COAST
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Borrower (collectively): New Image Industries, Inc.
Insight Imaging Systems, Inc.
Address: 2283 Cosmos Court
Carlsbad, California 92009
Date: May 22, 1996
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "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 borrowers named above (jointly and severally, the "Borrower"),
whose chief executive office is located at the above address ("Borrower's
Address"). This Agreement amends and restates in full that certain Loan and
Security Agreement dated April 17, 1996 between Coast and New Image Industries,
Inc. ("New Image"). All loans and other credit accommodations outstanding under
the April 17, 1996 Loan Agreement shall, after the date hereof, constitute
Obligations under this Agreement. 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 all of the 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.
1.4 LETTERS OF CREDIT. At the request of Borrower, Coast may, in its sole
discretion, arrange for the issuance of letters of credit for the account of
Borrower (collectively, "Letters of Credit"), by issuing guarantees to the
issuer of the letter of credit or by other means. All Letters of Credit shall
be in form and substance satisfactory to Coast in its sole discretion. The
aggregate face amount of all outstanding Letters of Credit from time to time
shall not exceed the amount shown on the Schedule (the "Letter of Credit
Sublimit"), and shall be reserved against Loans which would otherwise be
available hereunder. Borrower shall pay all bank charges for the issuance of
Letters of Credit. Any payment by Coast under or in connection with a Letter of
Credit shall constitute a Loan hereunder on the date such payment is made. Each
Letter of Credit shall have an expiry date no later than thirty days prior to
the Maturity Date. Borrower hereby agrees to indemnify, save, and hold Coast
harmless from any loss, cost, expense, or liability, including payments made by
Coast, expenses, and reasonable attorneys' fees incurred by Coast arising out of
or in connection with any Letters of Credit. Borrower agrees to be bound by the
regulations and interpretations of the issuer of any Letters of Credit
guarantied by Coast and opened for Borrower's account or by Coast's
interpretations of any Letter of Credit issued by Coast for Borrower's account,
and Borrower understands and agrees
that Coast shall not be liable for any error, negligence, or mistake, whether of
omission or commission, in following Borrower's instructions or those contained
in the Letters of Credit or any modifications, amendments, or supplements
thereto. Borrower understands that Letters of Credit may require Coast to
indemnify the issuing bank for certain costs or liabilities arising out of
claims by Borrower against such issuing bank. Borrower hereby agrees to
indemnify and hold Coast harmless with respect to any loss, cost, expense, or
liability incurred by Coast under any Letter of Credit as a result of Coast's
indemnification of any such issuing bank. The provisions of this Loan
Agreement, as it pertains to Letters of Credit, and any other present or future
documents or agreements between Borrower and Coast relating to Letters of Credit
are cumulative.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Coast a security interest in all
of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located: All Receivables, Inventory, Equipment, and
General Intangibles, including, without limitation, all of Borrower's Deposit
Accounts, and all money, and all property now or at any time in the future in
Coast's possession (including claims and credit balances), and all proceeds of
any of the foregoing (including proceeds of any insurance policies, proceeds of
proceeds, and claims against third parties), all products of any of the
foregoing, and all books and records related to any of the foregoing (all of the
foregoing, together with all other property in which Coast may now or in the
future be granted a lien or security interest, is referred to herein,
collectively, as the "Collateral").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Coast to enter into this Agreement and to make Loans,
Borrower represents and warrants to Coast as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation, is and will
continue to be, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Borrower is and will continue to
be qualified and licensed to do business in all jurisdictions in which any
failure to do so would have a material adverse effect on Borrower. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (iii) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Coast 30 days' prior written notice before changing its name
or doing business under any other name. Borrower has complied, and will in the
future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Coast at least 30 days prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for Permitted Liens. Coast now has, and
will continue to have, a first-priority perfected and enforceable security
interest in all of the Collateral, subject only to the Permitted Liens, and
Borrower will at all times defend Coast and the Collateral against all claims of
others. None of the Collateral now is or will be affixed to any real property
in such a manner, or with such intent, as to become a fixture. Borrower is not
and will not become a lessee under any real property lease pursuant to which
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the lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises. Whenever any
Collateral is located upon premises in which any third party has an interest
(whether as owner, mortgagee, beneficiary under a deed of trust, lien or
otherwise), Borrower shall, whenever requested by Coast, use its best efforts to
cause such third party to execute and deliver to Coast, in form acceptable to
Coast, such waivers and subordinations as Coast shall specify, so as to ensure
that Coast's rights in the Collateral are, and will continue to be, superior to
the rights of any such third party. Borrower will keep in full force and
effect, and will comply with all the terms of, any lease of real property where
any of the Collateral now or in the future may be located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in good
working condition, and Borrower will not use the Collateral for any unlawful
purpose. Borrower will immediately advise Coast in writing of any material loss
or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at Borrower's
Address complete and accurate books and records, comprising an accounting system
in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements now
or in the future delivered to Coast have been, and will be, prepared in
conformity with generally accepted accounting principles (except, in the case of
unaudited financial statements, for the absence of footnotes and subject to
normal year-end adjustments) and now and in the future will fairly reflect the
financial condition of Borrower, at the times and for the periods therein
stated. Between the last date covered by any such statement provided to Coast
and the date hereof, there has been no material adverse change in the financial
condition or business of Borrower. Borrower is now and will continue to be
solvent.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Coast in writing
of the commencement of, and any material development in, the proceedings, and
(iii) posts bonds or takes any other steps required to keep the contested taxes
from becoming a lien upon any of the Collateral. As of the date hereof,
Borrower is unaware of any claims or adjustments proposed for any of Borrower's
prior tax years which could result in additional taxes becoming due and payable
by Borrower. Borrower has paid, and shall continue to pay all amounts necessary
to fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all material foreign, federal, state
and local laws and regulations relating to Borrower, including, but not limited
to, those relating to Borrower's ownership of real or personal property, the
conduct and licensing of Borrower's business, and environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim, suit,
litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Coast in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of
$50,000 or more, or involving $200,000 or more in the aggregate.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation G of the Board of Governors of the Federal
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Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. RECEIVABLES.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and warrants
to Coast as follows: Each Receivable with respect to which Loans are requested
by Borrower shall, on the date each Loan is requested and made, represent an
undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods or the rendition of
services in the ordinary course of Borrower's business.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to Coast as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Receivables are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all respects what they purport to be. All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and indorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall deliver to
Coast transaction reports and loan requests, schedules of Receivables, and
schedules of collections, all on Coast's standard forms; provided, however, that
Borrower's failure to execute and deliver the same shall not affect or limit
Coast's security interest and other rights in all of Borrower's Receivables, nor
shall Coast's failure to advance or lend against a specific Receivable affect or
limit Coast's security interest and other rights therein. Loan requests
received after 10:30 AM will not be considered by Coast until the next Business
Day. Together with each such schedule, or later if requested by Coast, Borrower
shall furnish Coast with copies (or, at Coast's request, originals) of all
contracts, orders, invoices, and other similar documents, and all original
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Receivables, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Coast an aged accounts receivable trial balance
in such form and at such intervals as Coast shall request. In addition,
Borrower shall deliver to Coast the originals of all instruments, chattel paper,
security agreements, guarantees and other documents and property evidencing or
securing any Receivables, upon receipt thereof and in the same form as received,
with all necessary indorsements, all of which shall be with recourse. Borrower
shall also provide Coast with copies of all credit memos as and when requested
by Coast.
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect all
Receivables, unless and until an Event of Default has occurred. Borrower shall
hold all payments on, and proceeds of, Receivables in trust for Coast, and
Borrower shall deliver all such payments and proceeds to Coast within three
Business Days 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 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
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into account all such discounts settlements and forgiveness, the total
outstanding Loans will not exceed the Credit Limit. Coast may, at any time
after the occurrence of an Event of Default, settle or adjust disputes or claims
directly with Account Debtors for amounts and upon terms which Coast considers
advisable in its reasonable credit judgment and, in all cases, Coast shall
credit Borrower's Loan account with only the net amounts received by Coast in
payment of any Receivables.
4.7 RETURNS. Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower in the ordinary course of
its business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the Account Debtor in the appropriate
amount. In the event any attempted return occurs after the occurrence of any
Event of Default, Borrower shall (i) hold the returned Inventory in trust for
Coast, (ii) segregate all returned Inventory from all of Borrower's other
property, (iii) conspicuously label the returned Inventory as subject to Coast's
security interest, and (iv) immediately notify Coast of the return of any
Inventory, specifying the reason for such return, the location and condition of
the returned Inventory, and on Coast's request deliver such returned Inventory
to Coast.
4.8 VERIFICATION. Coast may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Coast or such other name as Coast may choose.
4.9 NO LIABILITY. Coast shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall Coast be deemed to be responsible for any of Borrower's obligations under
any contract or agreement giving rise to a Receivable. Nothing herein shall,
however, relieve Coast from liability for its own gross negligence or willful
misconduct.
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply with the
financial and other covenants set forth in the Schedule.
5.2 INSURANCE. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Coast, in such form and amounts as Coast may
reasonably require, and Borrower shall provide evidence of such insurance to
Coast, so that Coast is satisfied that such insurance is, at all times, in full
force and effect. All liability insurance policies of Borrower shall name Coast
as an additional insured, and all property casualty and related insurance
policies of Borrower shall name Coast as a loss payee thereon and Borrower shall
cause a lenders loss payee endorsement in form reasonably acceptable to Coast.
Upon receipt of the proceeds of any such insurance, Coast shall apply such
proceeds in reduction of the Obligations as Coast shall determine in its sole
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, Coast shall release to Borrower insurance proceeds with
respect to Equipment totaling less than $50,000, which shall be utilized by
Borrower for the replacement of the Equipment with respect to which the
insurance proceeds were paid. Coast may require reasonable assurance that the
insurance proceeds so released will be so used. If Borrower fails to provide or
pay for any insurance, Coast may, but is not obligated to, obtain the same at
Borrower's expense. Borrower shall promptly deliver to Coast copies of all
reports made to insurance companies.
5.3 REPORTS. Borrower, at its expense, shall provide Coast with the written
reports set forth in the Schedule, 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.
Borrower shall provide separate reports for New Image Industries, Inc. and
Insight Imaging Systems, Inc.
5.4 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times but generally
on a quarterly basis, and on one Business Day's notice, Coast, or its agents,
shall have the right to inspect, audit and copy Borrower's books and records and
the Collateral (the "Audits"). Coast shall take reasonable steps to keep
confidential all confidential information obtained in any Audit, but Coast shall
have the right to disclose any such information to its auditors, regulatory
agencies, and attorneys, and pursuant to any subpoena or other legal process.
The Audits shall be at Borrower's expense and the charge for the Audits
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shall be $550 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, which consent shall not be unreasonably withheld, do any of the
following: (i) merge or consolidate with another corporation or entity, except
in a transaction in which (A) the shareholders of the Borrower hold at least 50%
of the common stock and all other capital stock of the surviving corporation
immediately after such merger or consolidation, and (B) the Borrower is the
surviving corporation; (ii) acquire any assets or enter into any other
transaction, except (A) in the ordinary course of business, or (B) in a
transaction or a series of transactions, which may not be considered to be in
the ordinary course of Borrower's business, not involving the payment of an
aggregate amount in excess of $100,000; (iii) 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; (iv) store any Inventory or other Collateral with
any warehouseman or other third party; (v) sell any Inventory on a sale-or-
return, guaranteed sale, consignment, or other contingent basis; (vi) 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; (vii) 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; (viii) guarantee or
otherwise become liable with respect to the obligations of another party or
entity; (ix) pay or declare any dividends on Borrower's stock (except for
dividends payable solely in stock of Borrower); (x) 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; (xi) 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 (xii) 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). 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.
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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. At the beginning of each one year renewal, Borrower
shall pay Coast a renewal fee of .5% of the Maximum Dollar Amount.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrower, effective three Business Days after written
notice of termination is given to Coast; or (ii) by Coast at any time after the
occurrence of an Event of Default, without notice, effective immediately. If
this Agreement is terminated by Borrower or by Coast under this Section 6.2,
Borrower shall pay to Coast a termination fee (the "Early Termination Fee") in
the amount shown on the Schedule. The Early Termination Fee shall be due and
payable on the effective date of termination and thereafter shall bear interest
at a rate equal to the rate applicable to the Receivable Loans.
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding Letters of
Credit issued by Coast or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Coast,
then on such date Borrower shall provide to Coast cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said Letters of Credit, pursuant to Coast's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Coast's security interests in all of the Collateral and all of
the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Coast, Coast may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Coast, nor shall any such termination relieve Borrower of any
Obligation to Coast, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Coast shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be required to fully terminate Coast's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Coast immediate written notice thereof: (a) Any material warranty,
representation, statement, report or certificate made or delivered to Coast by
Borrower or any of Borrower's officers, employees or agents, now or in the
future, shall be untrue or misleading in a material respect; or (b) Borrower
shall fail to pay when due any Loan or any interest thereon or any other
monetary Obligation, which is not cured within 5 days of the date such payment
is due; or (c) the total Loans and other Obligations outstanding at any time
shall exceed the Credit Limit and such Event of Default is not cured within 5
days of the default; 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 Permitted Lien) is made on all or any part of the
Collateral which is not cured within 10 days after the occurrence of the same;
or (h) any default or event of default occurs under any obligation secured by a
Permitted Lien, which is not cured within any applicable cure period or waived
in writing by the holder of the Permitted Lien; or (i) Borrower breaches any
material contract or obligation, which has or may reasonably be expected to have
a material adverse effect on Borrower's business or financial condition; or (j)
Dissolution, termination of existence, insolvency or business failure of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement,
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readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect; or (k) the commencement of any
proceeding against Borrower or any guarantor of any of the Obligations under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect, which is not cured by the dismissal thereof within 30 days
after the date commenced; or (l) revocation or termination of, or limitation or
denial of liability upon, any guaranty of the Obligations or any attempt to do
any of the foregoing, or commencement of proceedings by any guarantor of any of
the Obligations under any bankruptcy or insolvency law; or (m) revocation or
termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset of any kind
pledged by any third party to secure any or all of the Obligations, or any
attempt to do any of the foregoing, or commencement of proceedings by or against
any such third party under any bankruptcy or insolvency law; or (n) Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations, other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such indebtedness
or obligations terminates or in any way limits his subordination agreement; or
(o) there shall be a change in the record or beneficial ownership of an
aggregate of more than 20% of the outstanding shares of common stock of New
Image accompanied, within 6 months, by (i) a change in more than 50% of the
members of the board of directors of New Image and (ii) a change in the Chief
Executive Officer of Borrower; 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, 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
8
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 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
9
of the Obligations, and shall be payable on demand. Coast may charge the
foregoing to Borrower's loan account and the foregoing shall thereafter bear
interest at the same rate applicable to the Receivable Loans. In no event shall
Coast's rights under the foregoing power of attorney or any of Coast's other
rights under this Agreement be deemed to indicate that Coast is in control of
the business, management or properties of Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any sale
of the Collateral shall be applied by Coast first to the reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred by Coast in the
exercise of its rights under this Agreement, second to the interest due upon any
of the Obligations, and third to the principal of the Obligations, in such order
as Coast shall determine in its sole discretion. Any surplus shall be paid to
Borrower or other persons legally entitled thereto; Borrower shall remain liable
to Coast for any deficiency. If, Coast, in its sole discretion, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Coast shall have the option, exercisable at
any time, in its sole discretion, of either reducing the Obligations by the
principal amount of purchase price or deferring the reduction of the Obligations
until the actual receipt by Coast of the cash therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth in
this Agreement, Coast shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Coast and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Coast of one or more of its rights or remedies shall not be deemed an election,
nor bar Coast from subsequent exercise or partial exercise of any other rights
or remedies. The failure or delay of Coast to exercise any rights or remedies
shall not operate as a waiver thereof, but all rights and remedies shall
continue in full force and effect until all of the Obligations have been fully
paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"ACCOUNT DEBTOR" means the obligor on a Receivable.
"AFFILIATE" means, with respect to any Person, a relative, partner, shareholder,
director, officer, or employee of such Person, or any parent or subsidiary of
such Person, or any Person controlling, controlled by or under common control
with such Person.
"BUSINESS DAY" means a day on which Coast is open for business.
"CODE" means the Uniform Commercial Code as adopted and in effect in the State
of California from time to time.
"COLLATERAL" has the meaning set forth in Section 2.1 above.
"DEFAULT" means any event which with notice or passage of time or both, would
constitute an Event of Default.
"DEPOSIT ACCOUNT" has the meaning set forth in Section 9105 of the Code.
"ELIGIBLE 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, and is not comprised of raw materials (other than Components),
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. Without Coast's prior
written consent, no Inventory of Insight Imaging Sytems, Inc. shall be Eligible
Inventory after 120 days from the date of this Agreement, subject to an
extension of 30 days at the discretion of Coast, reasonably exercised.
"ELIGIBLE RECEIVABLES" means Receivables arising in the ordinary course of
Borrower's business from the sale of goods or rendition of services, which
Coast, in its good faith business judgment, shall deem eligible for borrowing,
based on such considerations as Coast may from time to time deem appropriate.
Without Coast's prior written consent, no Receivables of Insight Imaging
Systems, Inc. shall be Eligible Receivables after 120 days from the date of this
Agreement.
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"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).
"INVENTORY" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
all raw materials, work in process, finished goods and goods in transit, and
including without limitation all farm products), and all materials and supplies
of every kind, nature and description which are or might be used or consumed in
Borrower's business or used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise or other
personal property, and all warehouse receipts, documents of title and other
documents representing any of the foregoing.
"MAXIMUM DOLLAR AMOUNT" has the meaning set forth in Section 1 of the Schedule.
"OBLIGATIONS" means all present and future Loans, advances, debts, liabilities,
obligations, guaranties, covenants, duties and indebtedness at any time owing by
Borrower to Coast, whether evidenced by this Agreement or any note or other
instrument or document, whether arising from an extension of credit, opening of
a letter of credit, banker's acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by Coast in Borrower's debts owing
to others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney's fees, expert
witness fees, audit fees, letter of credit fees, collateral monitoring fees,
closing fees, facility fees, termination fees, minimum interest charges and any
other sums chargeable to Borrower under this Agreement or under any other
present or future instrument or agreement between Borrower and Coast.
"PERMITTED LIENS" means the following: (i) purchase money security interests in
specific items of Equipment; (ii) leases of specific items of Equipment; (iii)
liens for taxes not yet payable; (iv) additional security interests and liens
consented to in writing by Coast, which consent shall not be unreasonably
withheld; (v) security interests being terminated substantially concurrently
with this Agreement; (vi) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business and
securing obligations which are not delinquent; (vii) liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Coast will have the
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on Coast's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Coast, and
agree not to take any action to enforce its subordinate security interest
11
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.
"RECEIVABLES" means all of Borrower's now owned and hereafter acquired accounts
(whether or not earned by performance), letters of credit, contract rights,
chattel paper, instruments, securities, documents and all other forms of
obligations at any time owing to Borrower, all guaranties and other security
therefor, all merchandise returned to or repossessed by Borrower, and all rights
of stoppage in transit and all other rights or remedies of an unpaid vendor,
lienor or secured party.
OTHER TERMS. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Coast (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by Coast on account of the Obligations three Business Days after receipt
by Coast of immediately available funds, and, for purposes of the foregoing, any
such funds received after 10:30 AM on any day shall be deemed received on the
next Business Day. Coast shall not, however, be required to credit Borrower's
account for the amount of any item of payment which is unsatisfactory to Coast
in its sole discretion, and Coast may charge Borrower's loan account for the
amount of any item of payment which is returned to Coast unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations may
be applied, and in Coast's sole discretion reversed and re-applied, to the
Obligations, in such order and manner as Coast shall determine in its sole
discretion.
9.3 CHARGES TO ACCOUNTS. Coast may, in its discretion, require that Borrower
pay monetary Obligations in cash to Coast, or charge them to Borrower's Loan
account, in which event they will bear interest at the same rate applicable to
the Loans. Coast may also, in its discretion, charge any monetary Obligations
to Borrower's Deposit Accounts maintained with Coast.
9.4 MONTHLY ACCOUNTINGS. Coast shall provide Borrower monthly with an account
of advances, charges, expenses and payments made pursuant to this Agreement.
Such account shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Coast), unless Borrower notifies Coast in
writing to the contrary within thirty days after each account is rendered,
describing the nature of any alleged errors or admissions.
9.5 NOTICES. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, or certified mail return receipt requested,
addressed to Coast or Borrower at the addresses shown in the heading to this
Agreement, or at any other address designated in writing by one party to the
other party. Notices to Coast shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager. All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.
9.6 SEVERABILITY. Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
9.7 INTEGRATION. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and Coast and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. THERE ARE NO ORAL
UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES WHICH ARE NOT
SET FORTH IN THIS AGREEMENT OR IN OTHER WRITTEN AGREEMENTS SIGNED BY THE PARTIES
IN CONNECTION HEREWITH.
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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.
9.11 TIME OF ESSENCE. Time is of the essence in the performance by Borrower of
each and every obligation under this Agreement.
9.12 ATTORNEYS FEES, COSTS AND CHARGES. Borrower shall reimburse Coast for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Coast, pursuant to, or
in connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any reasonable attorneys' fees and costs
Coast incurs in order to do the following: prepare and negotiate this Agreement
and the documents relating to this Agreement; obtain legal advice in connection
with this Agreement or Borrower; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, Account Debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of Borrower's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce Coast's
security interest in, the Collateral; and otherwise represent Coast in any
litigation relating to Borrower. If either Coast or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including (but not limited to) reasonable attorneys' fees and costs
incurred in the enforcement of, execution upon or defense of any order, decree,
award or judgment. Borrower shall also pay Coast's standard charges for
returned checks and for wire transfers, in effect from time to time. All
attorneys' fees, costs and charges to which Coast may be entitled pursuant to
this Paragraph may be charged by Coast to Borrower's loan account and shall
thereafter bear interest at the same rate as the Receivable Loans.
9.13 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Coast; provided, however, that
Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Coast, and any prohibited assignment shall
be void. No consent by Coast to any assignment shall release Borrower from its
liability for the Obligations.
9.14 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.15 LIMITATION OF ACTIONS. Any claim or cause of action by Borrower against
Coast, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Loan Agreement, or any other
present or future document or agreement, or any other transaction contemplated
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by Coast, its
directors, officers, employees,
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agents, accountants or attorneys, shall be barred unless asserted by Borrower by
the commencement of an action or proceeding in a court of competent jurisdiction
by the filing of a complaint within one year after the first act, occurrence or
omission upon which such claim or cause of action, or any part thereof, is
based, and the service of a summons and complaint on an officer of Coast, or on
any other person authorized to accept service on behalf of Coast, within thirty
(30) days thereafter. Borrower agrees that such one-year period is a reasonable
and sufficient time for Borrower to investigate and act upon any such claim or
cause of action. The one-year period provided herein shall not be waived,
tolled, or extended except by the written consent of Coast in its sole
discretion. This provision shall survive any termination of this Loan Agreement
or any other present or future agreement.
9.16 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used in
this Agreement for convenience. Borrower and Coast acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Coast or Borrower under any rule
of construction or otherwise.
9.17 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Coast and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Coast to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Coast's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Los Angeles County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.18 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND COAST EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR BORROWER, IN ALL
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
NEW IMAGE INDUSTRIES, INC.
By /s/ Harold R. Orr
------------------------------
Harold R. Orr - CFO
INSIGHT IMAGING SYSTEMS, INC.
By /s/ Harold R. Orr
------------------------------
Harold R. Orr - CFO
COAST:
COAST BUSINESS CREDIT, a division of Southern Pacific Thrift & Loan
Association
By
------------------------------
Title
---------------------------
14
COAST
SCHEDULE TO AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT
BORROWERS: NEW IMAGE INDUSTRIES, INC.
INSIGHT IMAGING SYSTEMS, INC.
ADDRESS: 2283 COSMOS COURT
CARLSBAD, CALIFORNIA 92009
DATE: MAY __, 1996
This Schedule forms an integral part of the Amended and Restated Loan and
Security Agreement of even date between Coast Business Credit, a division of
Southern Pacific Thrift & Loan Association, and the above-borrowers. All dollar
limitations herein represent aggregate maximums for both Borrowers.
1. CREDIT LIMIT
(Section 1.1): Loans in an amount not to exceed the lesser of a total
of $4,000,000 at any one time outstanding (the "Maximum
Dollar Amount"), or the sum of (a), (b) and (c):
(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), which are not more than 90 days old from
invoice date, including foreign Eligible
Receivables supported by letters of credit or
credit insurance assigned to Coast and otherwise
acceptable to Coast, plus 50% of foreign Eligible
Receivables due from account debtors which have a
verifiable credit history, shipped to a foreign
subsidiary of a large United States or Canadian
company with a demonstrated credit history or
shipped to a foreign corporation with a D&B rating
or similar rating agency equivalent to a 3A2 or
better and subject to credit review but otherwise
always at the sole discretion of Coast, plus
(b) Loans (the "Inventory Loans") in an amount
not to exceed the lesser of:
(1) 50% of the value of Borrower's component
Eligible Inventory (being printers, monitors,
cameras and assembly parts) and 40% of the
value of Borrower's Eligible Inventory
consisting of finished goods, located at 2283
Cosmos Court, Carlsbad, California 92009, or
981 D Industrial Road, San Carlos, California
94070, for 120 days from the date hereof
subject to the possible extensions referenced
in Section 8 hereof, calculated at the lower
of cost or market value and determined on a
first-in, first-out basis, or
(2) $1,250,000; plus
(c) An equipment acquisition facility of up to
$500,000 with advances of 80% of new
equipment acceptable to Coast, less
installation charges and taxes and/or 80% of
the appraised forced liquidation value of
used equipment acceptable to Coast, less
installation charges and taxes. This
facility shall have minimum incremental draws
of $100,000. Each advance shall be payable
based on a thirty-six month amortization.
Letter of Credit Sublimit
(Section 1.5): $1,000,000
2. INTEREST.
Interest Rate
(Section 1.2): A rate equal to the "Prime Rate" plus 2.25% per annum,
calculated on the basis of a 360-day year for the
actual number of days elapsed. 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 10% 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 "Prime Rate" published in
the "Money Rates" column of the Wall Street Journal on
the first business day of
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the month, as the base rate on corporate loans posted
by at least 75% of the nations 30 largest banks.
Minimum Monthly
Interest (Section 1.2): $12,000 per month.
3. FEES (Section 1.3):
Loan Fee: $15,000, payable concurrently with this increase of
$1,500,000 in the Maximum Dollar Amount.
Facility Fee: $4,500, per calendar quarter, payable in advance (which
increases by $1,000 the facility fee referenced in the
April 17, 1996 Loan and Security Agreement).
Letter of
Credit Fees: 2.25% of the face amount of all standby letters of
credit and .125% of the face amount of all other
letters of credit, plus a fee of .125% of the face
amount of any drawn documentary letters of credit, plus
all normal and applicable bank fees and charges. After
the first anniversary of this Agreement, Coast reserves
the right, in its discretion, to adjust the letter of
credit fees if it determines, in its reasonable credit
judgement, that the pricing for the opening or guaranty
of letters of credit has changed.
4. MATURITY DATE.
(Section 6.1): May 1, 1997, subject to automatic renewal as provided
in Section 6.1 above, and early termination as provided
in Section 6.2 above.
Early Termination Fee
(Section 6.2): $8,500 multiplied by the number of full or partial
months from the effective date of termination to the
Maturity Date.
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.
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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. Monthly internally prepared financial statements,
as soon as available, and in any event within
thirty days after the end of each month.
5. Quarterly internally prepared financial
statements, as soon as available, and in any event
within forty-five days after the end of each
fiscal quarter of Borrower.
6. Quarterly customer lists, including customer name,
address, and phone number.
7. Annual financial statements, as soon as available,
and in any event within 90 days following the end
of Borrower's fiscal year, certified by
independent certified public accountants
acceptable to Coast.
6. BORROWER INFORMATION:
Prior Names of Styles on Video, I.M.A.G.E. and
Borrower New Image Salon Systems
(Section 3.2):
Prior Trade
Names of Borrower
(Section 3.2): None
Existing Trade AcuCam, New Image, AcuChart, AcuPrinter,
Names of Borrower AcuCam PC, AcuView, AcuRay, MultiCam
(Section 3.2): and System One
Other Locations 20700-B Denker Ave.,
and Addresses Torrance, California 90501
(Section 3.3):
9700 Toledo Way
Irvine, California 92718
981 D Industrial Road
San Carlos, California 94070
Material Adverse
4
Litigation None
(Section 3.10):
5
7. OTHER COVENANTS
(Section 5.1): Borrower shall at all times comply with all of the
following additional covenants:
(1) In addition to all other conditions precedent
to Coast's obligation to extend financing to
Borrower hereunder, in no event shall Coast have
any obligation to advance the initial funds unless
(a) there is excess borrowing availability, after
deducting the initial advances, of at least
$500,000, (b) Borrower does not have any accounts
payable more than 90 days old unless scheduled by
written agreement, disputed in good faith or
reserved by Coast against borrowing availability,
(c) all taxes have been currently paid, and (d)
not less than $950,000 shall have been contributed
to the equity of Borrower in a manner acceptable
to Coast or shall be represented by debt
acceptable to Coast which is subordinated to the
Obligations. (2) Borrower has informed Coast
that Borrower may be issuing subordinated debt to
one or more entities. While the issuance of any
subordinated debt is subject to the approval of
Coast, in its reasonable credit judgment, Coast
will generally not object to the debt so long as
it does not exceed $500,000 in the aggregate, the
obligations are unsecured, interest does not
exceed 10% payable quarterly, principal payments
will not be due for at least two years from the
date hereof, there will be no cross default rights
and, at Coast's option, the debt will be subject
to a Subordination Agreement to be entered into
among Coast, the subordinated debt holder and
Borrower in form and substance reasonably
satisfactory to Coast. Such Subordination
Agreement will provide, among other things, that
there must be at least $100,000 of borrowing
availability, including any contemplated
subordinated debt payments, before any principal
payments on the subordinated debt may be made.
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Borrower: Coast:
NEW IMAGE INDUSTRIES, INC. COAST BUSINESS CREDIT, a division of
Southern Pacific Thrift & Loan
Association
By: /s/ Harold R. Orr By:
-------------------------- -------------------------------
CFO Barbara Nitkin, Vice President
INSIGHT IMAGING SYSTEMS, INC.
By: /s/ Harold R. Orr
--------------------------
CFO
7