Exhibit 10.3
_______________________________________________________________________________
LOAN AND SECURITY AGREEMENT
by and between
TURF PARTNERS, INC.,
a Delaware corporation
and
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank,
a California corporation
Dated as of June ___, 1999
_______________________________________________________________________________
Coast Business Credit Loan and Security Agreement
_______________________________________________________________________________
TABLE OF CONTENTS
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PAGE
1. DEFINITIONS 1
Account Debtor 1
Affiliate 1
Audit 1
Borrower 1
Borrower's Address 1
Business Day 1
Change of Control 1
Closing Date 2
Coast 2
Code 2
Collateral 2
Credit Limit 2
Default 2
Deposit Account 2
Account Debtor 2
Dollars or $ 2
Early Termination Fee 2
Eligible Inventory 2
Eligible Receivables 2
Equipment 3
Event of Default 3
GAAP 3
General Intangibles 3
Guarantor 4
Inventory 4
Inventory Loans 4
Investment Property 4
Letter of Credit 4
Letter of Credit Sublimit 4
Loan Documents 4
Loans 4
Material Adverse Effect 4
Maturity Date 4
Maximum Dollar Amount 4
Minimum Monthly Interest 4
Tangible Net Worth 4
Obligations 4
Other Terms 5
Permitted Liens 5
Person 5
Prime Rate 5
Receivable Loans 5
Receivables 6
Renewal Date 6
Renewal Fee 6
Solvent 6
Year 2000 Problem 6
2. CREDIT FACILITIES 6
2.1 Loans 6
2.2 Letters of credit 6
3. INTEREST AND FEES 7
3.1 Interest 7
3.2 Fees 7
4. SECURITY INTEREST 7
5. CONDITIONS PRECEDENT 7
5.1 Status of Accounts at Closing 7
5.2 Minimum Availability 9
5.3 Landlord Waivers/Warehouse Waivers 9
5.4 Executed Agreement 9
5.5 Opinion of Borrower's and Guarantor's Counsel 9
5.6 Priority of Coast's Liens 9
5.7 Insurance 9
5.8 Borrower's Existence 9
5.9 Organizational Documents 9
5.10 Taxes 9
5.11 Year 2000 Problem Assessment Certificate 9
5.12 Subordination of Long Term Debt 9
5.13 Management Background Checks 10
5.14 Lockbox/Blocked Account Agreements 11
5.15 Minimum Net Worth 11
5.16 Continuing Guaranty and Stock Pledge from Guarantor 11
5.17 Intercreditor Agreement 11
5.18 Review and Assignment of Leases/Licenses 11
5.19 Due Diligence 11
5.20 Other Documents and Agreements 11
6. REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE BORROWER 11
6.1 Existence and Authority 11
6.2 Name; Trade Names and Styles 12
6.3 Place of Business; Location of Collateral 12
6.4 Title to Collateral; Permitted Liens 12
6.5 Maintenance of Collateral 12
6.6 Books and Records 12
6.7 Financial Condition, Statements and Reports 12
6.8 Tax Returns and Payments; Pension Contributions 12
6.9 Compliance with Law 13
6.10 Litigation 13
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Coast Business Credit Loan and Security Agreement
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6.11 Use of Proceeds 13
6.12 Year 2000 Compliance 13
6.13 Merger of Accounting Systems. 13
6.14 Segregation of Inventory 13
6.15 Assignment of LicensesError! Bookmark not defined.
7. RECEIVABLES. 13
7.1 Representations Relating to Receivables 13
7.2 Representations Relating to Documents
and Legal Compliance 13
7.3 Schedules and Documents Relating to Receivables 15
7.4 Collection of Receivables 15
7.5 Remittance of Proceeds 15
7.6 Disputes 15
7.7 Returns 15
7.8 Verification 16
7.9 No Liability 16
8. ADDITIONAL DUTIES OF THE BORROWER 16
8.1 Financial and Other Covenants 16
8.2 Insurance 16
8.3 Reports 16
8.4 Access to Collateral, Books and Records 16
8.5 Negative Covenants 17
8.6 Litigation Cooperation 18
8.7 Further Assurances 18
9. TERM. 18
9.1 Maturity Date 18
9.2 Early Termination 18
9.3 Payment of Obligations 18
10. EVENTS OF DEFAULT AND REMEDIES. 19
10.1 Events of Default 19
10.2 Remedies 20
10.3 Standards for Determining Commercial Reasonableness 21
10.4 Power of Attorney 21
10.5 Application of Proceeds 23
10.6 Remedies Cumulative 23
11. GENERAL PROVISIONS 23
11.1 Interest Computation 23
11.2 Application of Payments 23
11.3 Charges to Accounts 23
11.4 Monthly Accountings 23
11.5 Notices 24
11.6 Severability 24
11.7 Integration 24
11.8 Waivers 24
11.9 No Liability for Ordinary Negligence 24
11.10 Amendment 24
11.11 Time of Essence 24
11.12 Attorneys Fees, Costs and Charges 24
11.13 Benefit of Agreement 25
11.14 Publicity 25
11.15 Paragraph Headings; Construction 25
11.16 Governing Law; Jurisdiction; Venue 25
11.17 Mutual Waiver of Jury Trial 25
11.18 Confidentiality 26
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Coast
Loan and Security Agreement
BORROWER: TURF PARTNERS, INC.,
A DELAWARE CORPORATION
ADDRESS: 00000 XXXXXXXXX XXXX
XXX XXXXX, XXXXXXXXXX 00000
DATE: JUNE __, 1999
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 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.)
Coast and the guarantor hereunder, Eco Soil Systems, Inc., a Nebraska
corporation anticipate entering into a term loan facility in the approximate
amount of Five Million Dollars ($5,000,000) (the "Term Loan") that will be
guaranteed by the Borrower hereunder. Borrower, Eco Soil Systems, Inc., and
Coast understand that said Term Loan is prospective and does not represent a
binding commitment by Coast to make said Term Loan.
1. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"ACCOUNT DEBTOR" means the obligor on a Receivable or General
Intangible.
"AFFILIATE" means, with respect to any Person, a relative, partner,
shareholder, 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 percent
(40%) of the total voting power of all classes of stock or other ownership
interests then
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Coast Business Credit Loan and Security Agreement
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outstanding of Borrower normally entitled to vote in the election
of directors or analogous governing body.
"CLOSING DATE" date of the initial funding under this Agreement.
"COAST" has the meaning set forth in the introduction to this
Agreement.
"CODE" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"COLLATERAL" has the meaning set forth in Section 4 hereof.
"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.
"DILUTION" to be determined by Coast in its sole discretion, shall
mean, without limitation, the amount of returns, chargebacks, discounts and
other items reducing the outstanding amounts of Receivables.
"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 INVENTORY" means Inventory which Coast, in its good faith
discretion, deems eligible for borrowing, based on such considerations as
Coast may from time to time deem appropriate. Without limiting the fact that
the determination of which Inventory is eligible for borrowing is a matter of
Coast's discretion, Inventory which does not meet the following requirements
will not be deemed to be Eligible Inventory: Inventory which (i) consists of
finished goods, in good, new and salable condition which is not perishable,
not obsolete or unmerchantable, and is not comprised of raw materials, work
in process, packaging materials or supplies; (ii) meets all applicable
governmental standards; (iii) has been manufactured in compliance with the
Fair Labor Standards Act; (iv) conforms in all respects to the warranties and
representations set forth in this Agreement; (v) is at all times subject to
Coast's duly perfected, first priority security interest; and (vi) is
situated at a one of the locations set forth on the Schedule.
"ELIGIBLE RECEIVABLES" means Receivables arising in the ordinary
course of Borrower's business from the sale of goods or rendition of
services, which Coast, in its good faith discretion, 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 their due date not to exceed 150 days past invoice date or
Receivables with selling terms of more than 90 days with the specific
exceptions that: (a) from March 1 through March 31 of each year, Borrower
will be able to obtain Loans against extended term Receivables invoiced
during August of the prior year, that are otherwise eligible for lending
purposes, in a total amount of Five Million Dollars ($5,000,000) with said
amount decreasing to Three Million Dollars ($3,000,000) for said extended
term Receivables during the period of April 1 through April 30, and (b) from
April 1 through May 15 of each year, Borrower will be able to obtain Loans
against extended term Receivables invoiced during September of the prior
year, that are otherwise eligible for lending purposes, in a total amount of
Five Million Dollars ($5,000,000);
(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 that are not payable in Dollars or with respect
to which the Account Debtor: (i) does not maintain its chief executive
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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. Section 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 respect to the Receivables;
(h) Receivables with respect to an Account Debtor whose total
obligations owing to Borrower exceed ten percent (10%) of all Eligible
Receivables, to the extent of the obligations owing by such Account Debtor in
excess of such percentage;
(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.
"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,
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Coast Business Credit Loan and Security Agreement
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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).
"GUARANTOR" means, Eco Soil Systems, Inc., a Nebraska corporation.
"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.
"INVENTORY LOANS" means the Loans described in Section 2.1(b) of the
Schedule.
"INVESTMENT PROPERTY" has the meaning set forth in Section 9115 of
the Code as in effect as of the date hereof.
"LETTER OF CREDIT" has the meaning set forth in Section 2.2 hereof.
"LETTER OF CREDIT SUBLIMIT" has the meaning set forth in Section 2.2
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 on a consolidated basis but
excluding Borrower's parent and Borrower's nonsubsidiary affiliates from such
consolidated basis, 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.
"NET WORTH" means shareholder's equity, PLUS subordinated debt
otherwise permitted hereunder, LESS goodwill. "Goodwill" will be treated on a
consolidated basis at the parent (i.e. Eco Soil) level of Borrower and, as a
result, goodwill at Borrower's level will be $0 at all times.
"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
(including, without limitation, Borrower's guaranty of Guarantor's
Obligations owing to Coast pursuant to the Term Loan), 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
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present or future instrument or agreement between Borrower and Coast.
"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.
"PERMITTED LIENS" means the following:
(a) purchase money security interests in specific items of
Equipment;
(b) leases of specific items of Equipment and technology
(including: (i) capital leases, and (ii) leases of BioJects, related
equipment and related technology and any filings or similar documentation
reasonably appropriate to evidence the parties' obligations and interests
with respect thereto provided that said documentation has been assigned to
Coast);
(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 and liens created hereunder;
(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 that any extension, renewal or
replacement lien is limited to the property encumbered by the existing lien
and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase; or
(h) liens in favor of customs and revenue authorities which
secure payment of customs duties in connection with the importation of goods.
Coast will have the right to require, as a condition to its consent
under clause (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 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 2.1(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.
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"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.
"TERM LOAN" means the prospective Five Million Dollars ($5,000,000)
term loan between Guarantor and Coast, which will be guaranteed by Borrower.
Borrower, Guarantor and Coast understand that said Term Loan is prospective
and does not represent a binding commitment by Coast to make said term loan.
"TERM LOAN AND SECURITY AGREEMENT" means, that certain Term Loan and
Security Agreement between Guarantor and Coast to be entered into in
connection with the prospective Term Loan.
"YEAR 2000 PROBLEM" means the risk that computer systems, software
and applications used by a Person may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any
dates after December 31, 1999.
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 or
Eligible Inventory without declaring a Default or an Event of Default if it
determines that there has occurred a Material Adverse Effect. At all times,
Coast will reserve an amount representing 100% of the accounts payable
obligations owing on consigned inventory located at all of Borrower's
locations including its Turf East location, with the amount and duration of
the reserve to be determined by Coast in its sole and absolute discretion.
2.2 LETTERS OF CREDIT. At the request of Borrower, Coast may, in its
sole discretion, arrange for the issuance of letters of credit for the
account of Borrower (collectively, "Letters of Credit"), by issuing
guarantees to the issuer of the letter of credit or by other means. All
Letters of Credit shall be in form and substance satisfactory to Coast in its
sole discretion. The aggregate face amount of all outstanding Letters of
Credit from time to time shall not exceed the amount shown on the Schedule
(the "Letter of Credit Sublimit"), and with respect to standby letters of
credit shall be reserved 100% and with respect to documentary letters of
credit shall be reserved 45% against Loans which would otherwise be available
hereunder. Borrower shall pay all bank charges for the issuance of Letters of
Credit. Any payment by Coast under or in connection with a Letter of Credit
shall constitute a Loan hereunder on the date such payment is made. Each
Letter of Credit shall have an expiry date no later than thirty (30) days
prior to the Maturity Date. Borrower hereby agrees to indemnify, save, and
hold Coast harmless from any loss, cost, expense, or liability, including
payments made by Coast, expenses, and reasonable attorneys' fees incurred by
Coast arising out of or in connection with any Letters of Credit. Borrower
agrees to be bound by the regulations and interpretations of the issuer of
any Letters of Credit guarantied by Coast and opened for Borrower's account
or by Coast's interpretations of any Letter of Credit issued by Coast for
Borrower's account, and Borrower understands and agrees that Coast shall not
be liable for any error, negligence, or mistake, whether of omission or
commission, in following Borrower's instructions or those contained in the
Letters of Credit or any modifications, amendments, or supplements thereto,
except for liability resulting from Coast's gross negligence or willful
misconduct. Borrower understands that Letters of Credit may require Coast to
indemnify the issuing bank for certain costs or liabilities arising out of
claims by Borrower against such
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issuing bank. Borrower hereby agrees to indemnify and hold Coast harmless
with respect to any loss, cost, expense, or liability incurred by Coast under
any Letter of Credit as a result of Coast's indemnification of any such
issuing bank. The provisions of this Agreement, as it pertains to Letters of
Credit, and any other present or future documents or agreements between
Borrower and Coast relating to Letters of Credit are cumulative.
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, including, without limitation, Borrower's guaranty of Guarantor's
Obligations owing to Coast pursuant to the Term Loan, 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 Borrower's
interests in that certain _________ dated _________, 1999 concerning
Borrower's lease of assets (including BioJects) and license of technology
from Guarantor, 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 one hundred and twenty (120) days past its invoice date except
for: (i) such accounts payable approved by Coast, and (ii) such accounts
payable for which extended terms have been granted by
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Coast Business Credit Loan and Security Agreement
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the vendor provided such extended terms accounts payable are no more than 45
days past their due dates. Accounts payable which have not been paid pursuant
to the terms of this paragraph and which have not been specifically excepted
will be restricted and reserved for.
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 WAIVERS. Coast shall have received duly executed
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 office locations where Borrower maintains any records.
5.4 EXECUTED AGREEMENT. Coast shall have received this Agreement
duly executed and in form and substance satisfactory to Coast in its sole and
absolute discretion.
5.5 OPINION OF BORROWER'S AND GUARANTOR'S COUNSEL. Coast shall have
received an opinion of Borrower's and Guarantor'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 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.
5.11 YEAR 2000 PROBLEM ASSESSMENT CERTIFICATE. Coast shall have
received a certificate from the relevant officer of Borrower to the effect
that, as the result of a comprehensive assessment undertaken by Borrower of
Borrower's computer systems, software and applications and after due inquiry
made to Borrower's material suppliers, vendors and customers, Borrower knows
of no facts that would cause Borrower to reasonably believe that the Year
2000 Problem will cause a Material Adverse Effect.
5.12 SUBORDINATION OF LONG TERM DEBT. Coast shall have received an
amendment to that certain Senior Subordinated Note and Warrant Purchase
Agreement (the "Note Purchase Agreement") dated ________ between Albion
Alliance Mezzanine Fund and Paribas Capital Funding LLC (the "Purchasers")
and Eco Soil Systems, Inc. wherein the Purchasers agree to subordinate all
obligations under the Purchase Agreement owed to them by Borrower and
Guarantor in favor of the Obligation owing by Borrower and Guarantor to
Coast, with the form and substance of said amendment to be acceptable to
Coast in its sole and absolute discretion.
5.13 MANAGEMENT BACKGROUND CHECKS. Coast shall have received the
results of management background checks, including without limitation, TRWs,
tax lien and litigation searches, LEXIS/nexis searches and such other
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Coast Business Credit Loan and Security Agreement
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5.14 due diligence as Coast may deem necessary on key officers of
Borrower with said background checks to be satisfactory to Coast in its sole
and absolute discretion.
5.15 LOCKBOX/BLOCKED ACCOUNT AGREEMENTS. Prior to the initial
funding, Coast shall have received evidence that all cash remittances of
Borrower shall be collected pursuant to one or more blocked account
agreements in form and substance acceptable to Coast and, prior to December
31, 1999, all cash remittances of Borrower must be collected pursuant to one
or more lockbox agreements in form and substance acceptable to Coast.
5.16 MINIMUM NET WORTH Borrower's Net Worth shall be no less than
Three Million Five Hundred Thousand Dollars ($3,500,000) on the Closing Date.
5.17 CONTINUING GUARANTY AND STOCK PLEDGE FROM GUARANTOR. Coast
shall have received the Continuing Guaranty of Guarantor along with a
Security Agreement - Stock Pledge from Guarantor pledging one hundred percent
(100%) of the issued and outstanding stock held in Borrower, with the form
and content of said agreements to be acceptable to Coast in its sole and
absolute discretion.
5.18 INTERCREDITOR AGREEMENT. Coast shall have received an
Intercreditor Agreement from First National Bank of San Diego ("First
National") wherein, among other things, First National and Coast agree that
Guarantor's guaranties of the obligations owing from Agricultural Supply,
Inc. ("Ag Supply") to First National and from Borrower to Coast,
respectively, shall be on a pari passu unsecured basis with the exceptions
that: (i) Guarantor's guaranty of Ag Supply's obligations to First National
shall be secured by Guarantor's pledge of its stock in Ag Supply, and (ii)
Guarantor's guaranty of Borrower's obligations to Coast shall be secured by
Guarantor's pledge of its stock in Borrower. The form and content of said
Intercreditor Agreement shall be acceptable to Coast in its sole and absolute
discretion.
5.19 REVIEW AND ASSIGNMENT OF LEASES/LICENSES. Coast shall have
received evidence that Borrower's lease of assets (including BioJects) and
license of technology from Guarantor have been memorialized and Coast shall
have the opportunity to review said leases/licenses with the results of said
review to be acceptable to Coast in its sole and absolute discretion.
Additionally, Coast shall have received assignments of said leases/licenses
and their proceeds from Borrower with the form and content of said
assignments to be acceptable to Coast in its sole and absolute discretion.
5.20 DUE DILIGENCE. Coast shall have completed its due diligence
with respect to Borrower.
5.21 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 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.
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Coast Business Credit Loan and Security Agreement
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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 of Borrower's present trade names. Borrower shall give Coast thirty (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.
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, lienholder, landlord, warehouseman 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. In the event that such
waivers and subordination specified by Coast have not been obtained from such
third parties, Coast will have a continuing right to institute a reserve for
payment of rent and other sums owing to any such third parties or Coast may
make any Collateral located on the premises of any such third party
ineligible for lending purposes. 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
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Coast Business Credit Loan and Security Agreement
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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 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 U of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of any Loan will be used
to purchase or carry any "margin stock" or to extend credit to others for the
purpose of purchasing or carrying any "margin stock."
6.12 YEAR 2000 COMPLIANCE. As the result of a comprehensive review
and assessment undertaken by Borrower of Borrower's computer systems,
software and applications and after due inquiry made of Borrower's material
suppliers, vendors and customers Borrower represents and warrants that the
Year 2000 problem will not result in a Material Adverse Effect.
6.13 MERGER OF ACCOUNTING SYSTEMS. Borrower and Guarantor shall have
completed the merger of their accounting systems by September 1, 1999.
6.14 SEGREGATION OF INVENTORY. Borrower shall at all times and at
all of its location, including its Turf East location, clearly segregate its
owned inventory from consigned inventory. Additionally, Borrower on its
inventory reporting provided to Coast shall at all times segregate its owned
inventory from consigned inventory.
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
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Coast Business Credit Loan and Security Agreement
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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 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
and is continuing. 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 material
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 and during the continuance of an
Event of Default, settle or adjust disputes or claims directly with Account
Debtors for amounts and upon terms which Coast considers advisable in its
reasonable credit judgment and, in all cases, Coast shall credit 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
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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 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
(including, without limitation, coverage in excess of the highest
consolidated inventory balance reflected in Borrower's financial statements
or reporting provided to Coast, with said coverage amount to be determined by
Coast in its sole discretion), 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
shall provide coverage for environmental related claims and issues, with said
coverage to be acceptable to Coast in its sole and absolute discretion, 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 one (1) Business Day's notice,
Coast, or its agents, shall have the right to perform Audits. Coast shall
take reasonable steps to keep confidential all confidential information
obtained in any Audit, but Coast shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant
to any subpoena or other legal process. The Audits shall be at 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
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accounting firm, service bureau or other third party to give Coast the same
rights with respect to access to books and records and related rights as
Coast has under this Loan Agreement. Borrower shall also take all necessary
steps to assure that its material accounting and software, systems and
applications, and those of its accounting firm, service bureau or any other
third party vendor or supplier, will, on a timely basis, adequately and
completely address the Year 2000 Problem in all material respects.
8.5 NEGATIVE COVENANTS. 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 not permitted hereunder
outside the ordinary course of business provided, however, that Borrower's
use and exploitation of the BoiJects and related equipment/technology as
permitted pursuant to the BioJect leases will be deemed to be in the ordinary
course of Borrower's business;
(d) sell or transfer any Collateral, except for: (i) the sale of
finished Inventory in the ordinary course of Borrower's business, (ii) the
sale of obsolete or unneeded Equipment in the ordinary course of business,
and (iii) other sales or transfers the aggregate market value of such
Collateral sold or otherwise disposed of in any year not to exceed Five
Hundred Thousand Dollars ($500,000) and the consideration received for such
Collateral being at least equal to the fair market value of such Collateral
provided: (i) such sales could not reasonably be expected to have a Material
Adverse Effect, and (ii) no Event of Default has occurred and is continuing
or will result from such sales or transfers;
(e) sell Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis wherein the proceeds of all of said
sales exceed ten percent (10%) of Borrower's total sales of any kind during
any monthly period;
(f) 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;
(g) incur any debts not permitted hereunder, outside the ordinary
course of business, which would have a Material Adverse Effect;
(h) guarantee or otherwise become liable with respect to the
obligations of another party or entity other than guarantees pursuant to the
Term Loan and guarantees with respect to the Note Purchase Agreement;
(i) pay or declare any dividends or distributions on the
ownership interests in Borrower (except for: (i) dividends or distributions
payable solely in stock form of ownership interests in Borrower), and (ii)
upstreaming of funds to Guarantor in an amount not to exceed 75% of net
income per month; PROVIDED, HOWEVER, that the total of said upstreaming
cannot exceed (y) 75% of period-to-date net income, and (z) 75% of fiscal
year end net income. Said calculation of period-to-date net income will
commence with the month of July, 1999. Notwithstanding the foregoing, any
amounts paid by Borrower to Guarantor as part of the initial funding of Loans
hereunder will not be subject to the limitations of this paragraph including
the upstreaming limitations of this paragraph;
(j) sidestream funds or distributions of any kind to other
subsidiaries of Guarantor;
(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
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Coast Business Credit Loan and Security Agreement
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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 one hundred twenty (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 (i) at
any time after the occurrence and during the continuance of an Event of
Default, without notice, effective immediately and (ii) at any time if the
Term Loan is terminated for any reason prior to its respective Maturity Date,
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 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, the Renewal Date, or on any earlier effective date of termination,
there are any outstanding Letters of Credit issued by Coast or issued by
another institution based upon an application, guarantee, indemnity or
similar agreement on the part of Coast, then on such date Borrower shall
provide to Coast cash collateral in an amount equal to the face amount of all
such Letters of Credit plus all interest, fees and costs 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 good faith 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
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Coast Business Credit Loan and Security Agreement
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(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 with respect to Loans
including, but not limited to, principal, interest, fees, costs, and expenses
relating thereto, outstanding at any time shall exceed the Credit Limit
provided, however, that if the excess is solely caused by Coast=s reduction
of advance rates against Eligible Receivables or Eligible Inventory and there
is no other Event of Default that has occurred and continuing, Borrower will
have five days to repay said excess before said excess will automatically
become an Event of Default; 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 thirty (30) 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 fifteen (15) 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 and such
failure could reasonably be expected to have a Material Adverse Effect; 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 which, with respect only to the commencement of
proceedings against Borrower or any Guarantor, is (i) not timely
controverted, or (ii) not cured by the dismissal thereof within forty-five
(45) days after the date commenced; 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
forty-five (45) 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 which, with respect only to the commencement of
proceedings against such third party, is (i) not timely controverted, or (ii)
not cured by the dismissal thereof within forty-five (45) days after the date
commenced; 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
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Coast Business Credit Loan and Security Agreement
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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.
(r) If an Event of Default, as defined in the Term Loan and
Security Agreement, has occurred.
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;
(iii) and 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. 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
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Coast Business Credit Loan and Security Agreement
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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 during 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 seven (7)
days prior to the sale, and, in the case of a public sale, notice of the sale
is published at least seven (7) days before the sale in a newspaper of
general circulation in the county where the sale is to be conducted;
(b) Notice of the sale describes the collateral in 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 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) After and during the continuance of an Event of Default,
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) After and during the continuance of an Event of Default,
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
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Coast Business Credit Loan and Security Agreement
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mechanic's, materialmen's or other lien, or assignment or satisfaction of
mechanic's, materialmen'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) After and during the continuance of an Event of Default, pay,
contest or settle any lien, charge, encumbrance, security interest and
adverse claim in or to any of the Collateral, or any judgment based thereon,
or otherwise take any action to terminate or discharge the same;
(g) After and during the continuance of an Event of Default,
grant extensions of time to pay, compromise claims and settle Receivables and
General Intangibles for less than face value and execute all releases and
other documents in connection therewith;
(h) After and during the continuance of an Event of Default, pay
any sums required on account of Borrower's taxes or to secure the release of
any liens therefor, or both;
(i) After and during the continuance of an Event of Default,
settle and adjust, and give releases of, any insurance claim that relates to
any of the Collateral and obtain payment therefor;
(j) Instruct any third party having custody or control of any
books or records belonging to, or relating to, Borrower to give Coast the
same rights of access and other rights with respect thereto as Coast has
under this Agreement; and
(k) After and during the continuance of an Event of Default, 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 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
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Coast Business Credit Loan and Security Agreement
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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 two (2)
Business Days after receipt by Coast of immediately available funds, and, for
purposes of the foregoing, any such funds received in the bank account
designated by Coast during Coast's normal business hours, shall be deemed
received on the day they are received PROVIDED, HOWEVER, if in the future
Coast's standard operating procedure should change, for a majority of Coast's
borrowers by number, with respect to deeming items of payment received on the
same day as they are received during normal business hours, Borrower agrees
to abide by such change. Coast shall be entitled to charge Borrower's account
for such two (2) 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 two (2) Business Days of
"clearance" or "float" actually occur, and shall be deemed to be the
equivalent of charging two (2) Business Days of interest on such collections.
This across-the-board two (2) 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. 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 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.
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Coast Business Credit Loan and Security Agreement
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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 and Coast 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 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
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Coast Business Credit Loan and Security Agreement
_______________________________________________________________________________
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 without the consent of
Borrower. Coast reserves the right to syndicate all or a portion of the
transaction created herein or sell, assign, transfer, negotiate, or grant
participations in all or any part of, or any interest in Coast's rights and
benefits hereunder. In connection with any such syndication, assignment or
participation, Coast may disclose all documents and information which Coast
now or hereafter may have relating to Borrower or Borrower's business. To the
extent that Coast assigns its rights and obligations hereunder to a third
Person, Coast thereafter shall be released from such assigned obligations to
Borrower.
11.14 PUBLICITY. Coast and Borrower are hereby authorized, at their
own 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 CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
11.18 CONFIDENTIALITY. Coast will maintain the confidentiality of
any non public information marked as confidential and relating to the
business operations and methodology of Borrower and financial performance of
Borrower ("Borrower Information") provided to Coast solely by the Borrower as
required under the terms of this Agreement, and will not disclose Borrower
Information to any person, other than employees, agents, attorneys or
accountants of Coast. Coast will not disclose Borrower Information to any
other party unless, prior to such disclosure, Coast obtains an executed
acknowledgment binding such party to maintain the confidentiality of the
information, prohibiting its disclosure except for the purposes permitted
under this Agreement, and agreeing that the information may not be used to
compete with the Borrower in any way. In the event Coast receives a subpoena
or other process for any Borrower Information, it will immediately
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Coast Business Credit Loan and Security Agreement
_______________________________________________________________________________
give notice in writing of the subpoena or other process, including a copy
thereof, to Borrower.
BORROWER:
TURF PARTNERS, INC.,
a Delaware corporation
By /s/ Xxxxxxx X. Xxxxx
------------------------------------
Chairman of the Board
By /s/ Xxxx Xxxxxxx
------------------------------------
Secretary or Assistant Secretary
COAST:
COAST BUSINESS CREDIT,
a division of Southern Pacific Bank,
a California corporation
By /s/ Xxxx Xxxxxxx
------------------------------------
Title: Vice President
------------------------------------
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