNT DEBTOR" means the obligor on a Receivable.
"AFFILIATE" means, with respect to any Person, a relative, partner, shareholder,
director, officer, or employee of such Person, or any parent or subsidiary of
such Person, or any Person controlling, controlled by or under common control
with such Person.
"BUSINESS DAY" means a day on which Coast is open for business.
"CODE" means the Uniform Commercial Code as adopted and in effect in the State
of California from time to time.
"COLLATERAL" has the meaning set forth in Section 2.1 above.
"DEFAULT" means any event which with notice or passage of time or both, would
constitute an Event of Default.
"DEPOSIT ACCOUNT" has the meaning set forth in Section 9105 of the Code.
"ELIGIBLE RECEIVABLES" means Receivables arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
Coast, in its good faith business judgment, shall deem eligible for borrowing,
based on such considerations as Coast may from time to time deem appropriate.
Without limiting the foregoing, in no event will a Receivable be an Eligible
Receivable if it is more than 90 days old from invoice date.
"EQUIPMENT" means all of Borrower's present and hereafter acquired machinery,
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible
personal property (other than Inventory) of every
9
kind and description used in Borrower's operations or owned by Borrower and
any interest in any of the foregoing, and all attachments, accessories,
accessions, replacements, substitutions, additions or improvements to any of
the foregoing, wherever located.
"EVENT OF DEFAULT" means any of the events set forth in Section 7.1 of this
Agreement.
"GENERAL INTANGIBLES" means all general intangibles of Borrower, whether now
owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in
all litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against Coast, rights to purchase or sell real
or personal property, rights as a licensor or licensee of any kind, royalties,
telephone numbers, proprietary information, purchase orders, and all insurance
policies and claims (including without limitation life insurance, key man
insurance, credit insurance, liability insurance, property insurance and other
insurance), tax refunds and claims, computer programs, discs, tapes and tape
files, claims under guaranties, security interests or other security held by or
granted to Borrower, all rights to indemnification and all other intangible
property of every kind and nature (other than Receivables).
"INVENTORY" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
all raw materials, work in process, finished goods and goods in transit, and
including without limitation all farm products), and all materials and supplies
of every kind, nature and description which are or might be used or consumed in
Borrower's business or used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise or other
personal property, and all warehouse receipts, documents of title and other
documents representing any of the foregoing.
"MAXIMUM DOLLAR AMOUNT" has the meaning set forth in Section 1 of the Schedule.
"OBLIGATIONS" means all present and future Loans, advances, debts, liabilities,
obligations, guaranties, covenants, duties and indebtedness at any time owing by
Borrower to Coast, whether evidenced by this Agreement or any note or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, banker's acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by Coast in Borrower's debts owing
to others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney's fees, expert
witness fees, audit fees, letter of credit fees, collateral monitoring fees,
closing fees, facility fees, termination fees, minimum interest charges and any
other sums chargeable to Borrower under this Agreement or under any other
present or future instrument or agreement between Borrower and Coast.
"PERMITTED LIENS" means the following: (i) purchase money security interests in
specific items of Equipment; (ii) leases of specific items of Equipment; (iii)
liens for taxes not yet payable; (iv) additional security interests and liens
consented to in writing by Coast, which consent shall not be unreasonably
withheld; (v) security interests being terminated substantially concurrently
with this Agreement; (vi) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business and
securing obligations which are not delinquent; (vii) liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Coast will have the
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on Coast's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Coast, and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
"PERSON" means any individual, sole proprietorship, partnership, joint venture,
trust, unincorporated organization, association, corporation, government, or any
agency or political division thereof, or any other entity.
10
"RECEIVABLES" means all of Borrower's now owned and hereafter acquired accounts
(whether or not earned by performance), letters of credit, contract rights,
chattel paper, instruments, securities, documents and all other forms of
obligations at any time owing to Borrower, all guaranties and other security
therefor, all merchandise returned to or repossessed by Borrower, and all rights
of stoppage in transit and all other rights or remedies of an unpaid vendor,
lienor or secured party.OTHER TERMS. All accounting terms used in this
Agreement, unless otherwise indicated, shall have the meanings given to such
terms in accordance with generally accepted accounting principles, consistently
applied. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all checks,
wire transfers and other items of payment received by Coast (including proceeds
of Receivables and payment of the Obligations in full) shall be deemed applied
by Coast on account of the Obligations three Business Days after receipt by
Coast of immediately available funds, and, for purposes of the foregoing, any
such funds received after 10:30 AM on any day shall be deemed received on the
next Business Day. Coast shall not, however, be required to credit Borrower's
account for the amount of any item of payment which is unsatisfactory to Coast
in its sole discretion, and Coast may charge Borrower's loan account for the
amount of any item of payment which is returned to Coast unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations may
be applied, and in Coast's sole discretion reversed and re-applied, to the
Obligations, in such order and manner as Coast shall determine in its sole
discretion.
9.3 CHARGES TO ACCOUNTS. Coast may, in its discretion, require that Borrower
pay monetary Obligations in cash to Coast, or charge them to Borrower's Loan
account, in which event they will bear interest at the same rate applicable to
the Loans. Coast may also, in its discretion, charge any monetary Obligations
to Borrower's Deposit Accounts maintained with Coast.
9.4 MONTHLY ACCOUNTINGS. Coast shall provide Borrower monthly with an account
of advances, charges, expenses and payments made pursuant to this Agreement.
Such account shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Coast), unless Borrower notifies Coast in
writing to the contrary within thirty days after each account is rendered,
describing the nature of any alleged errors or admissions.
9.5 NOTICES. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, or certified mail return receipt requested,
addressed to Coast or Borrower at the addresses shown in the heading to this
Agreement, or at any other address designated in writing by one party to the
other party. Notices to Coast shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager. All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.
9.6 SEVERABILITY. Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
9.7 INTEGRATION. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and Coast and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. THERE ARE NO ORAL
UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES WHICH ARE NOT
SET FORTH IN THIS AGREEMENT OR IN OTHER WRITTEN AGREEMENTS SIGNED BY THE PARTIES
IN CONNECTION HEREWITH.
9.8 WAIVERS. The failure of Coast at any time or times to require Borrower to
strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and Coast shall not waive or
diminish any right of Coast later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Coast shall be deemed to have been waived
by any act or knowledge of Coast or its agents or employees, but only by a
specific written waiver signed by an authorized officer of Coast and delivered
to Borrower. Borrower waives demand, protest, notice of protest and notice of
default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any
11
commercial paper, instrument, account, General Intangible, document or
guaranty at any time held by Coast on which Borrower is or may in any way be
liable, and notice of any action taken by Coast, unless expressly required by
this Agreement.
9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Coast, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Coast, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast, but nothing herein shall relieve Coast from
liability for its own gross negligence or willful misconduct.
9.10 AMENDMENT. The terms and provisions of this Agreement may not be waived or
amended, except in a writing executed by Borrower and a duly authorized officer
of Coast.
9.11 TIME OF ESSENCE. Time is of the essence in the performance by Borrower of
each and every obligation under this Agreement.
9.12 ATTORNEYS FEES, COSTS AND CHARGES. Borrower shall reimburse Coast for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Coast, pursuant to, or
in connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any reasonable attorneys' fees and costs
Coast incurs in order to do the following: prepare and negotiate this Agreement
and the documents relating to this Agreement; obtain legal advice in connection
with this Agreement or Borrower; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, Account Debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of Borrower's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce Coast's
security interest in, the Collateral; and otherwise represent Coast in any
litigation relating to Borrower. If either Coast or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including (but not limited to) reasonable attorneys' fees and costs
incurred in the enforcement of, execution upon or defense of any order, decree,
award or judgment. Borrower shall also pay Coast's standard charges for
returned checks and for wire transfers, in effect from time to time. All
attorneys' fees, costs and charges to which Coast may be entitled pursuant to
this Paragraph may be charged by Coast to Borrower's loan account and shall
thereafter bear interest at the same rate as the Receivable Loans.
9.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Coast; provided, however, that
Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Coast, and any prohibited assignment shall
be void. No consent by Coast to any assignment shall release Borrower from its
liability for the Obligations.
9.14 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one Person,
their liability shall be joint and several, and the compromise of any claim
with, or the release of, any Borrower shall not constitute a compromise with, or
a release of, any other Borrower.
9.15 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower against
Coast, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Loan Agreement, or any other
present or future document or agreement, or any other transaction contemplated
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by Coast, its
directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of competent jurisdiction by the filing of a complaint
within one year after the first act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based, and the service of a
summons and complaint on an officer of Coast, or on any other person authorized
to accept service on behalf of Coast, within thirty (30) days thereafter.
Borrower agrees that such one-year period is a reasonable and sufficient time
for Borrower to investigate and act upon any such claim or cause of action. The
one-year period provided herein shall not be waived, tolled, or extended except
by the written consent of Coast in its sole discretion. This provision shall
survive any termination of this Loan Agreement or any other present or future
agreement.
9.16 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
12
manner to construe, limit, define or interpret any term or provision of this
Agreement. The term "including", whenever used in this Agreement, shall mean
"including (but not limited to)". This Agreement has been fully reviewed and
negotiated between the parties and no uncertainty or ambiguity in any term or
provision of this Agreement shall be construed strictly against Coast or
Borrower under any rule of construction or otherwise.
9.17 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Coast and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Coast to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Coast's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Los Angeles County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.18 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND COAST EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR BORROWER, IN ALL
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
Borrower:
DELPHI INFORMATION SYSTEMS, INC.
By
-------------------------------------------
President or Vice President
COAST:
COAST BUSINESS CREDIT, a division of Southern Pacific Thrift & Loan
Association
By
----------------------------------------
Title
----------------------------------------
13
COAST
SCHEDULE TO LOAN AND SECURITY AGREEMENT
BORROWER: DELPHI INFORMATION SYSTEMS, INC.
ADDRESS: 3501 ALGONQUIN ROAD, SUITE 500
ROLLING MEADOWS, ILLINOIS 60008
DATE: JANUARY 8, 1997
This Schedule forms an integral part of the Loan and Security Agreement between
Coast Business Credit, a division of Southern Pacific Thrift & Loan Association,
and the above-borrower of even date.
1. CREDIT LIMIT
(Section 1.1): Loans in an amount not to exceed the lesser of a total
of $4,000,000 at any one time outstanding (the "Maximum
Dollar Amount"), or the sum of (a) and (b) below:
(a) Loans (the "Receivable Loans") in an amount
not to exceed 75% of the amount of Borrower's
Eligible Receivables (as defined in Section 8
above). If dilution at any time exceeds 10%,
Coast may, in its sole discretion, reduce the
advance rate against Eligible Receivables.
(b) CAPEX Subline. Coast shall provide Borrower
amounts not to exceed $500,000 in the aggregate
"CAPEX Subline" for the purchase of new or used
equipment. Advances shall not exceed 60% of
invoice cost on new equipment less tax and
installation costs or 60% of the appraised
liquidation value on used equipment, less tax and
installation costs. Appraised liquidation value
shall be determined by Coast in the sole
discretion by an appraiser acceptable to Coast.
The CAPEX Subline shall terminate on December 31,
1997 and the outstanding amounts thereunder shall
be amortized over 36 months beginning on the last
day of the sixth month following the initial draw
of funds, plus interest payable monthly, with the
unpaid balance due and payable on the Maturity
Date unless this Agreement is automatically
renewed pursuant to Section 6.1 hereof.
The CAPEX Subline shall only be available if
(i) no Event of Default has occurred and is
continuing, (ii) Borrower's Net Worth is not less
than $2,500,000 at the time of the drawdown of
funds; and (iii) Borrower's ratio of EBITDA to
total debt service is not less than 1.25:1 at the
time of drawdown. For purposes of the above,
"EBITDA" shall mean the earnings of Borrower
before interest expense, tax payments,
depreciation and amortization. "Net Worth" shall
mean a sum equal to: (i) the net book value
(after deducting related depreciation,
obsolescence, amortization, valuation and other
proper reserves) at which the assets of Borrower
would be shown on a balance sheet at such date in
accordance with generally accepted accounting
principles, less (ii) the amount at which
Borrower's liabilities (other than capital stock,
surplus and subordinated debt) would be shown on
such balance sheet in accordance with generally
accepted accounting principles, and including as
liabilities all reserves for contingencies. The
EBITDA shall be determined on a six-month trailing
basis. In no event shall any advance on the CAPEX
Subline be less than $100,000. The CAPEX Subline
will be evidenced by that certain CAPEX Promissory
Note in the form requested by Coast.
2. INTEREST.
INTEREST RATE
(Section 1.2): A rate equal to the "Prime Rate" plus 2.5% for the
Receivable Loans and Prime Rate plus 3.5% for the CAPEX
Subline per annum, calculated on the basis of a 360-day
year for the actual number of days elapsed. The
interest rate applicable to all Loans shall be adjusted
monthly as of the first day of each month, and the
interest to be charged for each month shall be based on
the highest "Prime Rate" in effect during said month,
but in no event shall the rate of interest charged on
any Loans in any month be less than 9% per annum.
"Prime Rate" means the actual "Reference Rate" or the
substitute therefor of the Bank of America NT & SA
whether or not that rate is the lowest interest rate
charged by said bank. If the Prime Rate, as defined,
is unavailable, "Prime Rate" shall mean the highest of
the prime rates published in the Wall Street Journal on
the first business day of the month, as the base rate
on corporate
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loans at large U.S. money center commercial banks.
Notwithstanding the foregoing, the interest rate on the
Receivable Loans shall be reduced to Prime Rate plus 2%
upon Borrower achieving and maintaining a Net Worth of
not less than $6,500,000. The reduction shall be
effective upon receipt by Coast of Borrower's year end
audited financial statements reflecting the minimum Net
Worth required. If any subsequent financial statement
reflects a reduction in the Net Worth below the minimum
Net Worth of $6,500,000, the interest rate on the
Receivable Loans shall increase to Prime Rate plus 2.5%
beginning with the first day of the first month
following the Borrower's failure to maintain such
minimum Net Worth.
MINIMUM MONTHLY
INTEREST
(Section 1.2): $1,600,000 average daily loan balance.
3. FEES (Section 1.3):
Loan Fee: $60,000, payable concurrently herewith.
Facility Fee: $3,500, per calendar quarter, payable in advance (which
includes any prior deposits, less expenses).
Renewal Fee: .25% of the Maximum Dollar Amount on the date the
Agreement automatically renews pursuant to Section 6.1.
4. MATURITY DATE
(Section 6.1): January 31, 1999, subject to automatic renewal as
provided in Section 6.1 above, and early termination as
provided in Section 6.2 above.
EARLY TERMINATION FEE
(Section 6.2): A fee during the first anniversary of this Agreement of
2% of the Maximum Dollar Amount, and a fee of 1% of the
Maximum Dollar Amount thereafter, provided that no
early termination fee shall be due if the Agreement is
terminated by Lender.
5. REPORTING.
(Section 5.3):
Borrower shall provide Coast with the following:
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1. Monthly Receivable agings, aged by invoice date,
within ten days after the end of each month.
2. Monthly accounts payable agings, aged by invoice
date, and outstanding or held check registers
within ten days after the end of each month.
3. Monthly internally prepared financial statements,
as soon as available, and in any event within
thirty days after the end of each month.
4. Quarterly internally prepared financial
statements, as soon as available, and in any event
within forty-five 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 90 days following the end
of Borrower's fiscal year, certified by
independent certified public accountants
acceptable to Coast.
6. BORROWER INFORMATION:
PRIOR NAMES OF
BORROWER
(Section 3.2): McCracken Inc.
Delphi/McCracken, Inc.
Insurnet, Inc.
Delphi/Insurnet, Inc.
Mountain Staics Systems
Continental Systems, Inc.
Redshaw, Inc.
Delphi/Redshaw, Inc.
Compusult, Inc.
Specialty Program Services, Inc.
PRIOR TRADE
NAMES OF BORROWER
(Section 3.2): See above
EXISTING TRADE
NAMES OF BORROWER
(Section 3.2): CICS
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OTHER LOCATIONS AND
ADDRESSES (Section 3.3): None
MATERIAL ADVERSE
LITIGATION
(Section 3.10): None
7. OTHER COVENANTS
(Section 5.1): Borrower shall at all times comply with all of the
following additional covenants:
Without limiting any other term or condition herein, in
no event shall Coast have any obligations under this
Agreement unless and until each of the following
conditions have been satisfied as of the closing date
(and thereafter in the case of #3 and #6) or waived in
writing by Coast:
(1) Borrower shall have a minimum excess lending
availability of at least $500,000 after accounting
for Coast's initial funding.
(2) Borrower shall have no accounts payable more than
90 days past due from invoice date unless an
account payable is subject to a bona fide dispute
and Coast has waived such payable in its sole
discretion.
(3) Borrower shall at all times have a minimum Net
Worth of $2,000,000.
(4) Coast shall have reviewed and accepted in its sole
discretion Borrower's financial forecast.
(5) Coast shall have received such subordinations as
may be required in form and substance acceptable
to Coast in its sole discretion.
(6) Coast shall have received and, reviewed and not
disapproved of Borrower's 10Q and 10K as of the
latest filing date. As a covenant, Borrower
agrees to provide to Coast copies of such 10Q's
and 10K's as may hereafter be filed by Borrower.
(7) Coast's re-audit shall be satisfactory to Coast in
its sole discretion.
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(8) Borrower shall have been reinstated in good
standing in the State of Illinois (without
limiting Borrower's obligation to be in good
standing in such other states as may be necessary
or appropriate).
Borrower: Coast:
Delphi Information Systems, Inc. COAST BUSINESS CREDIT, a division of
Southern Pacific Thrift & Loan
By--------------------------------- Association
President or Vice President
By
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Title
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CAPEX PROMISSORY NOTE
$500,000 Los Angeles, California
As of January 8, 1997
FOR VALUE RECEIVED, the undersigned, Delphi Information Systems, Inc.,
hereby promises to pay to Coast Business Credit, a division of Southern Pacific
Thrift & Loan Association, ("Lender"), or order, at 12121 Wilshire Blvd., Suite
1111, Los Angeles, California, or at such other address as the holder may
specify in writing, the principal sum of Five Hundred Thousand Dollars
($500,000.00) or so much as shall have been drawn by the undersigned pursuant to
the terms of the Agreement (as defined below), plus interest in the manner and
upon the terms and conditions set forth below. This CAPEX Promissory Note
("Note") is made pursuant to that certain Loan and Security Agreement of even
date between the undersigned and Lender (collectively the "Agreement"), the
provisions of which are incorporated herein by this reference. Capitalized
terms herein, unless otherwise noted, shall have the meaning set forth in the
Agreement.
1.0 RATE AND PAYMENT OF INTEREST
This Note shall bear interest on the unpaid principal balance hereof
from time to time outstanding at a rate equal to the "Prime Rate" (as
hereinafter defined) plus 3.5% per annum. Interest shall be calculated on the
basis of a 360-day year for the actual number of days elapsed. As used herein,
the term "Prime Rate" shall mean the actual "Reference Rate" or the substitute
therefor of Bank of America NT & SA whether or not that rate is the lowest
interest rate charged by said bank. The interest rate applicable to this Note
shall be adjusted monthly, as of the first day of each month, and the interest
rate charged during each month shall be based on the highest Prime Rate in
effect during said month. If the Prime Rate is unavailable, "Prime Rate" shall
mean the highest of the prime rates published in the Wall Street Journal on the
first business day of the month, as the base rate of corporate loans at large
U.S. money center banks. Accrued interest shall be payable monthly, commencing
on January 31, 1997, and continuing on the last day of each succeeding month.
Principal of, and interest on, this Note shall be payable in lawful
money of the United States of America. If a payment hereunder becomes due and
payable on a Saturday, Sunday or legal holiday, the due date thereof shall be
extended to the next succeeding business day, and interest shall be payable
thereon during such extension.
2.0 SCHEDULE OF PRINCIPAL PAYMENTS
Subject to the provisions of Section 4.0 below, principal under this
Note shall be due and payable in accordance with the following schedule:
a. Subject to Section 2.0(b) below, thirty-five equal successive
monthly installments of principal beginning on July 31, 1997 and continuing on
the last day of each month thereafter; and
b. A final installment of all unpaid principal plus accrued and
unpaid interest and charges on June 30, 2000.
3.0 PREPAYMENT
Prepayment may be made under this Note in whole or in part subject to
the prepayment charge, as set forth in the Agreement. All prepayments shall be
applied in the inverse order of maturity of payments.
4.0 HOLDER'S RIGHT OF ACCELERATION
If the Agreement is terminated for any reason whatsoever, the entire
remaining principal balance and all accrued and unpaid interest and other fees
and charges with respect to this Note shall, at Coast's option, become due and
payable on the effective date of termination.
5.0 HOLDER'S RIGHTS UPON DEFAULT
In the event any payment of principal or interest on this Note is
not paid in full when due, or if any other default or event of default occurs
under the Loan Agreement or any other present or future instrument, document, or
agreement between Borrower and Coast, Coast may, at its option, at any time
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thereafter, declare the entire unpaid principal balance of this Note plus all
accrued interest to be immediately due and payable, without notice or demand.
Without limiting the foregoing, and without limiting Coast's other rights and
remedies, in the event any installment of principal or interest is not paid in
full on or before the date due, Borrower agrees that it would be impracticable
or extremely difficult to fix the actual damages resulting therefrom to Coast,
and therefore the Borrower agrees immediately to pay to Coast an amount equal to
5% of the installment (or portion thereof) not paid, as liquidated damages, to
compensate Coast for the internal administrative expenses in administering the
default. Without limiting the foregoing, and without limiting Coast's other
rights and remedies, in the event any installment of interest is not paid on or
before the date due, it shall thereafter bear like interest as the principal of
this Note. The acceptance of any installment of principal or interest by Coast
after the time when it becomes due, as herein specified, shall not be held to
establish a custom, or to waive any rights of Coast to enforce payment when due
of any further installments or any other rights, nor shall any failure or delay
to exercise any rights be held to waive the same.
All payments hereunder are to be applied first to costs and fees
referred to hereunder, second to the payment of accrued interest and the
remaining balance to the payment of principal. Any principal prepayment
hereunder, to the extent permitted under the Agreement, shall be applied against
principal payments in the inverse order of maturity. Coast shall have the
continuing and exclusive right to apply or reverse and reapply any and all
payments hereunder in its sole discretion.
6.0 ADDITIONAL RIGHTS OF HOLDER
If any installment of principal or interest hereunder is not paid when
due, the holder shall have, in addition to the rights set forth herein, in the
Agreement and under law, the right to compound interest by adding the unpaid
interest to principal, with such amount thereafter bearing interest at the rate
provided in this Note.
7.0 GENERAL PROVISIONS
7.1 If this Note is not paid when due or upon the occurrence of
an Event of Default, the undersigned further
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promises to pay all costs of collection, foreclosure fees, and reasonable
attorneys' fees incurred by the holder, whether or not suit is filed
hereon, and the fees, costs and expenses as provided in the Agreement.
7.2 The undersigned hereby consents to any and all renewals,
replacements and/or extensions of time for payment of this Note before, at
or after maturity.
7.3 The undersigned hereby consents to the acceptance, release
or substitution of security for this Note.
7.4 Presentment for payment, notice of dishonor, protest and
notice of protest are hereby expressly waived.
7.5 In no event whatsoever shall the interest rate and other
charges charged hereunder exceed the highest rate permissible under any law
which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto. In the event that a court determines that the
payee hereunder has received interest in excess of the highest rate
applicable hereto, the payee shall promptly refund such excess amount to
the undersigned and the provisions hereof shall be deemed amended to
provide for such permissible rate.
7.6 No delay or omission on the part of the holder of this Note
in exercising any right shall operate as a waiver thereof or of any other
right.
7.7 A waiver by the holder of this Note upon any one occasion
shall not be construed as a bar or waiver of any right or remedy on any
future occasion.
7.8 Should any one or more of the provisions of this Note be
determined illegal or unenforceable, all other provisions shall
nevertheless remain effective.
7.9 This Note cannot be changed, modified, amended or terminated
orally.
7.10 This Note shall be governed by, construed and enforced in
accordance with the laws of the State of
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California, without reference to the principles of conflicts of laws
thereof.
8.0 SECURITY FOR THE NOTE
This Note is secured by the Collateral described in the Agreement and
is subject to all of the terms and conditions thereof, including, but not
limited to, the remedies specified therein.
IN WITNESS WHEREOF, this Note has been executed and delivered as of
the date first set forth above.
DELPHI INFORMATION SYSTEMS, INC.
By: ___________________________________
Its: ___________________________________
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