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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 12, 1996 (May 24, 1996)
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BUILDERS WAREHOUSE ASSOCIATION, INC.
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(Exact name of Registrant as specified in charter)
Colorado 0-2108-2 84-1090968
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State or other jurisdiction (Commission (IRS Employer)
of incorporation File Number) Identification No.)
2800 28th Street, Santa Monica, CA 90405
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 453-4371
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 24, 1996, Builders Warehouse Association, Inc., (the "Company"), through
its newly-created, wholly-owned subsidiary, PDP Acquisition Corp., entered into
an Asset Purchase Agreement (the "Agreement") under which the Company acquired
all of the assets of Pacific Data Products, Inc. ("PDP"). The Company agreed to
a payment of $350,000 in cash and an assumption of PDP's approximately $2.4
million bank debt as total consideration for all of PDP's assets, including
cash, accounts receivable, inventory, fixed assets and intangibles such as
patents, trademarks and copyrights, as well as certain specified business
agreements. The foregoing does not purport to be a complete statement of all
terms and conditions contained in the Agreement. Reference is made to Exhibit A
attached hereto for all terms and conditions of the Agreement.
PDP is a San Diego-based designer and manufacturer of shared printer network
adapters, servers and products such as font cartridges and memory modules. All
assets acquired will be used in the normal activities of the business of PDP
Acquisition. No previous relationship existed between PDP and the Company or
their officers or directors.
ITEM 5. OTHER EVENTS
PDP Acquisition Corp. also entered into an agreement with Coast Business Credit
for a $5 million credit facility secured by all of PDP Acquisition Corp.'s
acquired assets. Builders Warehouse Association, Inc., provided for an
injection of $500,000 working capital to PDP Acquisition, as well as a limited
guarantee of $750,000 to facilitate the credit facility. After using $2.4
million for the purchase of PDP, PDP Acquisition has $2.6 million available for
growth and acquisition.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Index to Exhibits
2.1 Loan and Security Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Builders Warehouse Association, Inc.
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(Registrant)
Dated: June 12, 1996 By: /s/ Barry Witz
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Barry Witz
Chief Executive Officer
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EXHIBIT 2.1
COAST
LOAN AND SECURITY AGREEMENT
BORROWER: PDP ACQUISITION CORPORATION, A CALIFORNIA CORPORATION
ADDRESS: 2800 28TH AVENUE, SUITE 100
SANTA MONICA, CA 90405
DATE: MAY 24, 1996
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
COAST BUSINESS CREDIT, a division of Southern Pacific Thrift & Loan Association
("Coast"), a California corporation, with offices at 12121 Wilshire Boulevard,
Suite 1111, Los Angeles, California 90025, and the borrower(s) named above
(jointly and severally, the "Borrower"), whose chief executive office is
located at the above address ("Borrower's Address"). The Schedule to this
Agreement (the "Schedule") shall for all purposes be deemed to be a part of
this Agreement, and the same is an integral part of this Agreement.
(Definitions of certain terms used in this Agreement are set forth in Section 8
below.)
1. LOANS.
1.1 LOANS. Coast will make loans to Borrower (the "Loans"), in
amounts determined by Coast in its 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. In addition, the Pre-Existing Obligations are
hereby assumed by Borrower, shall be paid as herein provided and shall be
secured by the Collateral
1.2 INTEREST. All Loans and all other monetary Obligations
(including the Pre-Existing 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 (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 limitations all of
Borrower's Deposit Accounts, and all money, and all property now or at any time
in the future in Coast's possession (including claims and credit balances), and
all proceeds of any of the foregoing (including proceeds of any insurance
policies, proceeds of proceeds, and claims against third parties), all products
of any of the foregoing, and all books and records related to any of the
foregoing (all of the foregoing, together with all other property in which
Coast may now or in the future be granted a lien or security interest, is
referred to herein, collectively, as the "Collateral").
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LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
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 10 days' prior written notice before changing
its name or doing business under any other name. Borrower has complied, and
will in the future comply, with all laws relating to the conduct of business
under a fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set
forth in the heading to this Agreement is Borrower's chief executive office.
In addition, Borrower has places of business and Collateral is located only at
the locations set forth on the Schedule. Borrower will give Coast at least 30
days prior written notice before opening any additional place of business,
changing its chief executive office, or moving any of the Collateral to a
location other than Borrower's Address or one of the locations set forth on the
Schedule.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and
will at all times in the future be, the sole owner of all the Collateral,
except for items of Equipment which are leased by Borrower. The Collateral now
is and will remain free and clear of any and all liens, charges, security
interests, encumbrances and adverse claims, except for Permitted Liens. Coast
now has, and will continue to have, a first-priority perfected and enforceable
security interest in all of the Collateral, subject only to the Permitted
Liens, and Borrower will at all times defend Coast and the Collateral against
all claims of others. None of the Collateral now is or will be affixed to any
real property in such a manner, or with such intent, as to become a fixture.
Borrower is not and will not become a lessee under any real property lease
pursuant to which the lessor may obtain any rights in any of the Collateral and
no such lease now prohibits, restrains, impairs or will prohibit, restrain or
impair Borrower's right to remove any Collateral from the leased premises.
Whenever any Collateral is located upon premises in which any third party has
an interest (whether as owner, mortgagee, beneficiary under a deed of trust,
lien or otherwise), Borrower shall, whenever requested by Coast, use its best
efforts to cause such third party to execute and deliver to Coast in form
acceptable to Coast, such waivers and subordinations as Coast shall specify,
so as to ensure that Coast's rights in the Collateral are, and will continue to
be, superior to the rights of any such third party. Borrower will keep in full
force and effect, and will comply with all the terms of, any lease of real
property where any of the Collateral now or in the future may be located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the
Collateral in good working condition, and Borrower will not use the Collateral
for any unlawful purpose. Borrower will immediately advise Coast in writing of
any material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain
at Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial
statements now or in the future delivered by Borrower to Coast have been, and
will
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LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
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.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply,
in all material respects, with all provisions of all material foreign, federal,
state and local laws and regulations relating to Borrower, including, but not
limited to, those relating to Borrower's ownership of real or personal
property, the conduct and licensing of Borrower's business, and environmental
matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of
Borrower's knowledge) threatened by or against or affecting Borrower in any
court or before any governmental agency (or any basis therefor known to
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of Borrower, or
in any material impairment in the ability of Borrower to carry on its business
in substantially the same manner as it is now being conducted. Borrower will
promptly inform Coast in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted by or against Borrower
involving any single claim of $50,000.00 or more, or involving $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.
See "Other Provisions" on Schedule.
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 arc 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
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LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
Receivable shall fully comply with all applicable laws and governmental rules
and regulations. All signatures and endorsements on all documents, instruments,
and agreements relating to all Receivables are and shall be genuine, and all
such documents, instruments and agreements are and shall be legally enforceable
in accordance with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower
shall deliver to Coast transaction reports and loan requests, schedules of
Receivables, and schedules of collections, all on Coast's standard forms;
provided, however, that Borrower's failure to execute and deliver the same shall
not affect or limit Coast's security interest and other rights in all of
Borrower's Receivables, nor shall Coast's failure to advance or lend against a
specific Receivable affect or limit Coast's security interest and other rights
therein. Loan requests received after 10:30 AM will not be considered by Coast
until the next Business Day. Together with each such schedule, or later if
requested by Coast, Borrower shall furnish Coast with copies (or, at Coast's
request, originals) of all contracts, orders, invoices, and other similar
documents, and all original shipping instructions, delivery receipts, bills of
lading, and other evidence of delivery, for any goods the sale or disposition of
which gave rise to such Receivables, and Borrower warrants the genuineness of
all of the foregoing. Borrower shall also furnish to Coast an aged accounts
receivable trial balance in such form and at such intervals as Coast shall
request. In addition, Borrower shall deliver to Coast the originals of all
instruments, chattel paper, security agreements, guarantees and other documents
and property evidencing or securing any Receivables, upon receipt thereof and in
the same form as received, with all necessary endorsements, all of which shall
be with recourse. Borrower shall also provide Coast with copies of all credit
memos as and when requested by Coast.
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to
collect all Receivables, unless and until an Event of Default has occurred.
Borrower shall hold all payments on, and proceeds of, Receivables in trust for
Coast, and Borrower shall deliver all such payments and proceeds to Coast
within one Business Day after receipt by Borrower, in their original form, duly
endorsed to Coast, to be applied to the Obligations in such order as Coast
shall determine. 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.
4.5. REMITTANCE OF PROCEEDS. All proceeds arising from the
disposition of any Collateral shall be delivered to Coast within one Business
Day after receipt by Borrower, in their original form, duly endorsed to Coast,
to be applied to the Obligations in such order as Coast shall determine.
Borrower agrees that it will not commingle proceeds of Collateral with any of
Borrower's other funds or property, but will hold such proceeds separate and
apart from such other funds and property and in an express trust for Coast.
Nothing in this Section limits the restrictions on disposition of Collateral
set forth elsewhere in this Agreement,
4.6 DISPUTES. Borrower shall notify Coast promptly of all
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: (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,
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and (iv) immediately notify Coast of the return of any Inventory, specifying
the reason for such return, the location and condition of the returned
Inventory, and on Coast's request deliver such returned Inventory to Coast.
4.8 VERIFICATION. Coast may, from time to time, verify directly
with the respective Account Debtors the validity, amount and other matters
relating to the Receivables, by means of mail, telephone or otherwise, either
in the name of Borrower or Coast or such other name as Coast may choose.
4.9 NO LIABILITY. Coast shall not under any circumstances be
responsible or liable for any shortage or discrepancy in, damage to, or loss or
destruction of, any goods, the sale or other disposition of which gives rise to
a Receivable, or for any error, act, omission, or delay of any kind occurring
in the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall Coast be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Coast from liability for
its own gross negligence or willful misconduct.
4.10 See Schedule.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times
comply with the financial and other covenants set forth in the Schedule.
5.2 INSURANCE. Borrower shall, at all times insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to Coast, in such form and amounts as Coast
may reasonably require, and Borrower shall provide evidence of such insurance
to Coast, so that Coast is satisfied that such insurance is, at all times, in
full force and effect. All liability insurance policies of Borrower shall name
Coast as an additional insured, and all property casualty and related insurance
policies of Borrower shall name Coast as a loss payee thereon and Borrower
shall cause a lenders loss payee endorsement in form reasonably acceptable to
Coast. Upon receipt of the proceeds of any such insurance, Coast shall apply
such proceeds in reduction of the Obligations as Coast shall determine in its
sole discretion, except that, provided no Default or Event of Default has
occurred and is continuing, Coast shall release to Borrower insurance proceeds
with respect to Equipment totaling less than $25,000.00, 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"). 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. Audit expenses shall not exceed $1,250.00 per
quarter for the first and second quarters from the date hereof Thereafter, the
charge for the Audits shall be $550.00 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
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shareholders of the Borrower hold at least 50% of the common stock and all
other capital stock of the surviving corporation immediately after such merger
or consolidation, and (B) the Borrower is the surviving corporation,
(ii) acquire any assets, except (A) in the ordinary course of
business, or (B) in a transaction or a series of transactions not involving the
payment of an aggregate amount in excess of $100,000.00.
(iii) enter into any other transaction outside the ordinary course
of business;
(iv) sell or transfer any Collateral, except for the sale of
finished Inventory in the ordinary course of Borrower's business, and except
for the sale of obsolete or unneeded Equipment in the ordinary course of
business;
(v) store any Inventory or other Collateral with any warehouseman
or other third party;
(vi) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis; if Inventory is sold on such basis,
such sales shall be reported to Coast and the receivables therefrom shall not
be deemed "Eligible Receivables". Collection of such Inventory and Receivables
shall, when collected, be applied to the Obligations;
(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 in excess of $100,000.00;
(viii) incur any debts, outside the ordinary course of business,
which would have a material, adverse effect on Borrower or on the prospect of
repayment of the Obligations;
(ix) guarantee or otherwise become liable with respect to the
obligations of another party or entity;
(x) pay or declare any dividends on Borrower's stock (except for
dividends payable solely in stock of Borrower);
(xi) redeem, retire, purchase or otherwise acquire, directly or
indirectly, any of Borrower's stock, except that Borrower may repurchase stock
owned by employees, directors and consultants of Borrower pursuant to terms of
employment, consulting or other stock restriction agreements at such time as
any such employee, director or consultant terminates his or her affiliation
with the Borrower, for an aggregate purchase price not to exceed $100,000 in
any fiscal year;
(xii) make any change in Borrower's capital structure which would
have a material adverse effect on Borrower or on the prospect of repayment of
the Obligations; or
(xiii) dissolve or elect to dissolve.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default would occur as a result of such
transaction.
5.6 LITIGATION COOPERATION. Should any third-party suit or
proceeding be instituted by or against Coast with respect to any Collateral or
relating to Borrower, Borrower shall, without expense to Coast, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Coast may deem them reasonably necessary in order
to prosecute or defend any such suit or proceeding.
5.7 INDEMNITY. Borrower hereby agrees to indemnify Coast and hold
Coast harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, reasonable costs
and expenses (including reasonable attorneys' fees), of every nature, character
and description, which Coast may sustain or incur based upon or arising out of
any of the Obligations, any actual or alleged failure to collect and pay over
any withholding or other tax relating to Borrower or its employees, any
relationship or agreement between Coast and Borrower, any actual or alleged
failure of Coast to comply with any writ of attachment or other legal process
relating to Borrower or any of its property, or any other matter, cause or
thing whatsoever occurred, done, omitted or suffered to be done by Coast
relating to Borrower or the Obligations (except any such amounts sustained or
incurred as the result of the gross negligence or willful misconduct of Coast).
The preceding indemnity shall not apply to claims, regardless of when asserted,
if any, existing prior to the date hereof provided such claims did not arise
from or relate to acts or omissions of Borrower.
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Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section shall survive any termination of this
Agreement and shall for all purposes continue in full force and effect.
5.8 FURTHER ASSURANCES. Borrower agrees, at its expense, on
request by Coast, to execute all documents and take all actions, as Coast, may
deem reasonably necessary or useful in order to perfect and maintain Coast's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until
the maturity date set forth on the Schedule (the "Maturity Date"); provided
that the Maturity date shall automatically be extended, and this Agreement
shall automatically and continuously renew, for successive additional terms of
one year each, unless one party gives written notice to the other, not less
than sixty days prior to the next Maturity Date, that such party elects to
terminate this Agreement effective on the next Maturity Date.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to
the Maturity Date as follows: (i) by Borrower, effective three Business Days
after written notice of termination is given to Coast; or (ii) by Coast at any
time after the occurrence of an Event of Default effective immediately. If
this Agreement is terminated by Borrower 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.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any
earlier effective date of termination, Borrower shall pay and perform in full
all Obligations, whether evidenced by installment notes or otherwise, and
whether or not all or any part of such Obligations are otherwise then due and
payable. Without limiting the generality of the foregoing, if on the Maturity
Date, or on any earlier effective date of termination, there are any
outstanding Letters of Credit issued by Coast or issued by another institution
based upon an application, guarantee, indemnity or similar agreement on the
part of Coast, then on such date Borrower shall provide to Coast cash
collateral in an amount equal to the face amount of all such Letters of Credit
plus all interest, fees and cost due or to become due in connection therewith,
to secure all of the Obligations relating to said Letters of Credit, pursuant
to Coast's then standard form cash pledge agreement. Notwithstanding any
termination of this Agreement, all of Coast's security interests in all of the
Collateral and all of the terms and provisions of this Agreement shall continue
in full force and effect until all Obligations have been paid and performed in
full; provided that, without limiting the fact that Loans are subject to the
discretion of Coast, Coast may, in its sole discretion, refuse to make any
further Loans after termination. No termination shall in any way affect or
impair any right or remedy of Coast, nor shall any such termination relieve
Borrower of any Obligation to Coast, until all of the Obligations have been
paid and performed in full. Upon payment and performance in full of all the
Obligations and termination of this Agreement, Coast shall promptly deliver to
Borrower termination statements, requests for reconveyances and such other
documents as may be required to fully terminate Coast's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" under this Agreement, and
Borrower shall give Coast immediate written notice thereof: (a) Any material
warranty, representation, statement, report or certificate made or delivered to
Coast by Borrower or any of Borrower's officers, employees or agents, now or in
the future, shall be untrue or misleading in a material respect; or (b)
Borrower shall fail to pay within 5 days after the due date of any Loan or any
interest thereon or any other monetary Obligation; or (c) the total Loans and
other Obligations outstanding at anytime shall exceed the Credit Limit and such
excess is not fully paid within 5 days; 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 5 Business Days after the date due; or (g) Any levy, assessment,
attachment, seizure, lien or encumbrance (other than a
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LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
Permitted Lien) is made on all or any part of the Collateral which is not cured
within 10 days after the occurrence of the same; or (h) any default or event of
default occurs under any obligation secured by a Permitted Lien, which is not
cured within any applicable cure period or waived in writing by the holder of
the Permitted Lien; or (i) Borrower breaches any material contract or
obligation, which has or may reasonably be expected to have a material adverse
effect on Borrower's business or financial condition which is not cured within
any applicable cure period or waived in writing by the other party to the
contract or to when the obligation is owing; 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 effects or (k) the commencement of
any proceeding against Borrower or any guarantor of any of the Obligations
under any reorganization, bankruptcy, insolvency, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, now or in
the future in effect, which is not cured by the dismissal thereof within 30
days after the date commenced; or (1) revocation or termination of, or
limitation or denial of liability upon, any guaranty of the Obligations or any
attempt to do any of the foregoing, or commencement of proceedings by any
guarantor of any of the Obligations under any bankruptcy or insolvency law; or
(m) revocation or termination of, or limitation or denial of liability upon,
any pledge of any certificate of deposit, securities or other property or asset
of any kind pledged by any third party to secure any or all of the Obligations,
or any attempt to do any of the foregoing, or commencement of proceedings by or
against any such third party under any bankruptcy or insolvency law; or (n)
Borrower makes any payment on account of any indebtedness or obligation which
has been subordinated to the Obligations, other than as permitted in the
applicable subordination agreement, or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits his subordination
agreement; or (o) there shall be a change in the record or beneficial ownership
of an aggregate of more than 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, fraudulent conveyance or similar law; or (q) there shall be a
material adverse change in Borrower's business or financial condition. Coast
may cease making any Loans hereunder during any of the above cure periods, and
thereafter if an Event of Default has occurred.
7.2 REMEDIES. Upon the occurrence, and during the continuance, of
any Event of Default, Coast, at its option, and without notice or demand of any
kind (all of which are hereby expressly waived by Borrower), may do any one or
more of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b)
Accelerate and declare all or any part of the Obligations to be immediately
due, payable, and performable, notwithstanding any deferred or installment
payments allowed by any instrument evidencing or relating to any Obligation;
(c) Take possession of any or all of the Collateral wherever it may be found,
and for that purpose Borrower hereby authorizes Coast without judicial process
to enter onto any of Borrower's premises without interference to search for,
take possession of, keep, store, or remove any of the Collateral, and remain on
the premises or cause a custodian to remain on the premises in exclusive
control thereof, without charge for so long as Coast deems it reasonably
necessary in order to complete the enforcement of its rights under this
Agreement or any other agreement; provided, however, that should Coast seek to
take possession of any of the Collateral by Court process, Borrower hereby
irrevocably waives: (i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession; (ii) any demand for possession prior to the 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,
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LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
lease or otherwise dispose of any of the Collateral, in its condition at the
time Coast obtains possession of it or after further manufacturing, processing
or repair, at one or more public and/or private sales, in lots or in bulk, for
cash, exchange or other property, or on credit, and to adjourn any such sale
from time to time without notice other than oral announcement at the time
scheduled for sale. Coast shall have the right to conduct such disposition on
Borrower's premises without charge, for such time or times as Coast deems
reasonable, or on Coast's premises, or elsewhere and the Collateral need not be
located at the place of disposition. Coast may directly or through any
affiliated company purchase or lease any Collateral at any such public
disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as
to title or physical condition or otherwise at the time of sale; (g) Demand
payment of, and collect any Receivables and General Intangibles comprising
Collateral and, in connection therewith, Borrower irrevocably authorizes Coast
to endorse or sign Borrower's name on all collections, receipts, instruments
and other documents, to take possession of and open mail addressed to Borrower
and remove therefrom payments made with respect to any item of the Collateral
or proceeds thereof, and, in Coast's sole discretion, to grant extensions of
time to pay, compromise claims and settle Receivables and the like for less
than face value; (h) Offset against any sums in any of Borrower's general,
special or other Deposit Accounts with Coast; and (i) Demand and receive
possession of any of Borrower's federal and state income tax returns and the
books and records utilized in the preparation thereof or referring thereto.
All reasonable attorneys' fees, expenses, costs, liabilities and obligations
incurred by Coast with respect to the foregoing shall be due from the Borrower
to Coast on demand. Coast may charge the same to Borrower's loan account, and
the same shall thereafter bear interest at the same rate as is applicable to
the Receivable Loans. Without limiting any of Coast's rights and remedies,
from and after the occurrence of any Event of Default, the interest rate
applicable to the Obligations shall be increased by an additional three percent
per annum.
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower
and Coast agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by Coast,
with or without the Collateral being present; (iv) The sale commences at any
time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in cash
or by cashier's check or wire transfer is required; (vi) With respect to any
sale of any of the Collateral, Coast may (but is not obligated to) direct any
prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Coast shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
7.4 POWER OF ATTORNEY. Upon the occurrence, and during the
continuance, of any Event of Default, without limiting Coast's other rights and
remedies, Borrower grants to Coast an irrevocable power of attorney coupled
with an interest, authorizing and permitting Coast (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to
do any or all of the following, in Borrower's name or otherwise, but Coast
agrees to exercise the following powers in a commercially reasonable manner:
(a) Execute on behalf of Borrower any documents that Coast may, in its sole
discretion, deem advisable in order to perfect and maintain Coast's security
interest in the Collateral, or in order to exercise a right of Borrower or
Coast, or in order to fully consummate all the transactions contemplated under
this Agreement, and all other present and future agreements; (b) Execute on
behalf of Borrower any document exercising, transferring or assigning any
option to purchase, sell or otherwise dispose of or to lease (as lessor or
lessee) any real or personal property which is part of Coast's Collateral or in
which Coast has an interest; (c) Execute on behalf of Borrower, any invoices
relating to any Receivable, any draft against any Account Debtor and any notice
to any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien,
claim of mechanic's, materialman's or other lien, or assignment or satisfaction
of mechanic's, materialman's or other lien; (d) Take control in any manner of
any cash or non-cash items of payment or proceeds of Collateral; 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
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LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
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 or relating to, Borrower to give Coast the
same rights of access and other rights with respect thereto as Coast has under
this Agreement; and (k) Take any action or pay any sum required of Borrower
pursuant to this Agreement and any other present or future agreements. Any and
all reasonable sums paid and any and all reasonable costs, expenses,
liabilities, obligations and attorneys' fees incurred by Coast with respect to
the foregoing shall be added to and become part of the Obligations, and shall
be payable on demand. Coast may charge the foregoing to Borrower's loan
account and the foregoing shall thereafter bear interest at the same rate
applicable to the Receivable Loans. In no event shall Coast's rights under the
foregoing power of attorney or any of Coast's other rights under this Agreement
be deemed to indicate that Coast is in control of the business, management or
properties of Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result
of any sale of the Collateral shall be applied by Coast first to the reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by Coast
in the exercise of its rights under this Agreement, second to the interest due
upon any of the Obligations, and third to the principal of the Obligations, in
such order as Coast shall determine in its sole discretion. Any surplus shall
be paid to Borrower or other persons legally entitled thereto; Borrower shall
remain liable to Coast for any deficiency. If, Coast, in its sole discretion,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale of Collateral, Coast shall have the
option, exercisable at any time, in its sole discretion, of either reducing the
Obligations by the principal amount of purchase price or deferring the
reduction of the Obligations until the actual receipt by Coast of the cash
therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies
set forth in this Agreement, Coast shall have all the other rights and remedies
accorded a secured party under the California Uniform Commercial Code and under
all other applicable laws, and under any other instrument or agreement now or
in the future entered into between Coast and Borrower, and all of such rights
and remedies are cumulative and none is exclusive. Exercise or partial
exercise by Coast of one or more of its rights or remedies shall not be deemed
an election, nor bar Coast from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Coast to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
8. Definitions. AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS
HAVE THE FOLLOWING MEANINGS:
"Account Debtor" means the obligor on Receivable.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Coast is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"Default" means any event which with notice or passage of time or
both, would constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the
Code.
"Eligible Inventory to means Inventory acquired by Debtor from and
after the date hereof (but excluding Pre-Existing Inventory) which Coast, in
its sole judgment, deems eligible for borrowing, based on
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LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
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 from and after the
date hereof (but excluding Pre-Existing Receivables) in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
Coast, in its good faith business judgment, shall deem eligible for borrowing,
based on such considerations as Coast may from time to time deem appropriate.
"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 the business
symbolized thereby, names, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, customer lists, security and other
deposits, rights in all litigation presently or hereafter pending for any cause
or claim (whether in contract, tort or otherwise), and all judgments now or
hereafter arising therefrom, all claims of Borrower against Coast, rights to
purchase or sell real or personal property, rights as a licensor or licensee of
any kind, royalties, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation
life insurance, key man insurance, credit insurance, liability insurance,
property insurance and other insurance), tax refunds and claims, computer
programs, discs, tapes and tape files, claims under guaranties, security
interests or other security held by or granted to Borrower, all rights to
indemnification and all other intangible property of every kind and nature
(other than Receivables) and, without limiting the generality of the foregoing,
the trademarks and patents listed on Exhibit "A" to the Schedule.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease (including
without limitation all raw materials, work in process, finished goods and goods
in transit, and including without limitation all farm products), and all
materials and supplies of every kind, nature and description which are or might
be used or consumed in Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise or other personal property, and all warehouse receipts,
documents of title and other documents representing any of the foregoing.
"Maximum Dollar Amount" has the meaning set forth in Section I of the
Schedule.
"Obligations" means the Pre-Existing Obligations, 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,
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LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
closing fees, facility fees, termination fees, minimum interest charges and any
other sums chargeable to Borrower under this Agreement or under any other
present or future instrument or agreement between Borrower and Coast.
"Permitted Liens" means the following: (i) purchase money security
interests in specific items of Equipment; (ii) leases of specific items of
Equipment; (iii) liens for taxes not yet payable; (iv) additional security
interests and liens consented to in writing by Coast, which consent shall not
be unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course
of business and securing obligations which are not delinquent; (vii) liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by liens of the type described above in clauses (i) or
(ii) above, provided that any extension, renewal or replacement lien is limited
to the property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Coast will have
the right to require, as a condition to its consent under subparagraph (iv)
above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Coast's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Coast,
and agree not to take any action to enforce its subordinate security interest
so long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Pre-Existing Inventory" means all Inventory of Borrower existing on
the date hereof including, without limitation, all Inventory heretofore owned
by Pacific Data Products, Inc. that was transferred to Borrower.
"Pre-Existing Obligations" means all Obligations of Pacific Data
Products, Inc. to Coast as of the date hereof together with interest thereon at
the rate herein provided for all of Borrower's Obligations. The Pre-Existing
Obligations are hereby assumed by Borrower, shall bear interest, be repaid as
herein provided and secured by the Collateral.
"Pre-Existing Receivables" means all Receivables of Borrower existing
on the date hereof including, without limitation, Receivables heretofore owned
by Pacific Data Products, Inc. that were transferred to Borrower.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents and all other forms
of obligations at any time owing to Borrower, all guaranties and other security
therefor, all merchandise returned to or repossessed by Borrower, and all
rights of stoppage in transit and all other rights or remedies of an unpaid
vendor, lienor or secured party.
Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the
Obligations, all checks, wire transfers and other items of payment received by
Coast (including proceeds of Receivables and payment of the Obligations in
full) shall be deemed applied by Coast on account of the Obligations three
Business Days after receipt by Coast of immediately available funds, and, for
purposes of the foregoing, any such funds received after 10:30 AM on any day
shall be deemed received on the next Business Day. Coast shall not, however,
be required to credit Borrower's account for the amount of any item of payment
which is unsatisfactory to Coast in its sole discretion, and Coast may charge
Borrower's loan account for the amount of any item of payment which is returned
to Coast unpaid.
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LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
9.2 APPLICATION OF PAYMENTS. All payments with respect to the
Obligations may be applied, and in Coast's sole discretion reversed and
reapplied, 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 ninety days after each account
is rendered, describing the nature of any alleged errors or emissions.
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 representations or agreements between the parties which are
not set forth in this Agreement or in other written agreements signed by the
parties in connection herewith.
9.8 WAIVERS. The failure of Coast at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and Coast shall not waive or
diminish any right of Coast later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Coast shall be deemed to have been waived
by any act or knowledge of Coast or its agents or employees, but only by a
specific written waiver signed by an authorized officer of Coast and delivered
to Borrower. Borrower waives demand, protest, notice of protest and notice of
default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any 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.
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<PAGE> 14
LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
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,
thirdparty 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. Subject to Borrower's prior written consent, 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, their liability shall be joint and several, and the compromise of
any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.
9.16 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 present or future document or agreement, or any other transaction
contemplated hereby or thereby or relating hereto or thereto, or any other
matter, cause or thing whatsoever, occurred, done, omitted or suffered to be
done by Coast, its directors, officers, employees, agents, accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of
an action or proceeding in a court of competent jurisdiction by the filing of a
complaint within one year after the first act, occurrence or emission 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 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
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<PAGE> 15
LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
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.
9.19 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND COAST EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT,
ACTS OR OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR
BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
BORROWER:
PDP ACQUISITION CORPORATION, A
CALIFORNIA CORPORATION
BY /s/
-------------------------------
PRESIDENT OR VICE PRESIDENT
BY /s/
-------------------------------
SECRETARY OR ASS'T SECRETARY
COAST:
COAST BUSINESS CREDIT, A DIVISION OF
SOUTHERN PACIFIC THRIFT & LOAN ASSOCIATION
BY /s/
-------------------------------
TITLE Senior Vice President
---------------------------
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: PDP ACQUISITION CORPORATION, A CALIFORNIA CORPORATION
ADDRESS: 2800 28th AVENUE, SUITE 100, SANTA MONICA, CA 90405
Date: MAY 24, 1996
This Schedule forms an integral part of the Loan and Security Agreement between
Coast Business Credit, a division of Southern Pacific Thrift & Loan
Association, and the above-borrower of even date.
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<PAGE> 16
SCHEDULE TO LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
- - -------------------------------------------------------------------------------
1. CREDIT LIMIT
(Section 1.1): Loans in a total amount at any time outstanding not
to exceed the lesser of a total of $5,000,000 at
any one time outstanding (the "Maximum Dollar
Amount"), or the sum of (a), (b) and (c) below:
(a) Loans (the "Receivable Loans") in an amount
not to exceed 80% of the amount of Borrower's
Eligible Receivables (as defined in Section 8 above),
plus
(b) Loans (the "Inventory Loans") in an amount
not to exceed the lesser of
(1) 35% of the value of Borrower's
Eligible Inventory (as defined in Section 8
above), calculated at the lower of cost or
market value and determined on a first-in,
first-out basis, or
(2) $1,000,000.00, PLUS
(c) The balance of the Pre-Existing Obligations
outstanding from time to time during the term of this
Agreement. The balance of the Pre-Existing
Obligations shall be determined as of the
commencement of the term of this Agreement.
- - -------------------------------------------------------------------------------
2. INTEREST.
INTEREST RATE
(Section 1.2): A rate equal to the "Prime Rate" plus 2% per
annum, calculated on the basis of a 360-day
year for the actual number of days elapsed.
The interest rate applicable to all Loans
shall be adjusted monthly as of the first day
of each month, and the interest to be charged
for each month shall be based on the highest
"Prime Rate" in effect during said month, but
in no event shall the rate of interest
charged on any Loans in any month be less
than 8% per annum. "Prime Rate" means the
actual "Reference Rate" or the substitute
therefor of the Bank of America NT & SA
whether or not that rate is the lowest
interest rate charged by said bank. If the
Prime Rate, as defined, is unavailable,
"Prime Rate" shall mean the highest of the
prime rates published in the Wall Street
Journal on the first business day of the
month, as the base rate on corporate loans at
large U.S. money center commercial banks.
MINIMUM MONTHLY
INTEREST (Section 1.2): $5,000.00 per month.
- - -------------------------------------------------------------------------------
3. FEES (Section 1.3):
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<PAGE> 17
SCHEDULE TO LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
- - -------------------------------------------------------------------------------
Loan Fee: $0 payable concurrently herewith.
Facility Fee: $0 per month, payable in advance (pro rated for
any partial month at the beginning of the
term of this Agreement).
- - -------------------------------------------------------------------------------
4. MATURITY DATE
(Section 6.1): 2/l/99 subject to automatic renewal as provided in
Section 6.1 above, and early termination as provided
in Section 6.2 above. The remaining principal and
interest of the Pre-Existing Obligations shall be due
and payable on 2/l/99 or upon early termination as
provided in 6.2 and shall not be subject to the
automatic renewal provided in Section 6.1.
EARLY TERMINATION FEE
(Section 6.2): $3,750 multiplied by the number of full or partial
months from the effective date of termination to the
Maturity Date. In no event will the Early
Termination Fee exceed $50,000.
- - -------------------------------------------------------------------------------
5. REPORTING.
(Section 5.3):
Borrower shall provide Coast with the following:
1. Monthly Receivable agings, aged by invoice
date, within ten days after the end of each
month.
2. Monthly accounts payable agings, aged by
invoice date, and outstanding or held check
registers within ten days after the end of
each month.
3. Monthly perpetual inventory reports for the
Inventory valued on a first-in, first-out
basis at the lower of cost or market (in
accordance with generally accepted accounting
principles) or such other inventory reports
as are reasonably requested by Coast, all
within ten days after the end of each month.
4. All annual 10K's, quarterly 10Q's, and all
other filings, reports and notices for
Builders Warehouse Association, Inc. and/or
affiliates filed with the Securities and
Exchange Commission ("Filings"). All Filings
required by applicable law, rule or
regulation shall be made prior to
delinquency. Copies of all such Filings
shall be provided to Coast not later than 5
days after the same are filed with the
Securities and Exchange Commission.
5. Updated lists of all of Borrower's customers
including customer names, addresses, and
phone numbers. Such lists shall be provided
to
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<PAGE> 18
SCHEDULE TO LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
Coast within 5 after request is made by Coast
for such lists. If not specifically
requested, such lists shall be provided to
Coast no later than 5 days after the end of
each fiscal quarter of Borrower.
6. Annual financial statements, as soon as
available, but in no event later than 90 days
following the end of Borrower's fiscal year,
certified by independent certified public
accountants acceptable to Coast.
- - -------------------------------------------------------------------------------
6. BORROWER INFORMATION:
PRIOR NAMES OF
BORROWER
(Section 3.2): None
TRADE NAMES OF BORROWER
(Section 3.2): See Exhibit A to this Schedule.
OTHER LOCATIONS AND
ADDRESSES (SECTION 3.3): 9855 Scranton Road, San Diego,
California 92121
MATERIAL ADVERSE
Litigation (Section 3.10): None
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<PAGE> 19
SCHEDULE TO LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
- - -------------------------------------------------------------------------------
7. OTHER PROVISIONS
(ADD TO SECTION 4): Notwithstanding anything
contained in Sections 4.1, 4.2 and 4.3 to the
contrary, the representations contained therein shall
have no applicability to Pre-Existing Receivables or
to the various documents, and schedules relating to
Pre-Existing Receivables. Except for Pre-Existing
Receivables the representations contained in Sections
4.1, 4.2 and 4.3 shall be fully applicable.
(ADD AS SECTION 4.10): From and after the date hereof
for a period of 6 months (the "Initial Period"), 85%
of all collections of Pre-Existing Receivables and 35%
of the cost of all Pre-Existing Inventory sold during
the Initial Period (as determined in accordance with
generally accepted accounting principals,
consistently applied) shall be applied to the
Pre-Existing Obligations. The 35% of cost of all
Pre-Existing Inventory sold during the Initial Period
shall be paid to Coast no later than the 15th day
after each fiscal quarter. Payment for any partial
calendar month shall be prorated by multiplying 35%
of the cost of the Pre-Existing Inventory sold during
the entire calendar month by the percentage of days
that the partial month bears to the total number of
days for the particular month. For example, if the
Initial Period ends on November 25, 1996, the payment
due 15 days after the fiscal quarter that includes
the month of November, 1996 for the period of
November 1, 1996 to and including November 25, 1996
for the inventory component of the Pre-Existing
Obligations would be 29.2% of the cost of all
Inventory sold during the entire month of November
(25 days is 83.3% of a 30 day month and 83.3% of 35%
of total inventory cost is 29.2% of the cost of all
inventory sold during that month). Borrower shall
provide quarterly accountings to Coast with respect
to collection of Pre-Existing Receivables, the cost
of all Pre-Existing Inventory utilized and the
application of the same to the Pre-Existing
Obligations for the Initial Period. Such accountings
shall be provided to Coast no later than the 15th day
after each fiscal quarter and shall be in such format
and contain such information as may be reasonably
required by Coast.
(ADD AS SECTION 4.11): In addition to Section 4.10,
commencing on June 15, 1996 and continuing on the
15th day of each month thereafter, Borrower shall pay
$5,000 (the "Minimum Monthly Payment") against its
Percentage Payment Obligations described in this
paragraph. No later than the 15th day after each
fiscal quarter, Borrower will make payments to Coast
to the extent that 25% of Borrower's Cash Flow for
the immediately preceding fiscal quarter exceeds the
Minimum Monthly Payments made by Borrower to Coast
during such fiscal quarter. Borrower's Cash Flow
shall be prorated for any period that is less than
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<PAGE> 20
SCHEDULE TO LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
the full month in the same manner as provided in
Section 4.10 of this Schedule. However, the Minimum
Monthly Payments will not be prorated for any partial
month. The calculation of Cash Flow will be in
accordance with generally accepted accounting
principals, consistently applied. The calculation of
Cash Flow shall be made substantially as follows:
CALCULATION OF CASH FLOW
FOR THE MONTH OF__________, 199__
<TABLE>
<S> <C>
Increase (Decrease) in Cash Amount
Cash flows from operating activities
Net Income for the Month $
Provision for Deferred Taxes
Depreciation & Amortization
Loss on Sale of Fixed Assets
(Increase) Decrease in Accts. Rec.
(Increase) Decrease in Inventory
(Prepaid Expenses)
(Increase) Decrease in Other Assets
(Purchases of Prop. & Equip)
Proceeds from Sales of Prop. & Equip.
Write-off or Reserve for Bad Debts
(Investment/Advances to Affiliates)
Investment/Advances from Affiliates
Increase (Decrease) in Accts. Payable
Increase (Decrease) in Accrued Liab.
Net Borrowings (Repayments) under
Line of Credit
(Repayments of Notes Payable)
Proceeds of Long Term Debt
(Repayment of Long Term Debt)
Capital Contributions or Issuance of
Securities
Other Sources (Applications) of Funds
Specify
Net Increase (Decrease) in Cash $
25% of Net Increase in Cash $
</TABLE>
- - -------------------------------------------------------------------------------
(ADD AS SECTION 4.12): Commencing with the 15th day
of the month immediately following conclusion of the
Second Period, and on the 15 day of each month
thereafter, the then outstanding principal balance,
if any, of the Pre-Existing Obligations shall be
paid in equal installments of 1/15th each to and
including January 15, 1999. On February 1, 1999, the
entire remaining principal balance of the
Pre-Existing Obligations shall be due and payable in
full together with any accrued interest that may then
be due. An extension of the term of the Loan and
Security Agreement and related agreements beyond
February 1,
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<PAGE> 21
SCHEDULE TO LOAN AND SECURITY AGREEMENT COAST BUSINESS CREDIT
1999 shall not include any extension of any of the
Pre-Existing Obligations.
(ADD AS SECTION 5.1A): As a material inducement to
Coast providing the loans and other financial
accommodations to Borrower, Builders Warehouse
Association, Inc., ("Builders") will, contribute not
less than $500,000 cash to Borrower which Borrower
shall use for working capital. A minimum of $100,000
shall be contributed concurrent with closing of this
Loan and Security Agreement. The remaining $400,000
shall be contributed on a when needed basis but in no
event later than June 30, 1996. The $500,000
contribution shall be subject to the provisions of
the Subordination Agreement between Coast and
Builders executed concurrently herewith.
Borrower: Coast:
PDP ACQUISITION CORPORATION, COAST BUSINESS CREDIT, a division of
A CALIFORNIA CORPORATION Southern Pacific Thrift &
Loan Association
By /s/ By /s/
---------------------------- ------------------------------------
President or Vice President Title Senior Vice President
---------------------------------
By /s/
----------------------------
Secretary or Ass't Secretary
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