EXHIBIT 10.10
COAST BUSINESS CREDIT /Registered ▇▇▇▇/
LOAN AND SECURITY AGREEMENT
BORROWER: OCEAN OPTIQUE DISTRIBUTORS, INC.
ADDRESS: ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
BORROWER: CLASSIC OPTICAL, INC.
ADDRESS: ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
BORROWER: EUROPEAN MANUFACTURERS AGENCY, INC.
ADDRESS: ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
DATE: MAY 28, 1997
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between COAST
BUSINESS CREDIT, a division of Southern Pacific Thrift & Loan Association
("Coast"), a California corporation, with offices at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and the three (3) borrowers named
above (jointly and severally, the "Borrower") whose chief executive office is
located at the above address ("Borrower's Address"). The Schedule to this
Agreement (the "Schedule") shall for all purposes be deemed to be a part of this
Agreement, and the same is an integral part of this Agreement. (Definitions of
certain terms used in this Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 LOANS. Coast will make loans to Borrower (the "Loans"), in
amounts determined by Coast in its sole discretion, up to the amounts (the
"Credit Limit") shown on the Schedule, provided no Default or Event of Default
has occurred and is continuing.
1.2 INTEREST. All Loans and all other monetary Obligations
shall bear interest at the rate shown on the Schedule, except where expressly
set forth to the contrary in this Agreement. Interest shall be payable monthly,
on the last day of the month. Interest may, in Coast's discretion, be charged to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans.
Regardless of the amount of Obligations that may be outstanding from time to
time, Borrower shall pay Coast minimum monthly interest during the term of this
Agreement with respect to the Receivable Loans in the amount set forth on the
Schedule (the "Minimum Monthly Interest").
1.3 FEES. Borrower shall pay Coast the fee(s) shown on the
Schedule, which are in addition to all interest and other sums payable to Coast
and are not refundable.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance
of all of the Obligations when due, Borrower hereby grants to Coast a security
interest in all of Borrower's interest in the following, whether now owned or
hereafter acquired, and wherever located: All Receivables, Inventory, Equipment,
and General Intangibles, including, without limitation, all of Borrower's
investment properties, Deposit Accounts, and all money, and all property now or
at any time in the future in Coast's possession (including claims and credit
balances), and all proceeds of any of the foregoing (including proceeds of any
insurance policies, proceeds of proceeds, and claims against third parties), all
products of any of the foregoing, and all books and records related to any of
the foregoing (all of the foregoing, together with all other property in which
Coast may now or in the future be granted a lien or security interest, is
referred to herein, collectively, as the "Collateral").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Coast to enter into this Agreement and to
make Loans, Borrower represents and warrants to Coast as follows, and Borrower
covenants that the following representations will continue to be true, and that
Borrower will at all times comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a
corporation, is and will continue to be, duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation. Borrower
is and will continue to be qualified and licensed to do business in all
jurisdictions in which any failure to do so would have a material adverse effect
on Borrower. The execution, delivery and performance by Borrower of this
Agreement, and all other documents contemplated hereby (i) have been duly and
validly authorized, (ii) are enforceable against Borrower in accordance with
their terms (except as enforcement may be limited by equitable principles and by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
creditors' rights generally), and (iii) do not violate Borrower's articles or
certificate of incorporation, or Borrower's by-laws, or any law or any material
agreement or instrument which is binding upon Borrower or its property, and (iv)
do not constitute grounds for acceleration of any material indebtedness or
obligation under any material agreement or instrument which is binding upon
Borrower or its property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set
forth in the heading to this Agreement is its correct name. Listed on the
Schedule are all prior names of Borrower and all of Borrower's present and prior
trade names. Borrower shall give Coast 30 days' prior written notice before
changing its name or doing business under any other name. Borrower has complied,
and will in the future comply, with all laws relating to the conduct of business
under a fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set
forth in the heading to this Agreement is Borrower's chief executive office. In
addition, Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule. Borrower will give Coast at least 30 days
prior written notice before opening any additional place of business, changing
its chief executive office, or moving any of the Collateral to a location other
than Borrower's Address or one of the locations set forth on the Schedule.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and
will at all times in the future be, the sole owner of all the Collateral, except
for items of Equipment which are leased by Borrower. The Collateral now is and
will remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Coast now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Coast and the Collateral against all claims of
others. None of the Collateral now is or will be affixed to any real property in
such a manner, or with such intent, as to become a fixture. Borrower is not and
will not become a lessee under any real property lease pursuant to which the
lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will
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prohibit, restrain or impair Borrower's right to remove any Collateral from the
leased premises. Whenever any Collateral is located upon premises in which any
third party has an interest (whether as owner, mortgagee, beneficiary under a
deed of trust, lien or otherwise), Borrower shall, whenever requested by Coast,
use its best efforts to cause such third party to execute and deliver to Coast,
in form acceptable to Coast, such waivers and subordinations as Coast shall
specify, so as to ensure that Coast's rights in the Collateral are, and will
continue to be, superior to the rights of any such third party. Borrower will
keep in full force and effect, and will comply with all the terms of, any lease
of real property where any of the Collateral now or in the future may be
located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the
Collateral in good working condition, and Borrower will not use the Collateral
for any unlawful purpose. Borrower will immediately advise Coast in writing of
any material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will
maintain at Borrower's Address complete and accurate books and records,
comprising an accounting system in accordance with generally accepted accounting
principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered to Coast have been, and will be,
prepared in conformity with generally accepted accounting principles (except, in
the case of unaudited financial statements, for the absence of footnotes and
subject to normal year-end adjustments) and now and in the future will fairly
reflect the financial condition of Borrower, at the times and for the periods
therein stated. Between the last date covered by any such statement provided to
Coast and the date hereof, there has been no material adverse change in the
financial condition or business of Borrower. Borrower is now and will continue
to be solvent.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower
has timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and Borrower has timely paid, and will
timely pay, all foreign, federal, state and local taxes, assessments, deposits
and contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Coast in writing
of the commencement of, and any material development in, the proceedings, and
(iii) posts bonds or takes any other steps required to keep the contested taxes
from becoming a lien upon any of the Collateral. As of the date hereof, Borrower
is unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will
comply, in all material respects, with all provisions of all material foreign,
federal, state and local laws and regulations relating to Borrower, including,
but not limited to, those relating to Borrower's ownership of real or personal
property, the conduct and licensing of Borrower's business, and environmental
matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is
no claim, suit, litigation, proceeding or investigation pending or to best of
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any
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governmental agency (or any basis therefor known to Borrower) which may result,
either separately or in the aggregate, in any material adverse change in the
financial condition or business of Borrower, or in any material impairment in
the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Coast in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of
Fifty Thousand Dollars ($50,000.00) or more, or involving One Hundred Thousand
Dollars ($100,000.00) or more in the aggregate.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used
solely for lawful business purposes. Borrower is not purchasing or carrying any
"margin stock" (as defined in Regulation G of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of any Loan will be used to
purchase or carry any "margin stock" or to extend credit to others for the
purpose of purchasing or carrying any "margin stock."
4. RECEIVABLES.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower
represents and warrants to Coast as follows: Each Receivable with respect to
which Loans are requested by Borrower shall, on the date each Loan is requested
and made, represent an undisputed bona fide existing unconditional obligation of
the Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL
COMPLIANCE. Borrower represents and warrants to Coast as follows: All statements
made and all unpaid balances appearing in all invoices, instruments and other
documents evidencing the Receivables are and shall be true and correct and all
such invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be.
All sales and other transactions underlying or giving rise to each Receivable
shall fully comply with all applicable laws and governmental rules and
regulations. All signatures and indorsements on all documents, instruments, and
agreements relating to all Receivables are and shall be genuine, and all such
documents, instruments and agreements are and shall be legally enforceable in
accordance with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower
shall deliver to Coast transaction reports and loan requests, schedules of
Receivables, and schedules of collections, all on Coast's standard forms;
provided, however, that Borrower's failure to execute and deliver the same shall
not affect or limit Coast's security interest and other rights in all of
Borrower's Receivables, nor shall Coast's failure to advance or lend against a
specific Receivable affect or limit Coast's security interest and other rights
therein. Loan requests received after 10:30 AM will not be considered by Coast
until the next Business Day. Together with each such schedule, or later if
requested by Coast, Borrower shall furnish Coast with copies (or, at Coast's
request, originals) of all contracts, orders, invoices, and other similar
documents, and all original shipping instructions, delivery receipts, bills of
lading, and other evidence of delivery, for any goods the sale or disposition of
which gave rise to such Receivables, and Borrower warrants the genuineness of
all of the foregoing. Borrower shall also furnish to Coast an aged accounts
receivable trial balance in such form and at such intervals as Coast shall
request. In addition, Borrower shall deliver to Coast, upon Coast's request, the
originals of all instruments, chattel paper, security agreements, guarantees and
other documents and property evidencing or securing any Receivables, upon
receipt thereof and in the same form as received, with all necessary
indorsements, all of which shall be with recourse. Borrower shall also provide
Coast with copies of all credit memos as and when requested by Coast.
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right
to collect all Receivables,
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unless and until an Event of Default has occurred. Borrower shall hold all
payments on, and proceeds of, Receivables in trust for Coast, and Borrower shall
deliver all such payments and proceeds to Coast within one Business Day after
receipt by Borrower, in their original form, duly endorsed to Coast, to be
applied to the Obligations in such order as Coast shall determine. 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
will use good faith efforts to enable Borrower to maintain its blocked account
at Republic National Bank of Miami provided Coast is able to enter into an
agreement, in form and substance satisfactory to Coast, with Republic National
Bank of Miami for the maintenance of that account. Coast or its designee may, at
any time with prior notice to Borrower notify Account Debtors that Coast has
been granted a security interest in the Receivables.
4.5. REMITTANCE OF PROCEEDS. All proceeds arising from the
disposition of any Collateral shall be delivered to Coast within one Business
Day after receipt by Borrower, in their original form, duly endorsed to Coast,
to be applied to the Obligations in such order as Coast shall determine.
Borrower agrees that it will not commingle proceeds of Collateral with any of
Borrower's other funds or property, but will hold such proceeds separate and
apart from such other funds and property and in a constructive trust for Coast.
Nothing in this Section limits the restrictions on disposition of Collateral set
forth elsewhere in this Agreement.
4.6 DISPUTES. Borrower shall notify Coast promptly of all
disputes or claims relating to Receivables. Borrower shall not forgive
(completely or partially), compromise or settle any Receivable for less than
payment in full, or agree to do any of the foregoing, except that Borrower may
do so, provided that: (i) Borrower does so in good faith, in a commercially
reasonable manner, in the ordinary course of business, and in arm's length
transactions, which are reported to Coast on the regular reports provided to
Coast; (ii) no Default or Event of Default has occurred and is continuing; and
(iii) taking into account all such discounts settlements and forgiveness, the
total outstanding Loans will not exceed the Credit Limit. Coast may, at any time
after the occurrence of an Event of Default, settle or adjust disputes or claims
directly with Account Debtors for amounts and upon terms which Coast considers
advisable in its reasonable credit judgment and, in all cases, Coast shall
credit Borrower's Loan account with only the net amounts received by Coast in
payment of any Receivables.
4.7 RETURNS. Provided no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower shall promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount. In the event any attempted return occurs after the
occurrence of any Event of Default, Borrower shall (i) hold the returned
Inventory in trust for Coast, (ii) segregate all returned Inventory from all of
Borrower's other property, (iii) conspicuously label the returned Inventory as
subject to Coast's security interest, and (iv) immediately notify Coast of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Coast's request deliver such
returned Inventory to Coast.
4.8 VERIFICATION. Coast may, from time to time, verify
directly with the respective Account Debtors the validity, amount and other
matters relating to the Receivables, by means of mail, telephone or otherwise,
either in the name of Borrower or Coast or such other name as Coast may choose.
4.9 NO LIABILITY. Coast shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss or
destruction of, any goods, the sale or other disposition of which gives rise to
a Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor
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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 negligence or willful
misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all
times comply with the financial and other covenants set forth in the Schedule.
5.2 INSURANCE. Borrower shall, at all times insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to Coast, in such form and amounts as Coast
may reasonably require, and Borrower shall provide evidence of such insurance to
Coast, so that Coast is satisfied that such insurance is, at all times, in full
force and effect. All liability insurance policies of Borrower shall name Coast
as an additional insured, and all property casualty and related insurance
policies of Borrower shall name Coast as a loss payee thereon and Borrower shall
cause a lenders loss payee endorsement in form reasonably acceptable to Coast.
Upon receipt of the proceeds of any such insurance, Coast shall apply such
proceeds in reduction of the Obligations as Coast shall determine in its sole
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, Coast shall release to Borrower insurance proceeds with
respect to Equipment and Inventory totaling less than Fifty Thousand Dollars
($50,000.00), which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid. Coast may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Coast may, but is
not obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Coast copies of all reports made to insurance companies.
5.3 REPORTS. Borrower, at its expense, shall provide Coast
with the written reports set forth in the Schedule, and such other written
reports with respect to Borrower (including budgets, sales projections,
operating plans and other financial documentation), as Coast shall from time to
time reasonably specify.
5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable
times, and on one Business Day's notice, Coast, or its agents, shall have the
right to inspect, audit and copy Borrower's books and records and the Collateral
(the "Audits"). However, Coast shall use reasonable good faith efforts to give
Borrower three (3) Business Days notice of regularly scheduled 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 ($750.00) per
person per day (or such higher amount as shall represent Coast's then current
standard charge for the same), plus reasonable out of pocket expenses. Borrower
will not enter into any agreement with any accounting firm, service bureau or
third party to store Borrower's books or records at any location other than
Borrower's Address, without first notifying Coast of the same and obtaining the
written agreement from such accounting firm, service bureau or other third party
to give Coast the same rights with respect to access to books and records and
related rights as Coast has under this Loan Agreement.
5.5 NEGATIVE COVENANTS. Borrower shall not, without Coast's
prior written consent, do any of the following:
(i) merge or consolidate with another corporation or entity, except in a
transaction in which (A) the shareholders of the Borrower hold at least 50% of
the common stock and all other capital stock of the surviving corporation
immediately after such merger or
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consolidation, and (B) the Borrower is the surviving corporation;
(ii) acquire any assets, except (A) in the ordinary course of business,
or (B) in a transaction or a series of transactions not involving the payment of
an aggregate amount in excess of Fifty Thousand Dollars ($50,000.00) .
(iii) enter into any material other transaction outside the ordinary
course of business;
(iv) sell or transfer any Collateral, except for the sale of finished
Inventory in the ordinary course of Borrower's business, and except for the sale
of obsolete or unneeded Equipment in the ordinary course of business;
(v) store any Inventory or other Collateral with any warehouseman or
other third party;
(vi) sell any Inventory on a sale-or-return, guaranteed sale or other
contingent basis;
(vii) make any loans of any money or other assets, except (A) advances to
customers or suppliers in the ordinary course of business, (B) travel advances,
employee relocation loans and other employee loans and advances in the ordinary
course of business, and (C) loans to employees, officers and directors for the
purpose of purchasing equity securities of the Borrower;
(viii) incur any debts, outside the ordinary course of business, which
would have a material, adverse effect on Borrower or on the prospect of
repayment of the Obligations;
(ix) guarantee or otherwise become liable with respect to the obligations
of another party or entity;
(x) pay or declare any dividends on Borrower's Common stock (except for
dividends payable solely in stock of Borrower, amongst Borrowers or upon
Preferred Stock currently issued with the express written consent of Coast);
(xi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Borrower's stock, except that Borrower may repurchase stock
owned by employees, directors and consultants of Borrower pursuant to terms of
employment, consulting or other stock restriction agreements at such time as any
such employee, director or consultant terminates his or her affiliation with the
Borrower, for an aggregate purchase price not to exceed Fifty Thousand Dollars
($50,000.00) in any fiscal year;
(xii) make any change in Borrower's capital structure which would have a
material adverse effect on Borrower or on the prospect of repayment of the
Obligations; or
(xiii) dissolve to elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default would occur as a result of such
transaction.
5.6 LITIGATION COOPERATION. Should any third-party suit or
proceeding be instituted by or against Coast with respect to any Collateral or
relating to Borrower, Borrower shall, without expense to Coast, make available
Borrower and its officers, employees and agents an Borrower's books and records,
to the extent that Coast may deem them reasonably necessary in order to
prosecute or defend any such suit or proceeding.
5.7 INDEMNITY. Borrower hereby agrees to indemnify Coast and
hold Coast harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, reasonable costs and
expenses (including reasonable attorneys' fees), of every nature, character and
description, which Coast may sustain or incur based upon or arising out of any
of the Obligations, any actual or alleged failure to collect and pay over any
withholding or other tax relating to Borrower or its employees, any relationship
or agreement between Coast and Borrower, any actual or alleged failure of Coast
to comply with any writ of attachment or other legal process relating to
Borrower or any of its property, or any other matter, cause or thing
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whatsoever occurred, done, omitted or suffered to be done by Coast relating to
Borrower or the Obligations (except any such amounts sustained or incurred as
the result of the negligence or willful misconduct of Coast). Notwithstanding
any provision in this Agreement to the contrary, the indemnity agreement set
forth in this Section shall survive any termination of this Agreement and shall
for all purposes continue in full force and effect.
5.8 FURTHER ASSURANCES. Borrower agrees, at its expense, on
request by Coast, to execute all documents and take all actions, as Coast, may
deem reasonably necessary or useful in order to perfect and maintain Coast's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect
until the maturity date set forth on the Schedule (the "Maturity Date");
provided that the Maturity Date shall automatically be extended, and this
Agreement shall automatically and continuously renew, for successive additional
terms of one year each, unless one party gives written notice to the other, not
less than one hundred twenty (120) days prior to the next Maturity Date, that
such party elects to terminate this Agreement effective on the next Maturity
Date. If this Agreement is renewed under this Section 6.1, Borrower shall pay to
Coast a renewal fee (the "Renewal Fee") in the amount shown in the Schedule. The
Renewal Fee shall be due and payable on the effective date of renewal and
thereafter shall incur interest at a rate equal to the rate applicable to the
Receivable Loans.
6.2 EARLY TERMINATION. This Agreement may be terminated prior
to the Maturity Date as follows: (i) by Borrower, effective three Business Days
after written notice of termination is given to Coast; or (ii) by Coast at any
time after the occurrence of an Event of Default, without notice, effective
immediately. If this Agreement is terminated by Borrower or by Coast under this
Section 6.2, Borrower shall pay to Coast a termination fee (the "Early
Termination Fee") in the amount shown on the Schedule. The Early Termination Fee
shall be due and payable on the effective date of termination and thereafter
shall bear interest at a rate equal to the rate applicable to the Receivable
Loans.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any
earlier effective date of termination, Borrower shall pay and perform in full
all Obligations, whether evidenced by installment notes or otherwise, and
whether or not all or any part of such Obligations are otherwise then due and
payable. Without limiting the generality of the foregoing, if on the Maturity
Date, or on any earlier effective date of termination, there are any outstanding
Letters of Credit issued by Coast or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Coast,
then on such date Borrower shall provide to Coast cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Coast's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Coast's security interests in all of the Collateral and all of
the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Coast, Coast may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Coast, nor shall any such termination relieve Borrower of any
Obligation to Coast, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Coast shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be required to fully terminate Coast's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
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7.1 EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" under this Agreement, and Borrower
shall give Coast immediate written notice thereof:
(a) Any material warranty, representation, statement, report
or certificate made or delivered to Coast by Borrower or any of Borrower's
officers, employees or agents, now or in the future, shall be untrue or
misleading in a material respect; or
(b) Borrower shall fail to pay when due any Loan or any
interest thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any
time shall exceed the Credit Limit; or
(d) Borrower shall fail to deliver the proceeds of Collateral
to Coast as provided in Section 4.5 above, or shall fail to give Coast access to
its books and records or Collateral as provided in Section 5.4 above, or shall
breach any negative covenant set forth in Section 5.5 above; or
(e) Borrower shall fail to comply with the financial covenants
(if any) set forth in the Schedule or shall fail to perform any other
non-monetary Obligation which by its nature cannot be cured; or
(f) Borrower shall fail to perform any other non-monetary
Obligation, which failure is not cured within ten (10-) Business Days after the
date due; or
(g) Any levy, assessment, attachment, seizure, lien or
encumbrance (other than a Permitted Lien) is made on all or any part of the
Collateral which is not cured within ten (10) Business Days after the occurrence
of the same; or
(h) Any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure period or waived in writing by the holder of the Permitted Lien; or
(i) Borrower breaches any material contract or obligation,
which has or may reasonably be expected to have a material adverse effect on
Borrower's business or financial condition; or
(j) Dissolution, termination of existence, insolvency or
business failure of Borrower; or appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or
(k) The commencement of any proceeding against Borrower or any
guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, which is not cured
by the dismissal thereof within thirty (30) days after the date commenced; or
(l) Revocation or termination of, or limitation or denial of
liability upon, any guaranty of the Obligations or any attempt to do any of the
foregoing, or commencement of proceedings by any guarantor of any of the
Obligations under any bankruptcy or insolvency law; or
(m) Revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or
(n) Borrower makes any payment on account of any indebtedness
or obligation which has been subordinated to the Obligations, other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
his subordination agreement; or
9
if any Person who has subordinated such indebtedness or obligations terminates
or in any way limits his subordination agreement; or
(o) There shall be a change in the record or beneficial
ownership of an aggregate of more than twenty percent (20%) of the outstanding
shares of stock of Borrower, in one or more transactions, compared to the
ownership of outstanding shares of stock of Borrower in effect on the date
hereof, without the prior written consent of Coast; 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,
fradulent conveyance or similar law; or
(q) There shall be a material adverse change in Borrower's
business or financial condition; or
(r) Coast, acting in good faith and in a commercially
reasonable manner, deems itself insecure because of the occurrence of an event
prior to the effective date hereof of which Coast had no knowledge on the
effective date or because of the occurrence of an event on or subsequent to the
effective date. Coast may cease making any Loans hereunder during any of the
above cure periods, and thereafter if an Event of Default has occurred.
7.2 REMEDIES. Upon the occurrence, and during the continuance,
of any Event of Default, Coast, at its option, and without notice or demand of
any kind (all of which are hereby expressly waived by Borrower), may do any one
or more of the following:
(a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement;
(b) Accelerate and declare all or any part of the Obligations
to be immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation;
(c) Take possession of any or all of the Collateral wherever
it may be found, and for that purpose Borrower hereby authorizes Coast without
judicial process to enter onto any of Borrower's premises without interference
to search for, take possession of, keep, store, or remove any of the Collateral,
and remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof, without charge for so long as Coast deems it
reasonably necessary in order to complete the enforcement of its rights under
this Agreement or any other agreement; provided, however, that should Coast seek
to take possession of any of the Collateral by Court process, Borrower hereby
irrevocably waives:
(i) any bond and any surety or security relating
thereto required by any statute, court rule or otherwise as an incident to such
possession;
(ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and
(iii) any requirement that Coast retain possession
of, and not dispose of, any such Collateral until after trial or final judgment;
(d) Require Borrower to assemble any or all of the Collateral
and make it available to Coast at places designated by Coast which are
reasonably convenient to Coast and Borrower, and to remove the Collateral to
such locations as Coast may deem advisable;
(e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Coast shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge;
(f) Sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Coast
10
obtains possession of it or after further manufacturing, processing or repair,
at one or more public and/or private sales, in lots or in bulk, for cash,
exchange or other property, or on credit and to adjourn any such sale from time
to time without notice other than oral announcement at the time scheduled for
sale. Coast shall have the right to conduct such disposition on Borrower's
premises without charge, for such time or times as Coast deems reasonable, or on
Coast's premises, or elsewhere and the Collateral need not be located at the
place of disposition. Coast may directly or through any affiliated company
purchase or lease any Collateral at any such public disposition, and if
permissible under applicable law, at any private disposition. Any sale or other
disposition of Collateral shall not relieve Borrower of any liability Borrower
may have if any Collateral is defective as to title or physical condition or
otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General
Intangibles comprising Collateral and, in connection therewith, Borrower
irrevocably authorizes Coast to endorse or sign Borrower's name on all
collections, receipts, instrument and other documents, to take possession of and
open mail addressed to Borrower and remove therefrom payments made with respect
to any item of the Collateral or proceeds thereof, and, in Coast's sole
discretion, to grant extensions of time to pay, compromise claims and settle
Receivables and the like for less than face value;
(h) Offset against any sums in any of Borrower's general,
special or other Deposit Accounts with Coast; and
(i) Demand and receive possession of any of Borrower's federal
and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto. All reasonable attorneys' fees,
expenses, costs, liabilities and obligations incurred by Coast with respect to
the foregoing shall be due from the Borrower to Coast on demand. Coast may
charge the same to Borrower's loan account, and the same shall thereafter bear
interest at the same rate as is applicable to the Receivable Loans. Without
limiting any of Coast's rights and remedies, from and after the occurrence of
any Event of Default, the interest rate applicable to the Obligations shall be
increased by an additional three percent per annum.
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS.
Borrower and Coast agree that a sale or other disposition (collectively, "sale")
of any Collateral which complies with the following standards will conclusively
be deemed to be commercially reasonable:
(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;
(e) Payment of the purchase price in cash or by cashier's
check or wire transfer is required;
(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.
7.4 POWER OF ATTORNEY. Upon the occurrence, and during the
continuance, of any Event of Default, without limiting Coast's other rights and
remedies, Borrower grants to Coast an irrevocable power of attorney coupled with
an interest, authorizing and permitting Coast (acting through any of its
employees, attorneys or agents) at any time, at its
11
option, but without obligation, with or without notice to Borrower, and at
Borrower's expense, to do any or all of the following, in Borrower's name or
otherwise, but Coast agrees to exercise the following powers in a commercially
reasonable manner:
(a) Execute on behalf of Borrower any documents that Coast
may, in its sole discretion, deem advisable in order to perfect and maintain
Coast's security interest in the Collateral, or in order to exercise a right of
Borrower or Coast, or in order to fully consummate all the transactions
contemplated under this Agreement, and all other present and future agreements;
(b) Execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase, sell or otherwise dispose of
or to lease (as lessor or lessee) any real or personal property which is part of
Coast's Collateral or in which Coast has an interest;
(c) Execute on behalf of Borrower, any invoices relating to
any Receivable, any draft against any Account Debtor and any notice to any
Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien;
(d) Take control in any manner of any cash or non-cash items
of payment or proceeds of Collateral; endorse the name of Borrower upon any
instruments, or documents, evidence of payment or Collateral that may come into
Coast's possession;
(e) Endorse all checks and other forms of remittances received
by Coast;
(f) Pay, contest or settle any lien, charge, encumbrance,
security interest and adverse claim in or to any of the Collateral, or any
judgment based thereon, or otherwise take any action to terminate or discharge
the same;
(g) Grant extensions of time to pay, compromise claims and
settle Receivables and General Intangibles for less than face value and execute
all releases and other documents in connection therewith;
(h) Pay any sums required on account of Borrower's taxes or to
secure the release of any liens therefor, or both;
(i) Settle and adjust, and give releases of, any insurance
claim that relates to any of the Collateral and obtain payment therefor;
(j) Instruct any third party having custody or control of any
books or records belonging to, or relating to, Borrower to give Coast the same
rights of access and other rights with respect thereto as Coast has under this
Agreement; and
(k) Take any action or pay any sum required of Borrower
pursuant to this Agreement and any other present or future agreements. Any and
all reasonable sums paid and any and all reasonable costs, expenses,
liabilities, obligations and attorneys' fees incurred by Coast with respect to
the foregoing shall be added to and become part of the Obligations, and shall be
payable on demand. Coast may charge the foregoing to Borrower's loan account and
the foregoing shall thereafter bear interest at the same rate applicable to the
Receivable Loans. In no event shall Coast's rights under the foregoing power of
attorney or any of Coast's other rights under this Agreement be deemed to
indicate that Coast is in control of the business, management or properties of
Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the
result of any sale of the Collateral shall be applied by Coast first to the
reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by Coast in the exercise of its rights under this Agreement, second to
the interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as Coast shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to Coast for any deficiency. If, Coast, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral,
12
Coast shall have the option, exercisable at any time, in its sole discretion, of
either reducing the Obligations by the principal amount of purchase price or
deferring the reduction of the Obligations until the actual receipt by Coast of
the cash therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and
remedies set forth in this Agreement, Coast shall have all the other rights and
remedies accorded a secured party under the California Uniform Commercial Code
and under all other applicable laws, and under any other instrument or agreement
now or in the future entered into between Coast and Borrower, and all of such
rights and remedies are cumulative and none is exclusive. Exercise or partial
exercise by Coast of one or more of its rights or remedies shall not be deemed
an election, nor bar Coast from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Coast to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms
have the following meanings:
"ACCOUNT DEBTOR" means the obligor on a Receivable.
"AFFILIATE" means, with respect to any Person, a relative,
partner, shareholder, director, officer, or employee of such Person, or any
parent or subsidiary of such Person, or any Person controlling, controlled by or
under common control with such Person.
"BUSINESS DAY" means a day on which Coast is open for
business.
"CLOSING DATE" date of the initial funding under 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 2.1 above.
"DEFAULT" means any event which with notice or passage of time
or both, would constitute an Event of Default.
"DEPOSIT ACCOUNT" has the meaning set forth in Section 9105 of
the Code.
"ELIGIBLE INVENTORY" means Inventory which Coast, in its sole
judgment, 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; (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, lease or rental of goods
or rendition of services, which Coast, in its good faith business judgment,
shall deem eligible for borrowing, based on such considerations as Coast may
from time to time deem appropriate. Without limiting the fact that the
determination of which Receivables are eligible for borrowing is a matter of
Coast's discretion, Receivables that are in excess of sixty (60) days past due
date, one hundred twenty (120) days past invoice date or do not otherwise meet
the requirements specified in Sections 1 and 7 of the Schedule, will be
expressly excluded from Eligible Receivables.
13
"ENTITY" means any person, partnership, trust or corporation
and its affiliates, subsidiaries, parents, stockholders, officers or directors.
"EQUIPMENT" means all of Borrower's present and hereafter
acquired machinery, molds, machine tools, motors, furniture, equipment,
furnishings, fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs,
goods and other tangible personal property (other than Inventory) of every kind
and description used in Borrower's operations or owned by Borrower and any
interest in any of the foregoing, and all attachments, accessories, accessions,
replacements, substitutions, additions or improvements to any of the foregoing,
wherever located.
"EVENT OF DEFAULT" means any of the events set forth in
Section 7.1 of this Agreement.
"GENERAL INTANGIBLES" means all general intangibles of
Borrower, whether now owned or hereafter created or acquired by Borrower,
including, without limitation, all choses in action, causes of action, corporate
or other business records, Deposit Accounts, inventions, designs, drawings,
blueprints, patents, patent applications, trademarks and the goodwill of he
business symbolized thereby, names, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, security and
other deposits, rights in all litigation presently or hereafter pending for any
cause or claim (whether in contract, tort or otherwise), and all judgments now
or hereafter arising therefrom, all claims of Borrower against Coast, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation life
insurance, key man insurance, credit insurance, liability insurance, property
insurance and other insurance), tax refunds and claims, computer programs,
discs, tapes and tape files, claims under guaranties, security interests or
other security held by or granted to Borrower, all rights to indemnification and
all other intangible property of every kind and nature (other than Receivables).
"INVENTORY" means all of Borrower's now owned and hereafter
acquired goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease (including
without limitation all raw materials, work in process, finished goods and goods
in transit, and including without limitation all farm products), and all
materials and supplies of every kind, nature and description which are or might
be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
merchandise or other personal property, and all warehouse receipts, documents of
title and other documents representing any of the foregoing.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
(i) the business, assets, conditions (financial or otherwise) or results of
operations of Borrower or any subsidiary of Borrower, (ii) the ability of
Borrower 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 material agreement or document
entered into by any party in connection herewith, or the rights or remedies of
Coast hereunder or thereunder.
"MAXIMUM DOLLAR AMOUNT" has the meaning set forth in Section 1
of the Schedule.
"OBLIGATIONS" means all present and future Loans, advances
debts, liabilities, obligations, guaranties, covenants, duties and indebtedness
at any time owing by Borrower to Coast, whether evidenced by this Agreement or
any note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Coast in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest
charges
14
and any other sums chargeable to Borrower under this Agreement or under
any other present or future instrument or agreement between Borrower and Coast.
"PERMITTED LIENS" means the following:
(a) purchase money security interests in specific items of
Equipment;
(b) leases of specific items of Equipment;
(c) liens for taxes not yet payable;
(d) additional security interests and liens consented to in
writing by Coast, which consent shall not be unreasonably withheld;
(e) security interests being terminated substantially
concurrently with this Agreement;
(f) liens of materialmen, mechanics, warehousemen, carriers,
or other similar lien 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;
(h) liens in favor of customs and revenue authorities which
secure payment of customs duties in connection with the importation of goods.
Coast will have the right to require, as a condition to its consent under
subparagraph (d) above, that the holder of the additional security interest or
lien sign an intercreditor and/or subordination agreement on Coast's then
standard form, acknowledge that the security interest is subordinate to the
security interest in favor of Coast, and agree not to take any action to enforce
its subordinate security interest so long as any Obligations remain outstanding,
and that Borrower agree that any uncured default in any obligation secured by
the subordinate security interest shall also constitute an Event of Default
under this Agreement.
"PERSON" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, government, or any agency or political division thereof, or any
other entity
"REAL PROPERTY" means Borrower's real property located at
▇▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
"RECEIVABLES" means all of Borrower's now owned and hereafter
acquired accounts (whether or not earned by performance), letters of credit,
contract rights, chattel paper, instruments, securities, documents and all other
forms of obligations at any time owing to Borrower, all guaranties and other
security therefor, all merchandise returned to or repossessed by Borrower, and
all rights of stoppage in transit and all other rights or remedies of an unpaid
vendor, lienor or secured party.
"TANGIBLE NET WORTH" means consolidated stockholders' equity
plus subordinated debt acceptable to Coast less goodwill, patents, trademarks,
copyrights, franchises, formulas, leaseholds, non-compete agreements,
engineering plans, deferred tax benefits and organization costs.
OTHER TERMS. All accounting terms used in this Agreement,
unless otherwise indicated, shall have the meanings given to such terms in
accordance with generally accepted accounting principles, consistently applied.
All other terms contained in this Agreement, unless otherwise indicated, shall
have the meanings provided by the Code, to the extent such terms are defined
therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the
Obligations, all checks, wire
15
transfers and other items of payment received by Coast (including proceeds of
Receivables and payment of the Obligations in full) shall be deemed applied by
Coast on account of the Obligations three (3) Business Days after receipt by
Coast of immediately available funds, and, for purposes of the foregoing, any
such funds received after 10:30 AM on any day shall be deemed received on the
next Business Day. Coast shall not, however, be required to credit Borrower's
account for the amount of any item of payment which is unsatisfactory to Coast
in its sole discretion, and Coast may charge Borrower's loan account for the
amount of any item of payment which is returned to Coast unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the
Obligations may be applied, and in Coast's sole discretion reversed and
re-applied, to the Obligations, in such order and manner as Coast shall
determine in its sole discretion.
9.3 CHARGES TO ACCOUNTS. Coast may, in its discretion, require
that Borrower pay monetary Obligations in cash to Coast, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans. Coast may also, in its discretion, charge any monetary
Obligations to Borrower's Deposit Accounts maintained with Coast.
9.4 MONTHLY ACCOUNTINGS. Coast shall provide Borrower monthly
with an account of advances, charges, expenses and payments made pursuant to
this Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Coast), unless Borrower
notifies Coast in writing to the contrary within thirty days after each account
is rendered, describing the nature of any alleged errors or omissions.
9.5 NOTICES. All notices to be given under this Agreement
shall be in writing and shall be given either personally or by reputable private
delivery service or by regular first-class mail, or certified mail return
receipt requested, addressed to Coast or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. Notices to Coast shall be directed to the Commercial
Finance Division, to the attention of the Division Manager or the Division
Credit Manager. All notices shall be deemed to have been given upon delivery in
the case of notices personally delivered, or at the expiration of one Business
Day following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.
9.6 SEVERABILITY. Should any provision of this Agreement be
held by any court of competent jurisdiction to be void or unenforceable, such
defect shall not affect the remainder of this Agreement, which shall continue in
full force and effect.
9.7 INTEGRATION. This Agreement and such other written
agreements, documents and instruments as may be executed in connection herewith
are the final, entire and complete agreement between Borrower and Coast and
supersede all prior and contemporaneous negotiations and oral representations
and agreements, all of which are merged and integrated in this Agreement. THERE
ARE NO ORAL UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES
WHICH ARE NOT SET FORTH IN THIS AGREEMENT OR IN OTHER WRITTEN AGREEMENTS SIGNED
BY THE PARTIES IN CONNECTION HEREWITH.
9.8 WAIVERS. The failure of Coast at any time or times to
require Borrower to strictly comply with any of the provisions of this Agreement
or any other present or future agreement between Borrower and Coast shall not
waive or diminish any right of Coast later to demand and receive strict
compliance therewith. Any waiver of any default shall not waive or affect any
other default, whether prior or subsequent, and whether or not similar. None of
the provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Coast shall be deemed to have been waived
by any act or knowledge of Coast or its agents or employees, but only by a
specific written waiver signed by an authorized officer of Coast and delivered
to
16
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.
9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Coast, nor
any of its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Coast shall be liable for any claims, demands
losses or damages, of any kind whatsoever, made, claimed, incurred or suffered
by Borrower or any other party through the ordinary negligence of Coast, or any
of its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Coast, but nothing herein shall relieve Coast
from liability for its own gross negligence or willful misconduct.
9.10 AMENDMENT. The terms and provisions of this Agreement may
not be waived or amended, except in a writing executed by Borrower and a duly
authorized officer of Coast.
9.11 TIME OF ESSENCE. Time is of the essence in the
performance by Borrower of each and every obligation under this Agreement.
9.12 ATTORNEYS FEES, COSTS AND CHARGES. Borrower shall
reimburse Coast for all reasonable attorneys' fees and all filing, recording,
search, title insurance, appraisal, audit, and other reasonable costs incurred
by Coast, pursuant to, or in connection with, or relating to this Agreement
(whether or not a lawsuit is filed), including, but not limited to, any
reasonable attorneys' fees and costs Coast incurs in order to do the following:
prepare and negotiate this Agreement and the documents relating to this
Agreement; obtain legal advice in connection with this Agreement or Borrower;
enforce, or seek to enforce, any of its rights; prosecute actions against, or
defend actions by, Account Debtors; commence, intervene in, or defend any action
or proceeding; initiate any complaint to be relieved of the automatic stay in
bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party
claim, or other claim; examine, audit, copy, and inspect any of the Collateral
or any of Borrower's books and records; protect, obtain possession of, lease,
dispose of, or otherwise enforce Coast's security interest in, the Collateral;
and otherwise represent Coast in any litigation relating to Borrower. If either
Coast or Borrower files any lawsuit against the other predicated on a breach of
this Agreement, the prevailing party in such action shall be entitled to recover
its reasonable costs and attorneys' fees, including (but not limited to)
reasonable attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment. Borrower shall also pay
Coast's standard charges for returned checks and for wire transfers, in effect
from time to time. All attorneys' fees, costs and charges to which Coast may be
entitled pursuant to this Paragraph may be charged by Coast to Borrower's loan
account and shall thereafter bear interest at the same rate as the Receivable
Loans.
9.13 BENEFIT OF AGREEMENT. The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective successors,
assigns, heirs, beneficiaries and representatives of Borrower and Coast;
provided, however, that Borrower may not assign or transfer any of its rights
under this Agreement without the prior written consent of Coast, and any
prohibited assignment shall be void. No consent by Coast to any assignment shall
release Borrower from its liability for the Obligations.
9.14 PUBLICITY. Coast is hereby authorized, at its expense, to
issue appropriate press releases and to cause a tombstone to be published
announcing the consummation of this transaction and the aggregate amount
thereof.
9.15 JOINT AND SEVERAL LIABILITY. If Borrower consists of more
than one Person, they shall be cross-collateralized and cross-defaulted, their
liability shall be joint and several, and the compromise of any claim with, or
the release of, any Borrower shall not
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constitute a compromise with, or a release of, any other Borrower.
9.16 LIMITATION OF ACTIONS. Any claim or cause of action by
Borrower against Coast, its directors, officers, employees, agents, accountants
or attorneys, based upon, arising from, or relating to this Loan Agreement, or
any other resent or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by Coast, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of an
action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after the first act, occurrence or omission upon which
such claim or cause of action, or any part thereof, is based, and the service of
a summons and complaint on an officer of Coast, or on any other person
authorized to accept service on behalf of Coast, within thirty (30) days
thereafter. Borrower agrees that such one-year period is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim or cause
of action. The one-year period provided herein shall not be waived, tolled, or
extended except by the written consent of Coast in its sole discretion. This
provision shall survive any termination of this Loan Agreement or any other
present or future agreement.
9.17 PARAGRAPH HEADING; 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.
9.18 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and
all acts and transactions hereunder and all rights and obligations of Coast and
Borrower shall be governed by the laws of the State of California. As a material
part of the consideration to Coast to enter into this Agreement, Borrower (i)
agrees that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Coast's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Los Angeles County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
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9.19 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND COAST EACH
HEREBY WAIVE THE RIGHT TO TRIAL BY JURY I ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT,
ACTS OR OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR
BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
BORROWER: BORROWER:
OCEAN OPTIQUE DISTRIBUTORS, INC. EUROPEAN MANUFACUTURERS AGENCY, INC.
BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
NAME: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TITLE: CHIEF FINANCIAL OFFICER BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
NAME: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TITLE: CHIEF FINANCIAL OFFICER
BORROWER: COAST:
CLASSICAL OPTICAL, INC. COAST BUSINESS CREDIT, A DIVISION OF
SOUTHERN PACIFIC THRIFT & LOAN ASSOCIATION
BY: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
NAME: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TITLE: CHIEF FINANCIAL OFFICER
19
BY: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
NAME: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
TITLE: VICE PRESIDENT
20