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EXHIBIT 18
SUBJECT TO THAT CERTAIN SUBORDINATION AND INTERCREDITOR AGREEMENT EXECUTED
BY AND AMONG COAST BUSINESS CREDIT, DENTSPLY INTERNATIONAL INC., AND
NEW IMAGE INDUSTRIES, INC. AND INSIGHT IMAGING SYSTEMS, INC.,
DATED AS OF DECEMBER 24, 1996
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CREDIT AGREEMENT
DATED AS OF DECEMBER 24, 1996
BETWEEN
NEW IMAGE INDUSTRIES, INC.
AND
INSIGHT IMAGING SYSTEMS, INC.
AS BORROWER,
AND
DENTSPLY INTERNATIONAL INC.
AS LENDER
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 24, 1996 (the "Agreement"), is
made by and between New Image Industries, Inc., a Delaware corporation, and
Insight Imaging Systems, Inc., a California corporation (together, "Borrower"),
and DENTSPLY International Inc., a Delaware corporation, as Lender ("Lender").
W I T N E S S E T H:
WHEREAS, Lender and Borrower have executed a letter of intent, dated
December 24, 1996, with respect to the acquisition of Borrower by Lender (the
"Letter of Intent");
WHEREAS, Borrower has requested that Lender make available to Borrower a
line of credit of up to an aggregate principal amount of $3,000,000 (the
"Line") and, as a condition precedent to Lender extending such credit, Borrower
has agreed to grant a security interest in favor of Lender in all of its right,
title and interest in, to and under the Collateral as described herein;
WHEREAS, concurrently herewith, Lender is entering into a Subordination
and Intercreditor Agreement with Coast Business Credit, a Division of Southern
Pacific Trust & Loan Association; and
WHEREAS, subject to the terms and conditions set forth herein, Lender
agrees to make the Line available to Borrower;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE 1 - DEFINITIONS
The following words and terms are used in this Agreement and have the
meanings ascribed to them in this Article 1 or at the locations in the
Agreement indicated below:
"1934 Act" is defined in Article 7.1(h).
"Advance" means any advance to Borrower by Lender under the Line.
"Affiliate" means and refers to, as applied to any Person, any other
Person directly or indirectly controlling, or through one or more Persons
controlled by, controlling or under common control with that Person (whether
through ownership of voting securities, by contract or otherwise).
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"Agreement" is defined in the introduction to this Agreement.
"Bankruptcy Code" means Title 11 of the United States Code as now or
hereafter in effect, or any successor statute.
"Borrower" is defined in the introduction to this Agreement.
"Borrower Intellectual Property Rights" is defined in Article 5.14.
"Business" means design, manufacture, distribution and sale of intraoral
cameras and computer imaging systems exclusively to the dental marketplace.
"Business Day" means any day other than a Saturday, Sunday or day on which
banking institutions in the Commonwealth of Pennsylvania are authorized by law
or regulation to close.
"Coast" means Coast Business Credit, a Division of Southern Pacific Thrift
& Loan Association.
"Coast Agreement" means that certain Amended and Restated Loan and
Security Agreement, dated as of May 22, 1996, between Coast and Borrower.
"Collateral" means all personal property, rights, interests and privileges
of Borrower including, but not limited to, all accounts, inventory, chattel
paper, contracts, contract rights, documents, equipment, fixtures, general
intangibles, Borrower Intellectual Property Rights (including, but not limited
to, patents, copyrights, trademarks, service marks and applications therefor
and trade secrets and confidential information), goods, instruments, stock
rights, pledged deposits, insurance policies, cash, bank accounts, all customer
lists, credit files, computer files, programs, printouts and other computer
materials and records related to the foregoing, wherever located, whether now
existing or hereafter created or arising, in which Borrower now has or
hereafter acquire any right or interest, and the proceeds, insurance proceeds
and products thereof and documents of title evidencing or issued with respect
thereto, all accessories, substitutions, additions and replacements thereto and
thereof, together with all Liens and security instruments and agreements and
guarantees securing or relating to any of the foregoing, and all rights and
interests of Borrower as a seller of goods or services and rights to returned
or repossessed goods.
"Collection Date" means the date on which Borrower has satisfied and paid
all its Obligations to Lender hereunder and under the Note and Lender is under
no obligation to make Advances hereunder.
"Effective Date" means December 24, 1996.
"Environmental Laws" is defined in Article 5.12.
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"Event of Default" is defined in Article 7.
"Financing Statements" means any and all financing statements, amendments
or continuation statements required or appropriate to perfect and keep
perfected any security interest created hereby pursuant to the Uniform
Commercial Code.
"Forbearance Letter" means the letter agreement of even date herewith by
and among Coast, Borrower and Lender.
"Funding Date" means the date on which an Advance is made.
"Funding Request" is defined in Section 2.3(b).
"GAAP" means generally accepted accounting principles as set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board as in effect on the Effective Date or
in such other statements by such other Person as may be approved by a
significant segment of the accounting profession, which are applicable to the
circumstances as of the date of determination and which are applied on a
consistent basis.
"Governmental Entity" means any federal, state or local government or any
court, administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign.
"Hazardous Material" is defined in Article 5.14(b).
"Indebtedness" is defined in Article 5.8(b).
"Initial Advance" is defined in Article 2.3.
"Lender" is defined in the introduction to this Agreement.
"Letter of Intent" is defined in the recitals to this Agreement.
"Lien" means any security interest, mortgage, pledge, lien, claim, charge,
encumbrance, title retention agreement in, of or on any Person's Properties in
favor of any other Person.
"Line" means the line of credit made available by Lender to Borrower up to
an aggregate principal amount of $3,000,000.
"Line Interest Rate" is defined in Article 2.2.
"Maximum Available Credit" means three million dollars ($3,000,000) of
principal
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outstanding at any time.
"Mercury Partners" means Mercury Partners, LLC, a California limited
liability company.
"Note" is defined in Article 2.3(c).
"Obligations" means the obligation of Borrower to pay the principal and
interest on the Advances in accordance with the terms hereof and the terms of
the Note and to satisfy all other liabilities to Lender hereunder and under the
Note and under any other document, agreement, instrument or certificate,
whether now existing or hereafter incurred, matured or unmatured, direct or
contingent, due or to become due, including any extensions, or renewals thereof
and substitutions therefor.
"Permits" is defined in Article 5.14.
"Permitted Liens" means the items listed on Schedule 5.5 hereto.
"Person" means any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, joint venture, court
or government or political subdivision or agency thereof.
"Prime Rate" means the prime rate of interest set forth in the Money Rates
Section of the New York edition of the Wall Street Journal, rounded up to the
nearest one-eighth.
"Property" means any interest in any kind of personal property or asset,
whether tangible or intangible.
"Release" is defined in Article 5.14(c).
"SEC Filings" means any and all reports filed made by Borrower with the
Securities and Exchange Commission under the 1934 Act since January 1, 1995.
"Term" means the period commencing on the Effective Date and ending on the
Termination Date.
"Termination Date" means the date on which (i) there is an Event of
Default upon which Lender forthwith declares all principal and interest on the
Note to be immediately due and payable or on which all principal and interest
is immediately due and payable without any declaration by Lender, or (ii) the
date on which a Termination Event occurs.
"Termination Event" means the earliest to occur of (i) the termination of
the Letter of Intent other than by means of the execution and delivery of a
definitive merger agreement as contemplated therein, (ii) the termination of
such definitive merger agreement other than by means
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of the consummation of the transactions contemplated therein or (iii) March 25,
1997.
"Uniform Commercial Code" means the Uniform Commercial Code as adopted in
any state having jurisdiction over the Collateral.
"Unmatured Event of Default" means and refers to any event, act or
occurrence which with the passage of time or giving of notice or both would
become an Event of Default.
ARTICLE 2 - LINE OF CREDIT
2.1 Line of Credit Established. Subject to the terms and conditions
hereof, and in reliance on the representations and warranties and covenants
herein, and provided that no Event of Default has occurred and is continuing
(not including any Event of Default which has been waived or is otherwise
subject to a forbearance agreement), commencing on the Effective Date and
expiring on the Termination Date, Lender hereby agrees, from time to time
during the Term, to extend one or more Advances, the aggregate of which at any
one time shall not exceed the Maximum Available Credit. From and after the
Termination Date, Lender shall have no obligation to make Advances.
2.2 Line Interest Rate. Advances shall bear interest on the unpaid
principal balance outstanding at any time from the Funding Date of each such
Advance to maturity (or repayment) at the floating interest rate of four
percent (4%) per annum in excess of the Prime Rate (the "Line Interest Rate")
or such lesser rate permitted by applicable law, if the Line Interest Rate
would violate applicable law. The Line Interest rate shall be changed
automatically on and as of the effective date of each change in the Prime Rate.
Interest shall be calculated on the basis of a 360-day year, but charged for
the actual number of days elapsed.
2.3 Funding Requests.
(a) Upon execution and delivery of this Agreement, subject to the
conditions set forth in Article 4.1, Lender will make an Advance (the "Initial
Advance") to Borrower in the amount of $2,500,000 to pay necessary and
reasonable operating expenses required to keep it operating as a going concern
through the Termination Date.
(b) At any time and from time to time during the Term until the
Termination Date, Borrower may request one or more Advances by submitting to
Lender a completed and executed Funding Request in the form attached hereto as
Schedule 2.3(b) ("Funding Request") no later than 11:00 a.m., Eastern Time, one
(1) day prior to the proposed Funding Date. Each Funding Request shall specify
(i) the proposed Funding Date (which shall be a Business Day), (ii) the amount
of the proposed Advance, and (iii) a detailed schedule of Borrower's proposed
use of the Advance. Subject to the provisions of Section 2 hereof and Lender's
approval of the Funding
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Request, Lender shall make the Advance requested on the proposed Funding Date
in accordance with Borrower's Funding Requests.
(c) Lender agrees that it shall approve the Advance set forth in a
Funding Request if the Advance requested thereby is to be used to pay necessary
and reasonable operating expenses of the Business required to keep it operating
as a going concern through the Termination Date including, without limitation,
accounts payable which are due as of the date of such request. Lender shall not
be required to, but in its sole and absolute discretion may, advance funds to
be used by Borrower for any other purpose related to the operation of the
Business. The Initial Advance and each subsequent Advance shall be evidenced
by the Note in the form attached hereto as Schedule 2.3(c). No third party is
intended to be a beneficiary of this provision (or of any other provision of
this Agreement).
2.4 Maximum Available Credit. The aggregate amount of principal which
Borrower may have outstanding under the Line at any time shall not exceed the
Maximum Available Credit. Borrower agrees, without notice or demand,
immediately to repay, any principal balance of the Line in excess of the
Maximum Available Credit.
2.5 Principal and Interest Payments.
(a) Interest shall accrue on the principal balance outstanding under
the Line at the Line Interest Rate. All unpaid principal on the Line and all
interest accrued but unpaid thereon shall be paid in full by Borrower on March
25, 1997 (or as otherwise provided herein or in the Note). Prior to the
Termination Date, accrued interest shall be calculated monthly and capitalized,
and constitute outstanding principal but such capitalized interest shall not be
considered principal for purposes of determining the Maximum Available Credit.
(b) Without in any way limiting Lender's rights and remedies hereunder
and under the Note in the case of Events of Default, any principal payments on
the Line not paid when due and, to the extent permitted by applicable law, any
interest payment on the Line not paid when due, and any other amount due to
Lender under this Agreement not paid when due, shall thereafter bear interest
payable upon demand at a rate which is three percent (3%) per annum in excess
of the applicable Line Interest Rate.
(c) Borrower may prepay the Advances, in whole or in part from time to
time, without penalty.
ARTICLE 3 - SECURITY
3.1 Grant of Security Interests. To secure the prompt and complete payment
when due of all of its Obligations and the performance by Borrower of all of
the covenants and obligations to be performed by it pursuant to this Agreement,
Borrower hereby assigns and pledges to Lender
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and grants to Lender a security interest in and lien on all of Borrower's
right, title and interest in and to all of the Collateral, wherever located,
whether now owned or existing or hereafter arising or acquired.
3.2 Continuing Liability of Borrower. The security interests described
above are granted as security only and shall not subject Lender, or transfer or
in way affect or modify, any obligation or liability of Borrower with respect
to, any of the Collateral or any transaction in connection therewith. Lender
shall not be required or obligated in any manner to make any inquiry as to the
nature or sufficiency of any payment received by it or the sufficiency of any
performance by any party under any such obligation, or to make any payment or
present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amount thereunder to which any such Person
may be entitled at any time.
3.3 Filings; Further Assurances. Borrower will, from time to time, at its
expense and in such manner and form as Lender may reasonably require, execute,
deliver, file and record Financing Statements and any other statements,
continuation statement, specific assignment or other instrument or document and
take any other action that may be necessary or desirable, to create, preserve,
perfect or validate the security interests created hereunder or to enable
Lender to exercise and enforce its rights hereunder with respect to any of the
Collateral.
3.4 Power of Attorney. Borrower hereby authorizes Lender, and gives Lender
its irrevocable power of attorney (which authorization is coupled with an
interest), in the name of Borrower or otherwise, to execute, deliver, file and
record any financing statement, continuation statement, specific assignment or
other paper and to take any other action that Lender in its sole discretion may
deem necessary or appropriate to further perfect the security interests created
hereby. Borrower agrees that a carbon, photographic, photostatic, or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement where permitted by applicable law.
3.5 Place of Business; Change of Name. As of the Effective Date, the chief
executive office of the Borrower and its chief place of business, the locations
of the Collateral and the location where it maintains all records relating to
the Collateral are listed on Schedule 3.5 hereto. Borrower will not (x) change
its principal place of business or chief executive office from the location
listed on such Schedule, (y) change its name, identity or corporate structure
or (z) change the location of the Collateral or its records relating to the
Collateral from those specified on Schedule 3.5 hereto, unless in any such
event Borrower shall have given Lender at least sixty (60) days' (or such
shorter period to which Lender may consent in writing) prior written notice
thereof and shall have taken all action necessary or reasonably requested
(including without limitation appropriate opinions of counsel) by Lender to
amend its existing financing statements and continuation statements so that
they are not misleading and to file additional financing statements in all
applicable jurisdictions to perfect the security interests of Lender in all of
the Collateral.
3.6 Maintenance of Collateral. If Borrower fails to do so, Lender may, at
its option,
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pay and discharge taxes, liens, security interests and other encumbrances
pertaining to the Collateral (except Permitted Liens), and may pay for the
maintenance and preservation of the Collateral to prevent a material
deterioration from its present condition and for insurance thereon in order to
keep the Collateral in salable condition. Borrower agrees to reimburse Lender
promptly after notice thereof for any payment so made.
ARTICLE 4 - CONDITIONS OF ADVANCES
The performance by Lender of its obligations hereunder are subject to the
following conditions precedent:
4.1 Closing. On the Effective Date Borrower shall deliver or cause to be
delivered to Lender, in form and substance satisfactory to Lender and its
counsel, in addition to this Agreement, the following documents and instruments
and the following conditions shall have been satisfied:
(a) Coast shall have purchased the Senior Subordinated Secured
Promissory Note, dated May 24, 1996, payable to Mercury Partners in the amount
of $500,000 and Mercury shall have assigned to Coast its rights under the
Trademark Security Agreement and Patent Security Agreement each dated May 24,
1996.
(b) Borrower shall have delivered to Lender a copy of the resolutions
of Borrower's Board of Directors, certified as of the Effective Date by the
Secretary of Borrower, with respect to the authorization, execution, delivery
and performance of this Agreement by Borrower;
(c) Borrower shall have delivered to Lender a certificate dated as of
the Effective Date as to the incumbency and signature of the President of
Borrower and/or any other authorized officer signing this Agreement or
authorized to execute and deliver the Note on behalf of Borrower;
(d) Borrower shall have executed and delivered the Note to Lender;
(e) Borrower shall have delivered to Lender appropriate Financing
Statements covering the Collateral, duly executed by Borrower for each
jurisdiction as Lender shall have specified, and security agreements and such
other documents and statements, duly executed by Borrower, as may be required
to perfect a security interest in the Collateral;
(f) Borrower shall have fulfilled and complied in all respects with
each and every obligation, covenant, term and condition of this Agreement which
are then required to be fulfilled and complied with by it;
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(g) Counsel to Borrower shall have delivered to Lender an opinion in
form and substance satisfactory to Lender;
(h) Borrower shall have delivered to Lender a certificate of good
standing from its state of incorporation and every jurisdiction in which
Borrower is required to be qualified as a foreign corporation to transact
business;
(i) The Forbearance Letter in form and substance satisfactory to
Lender shall have been executed and delivered to Lender.
4.2 Advances. The agreement of Lender to make any Advances after the
Effective Date hereunder is subject to satisfaction of the following conditions
precedent:
(a) Lender shall have timely received a Funding Request as required
under Article 2.3 hereof;
(b) Borrower shall have delivered to Lender a certificate, dated as of
the date of the Advance, of the President and Chief Financial Officer of
Borrower certifying compliance with all covenants and agreements herein then
required to be or to have been complied with by it, the absence of any Event of
Default which has occurred and is continuing (not including any Event of
Default which has been waived or is otherwise subject to a forbearance
agreement) and the truth of all representations and warranties herein with the
same effect as though made on and as of such date, except to the extent such
representations and warranties specifically relate to an earlier date; and
(d) There shall have been no material adverse change in the business,
financial condition, results or operations of Borrower since the Effective Date
and the Borrower shall have delivered to Lender a certificate to such effect,
dated the date of the Advance, executed on behalf of Borrower by its President
and Chief Financial Officer.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF BORROWER
Except as disclosed in a document referring specifically to the
representations and warranties in this Agreement which reasonably identifies an
exception to a representation and warranty in this Agreement and which is
delivered by Borrower to Lender prior to the execution of this Agreement (the
"Borrower Disclosure Schedule"), Borrower represents and warrants to Lender as
of the Effective Date and the date of each Advance:
5.1 Due Incorporation and Good Standing. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Borrower is duly qualified to do business as a
foreign corporation and is in good standing in every jurisdiction in which the
nature of its business requires it to be so qualified or where the ownership
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of its properties or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not materially
adversely affect the Business or the enforceability of this Agreement or the
Note or the ability of Borrower to perform its Obligations hereunder.
5.2 Due Authorization and No Conflict. The execution, delivery and
performance by Borrower of this Agreement and the transactions contemplated
hereby, including the Note and security interests contemplated hereunder, are
within Borrower's corporate powers, have been duly authorized by all necessary
corporate action, do not contravene Borrower's certificate of incorporation or
by-laws, any law, rule or regulation applicable to Borrower, any contractual
restriction contained in any indenture, loan or credit agreement, lease,
mortgage, security agreement, bond, note, or other agreement or instrument
binding on or affecting Borrower or its property or any order, writ, judgment,
award, injunction or decree binding on or affecting Borrower or its property.
This Agreement has been duly executed and delivered on behalf of Borrower.
5.3 Government and Other Consents. Except for (i) the filing of Financing
Statements required to perfect the security interests granted hereunder, or
(ii) the consent of Coast, which consent has been obtained, no authorization,
consent, approval or other action by, and no registration, qualification,
designation, declaration, notice to or filing with, any governmental authority
or other Person is or will be necessary in connection with the execution and
delivery of this Agreement or any of the other documents contemplated hereby,
the consummation of the transactions herein contemplated, or performance of or
compliance with the terms and conditions hereof, to ensure the legality,
validity or enforceability hereof.
5.4 Enforceability. This Agreement has been validly executed and delivered
by Borrower and constitutes the legal, valid and binding obligation of Borrower
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws relating to or affecting
creditors' rights generally and by equitable principles.
5.5 Priority of Liens. Other than Permitted Liens listed on Schedule 5.5
hereto, Borrower owns the Collateral free and clear of all Liens subject to the
rights and interests granted Lender herein, and upon perfection of Lender's
security interest in the Collateral, Lender will have a security interest in
and lien on the Collateral superior in right of preference to all other Liens
other than Permitted Liens.
5.6 Financial Statements. The Financial Statements of Borrower contained
in the SEC Filings are true, complete and correct in all material respects,
have been prepared in accordance with GAAP, consistently applied, and present
fairly the financial condition of Borrower as of said dates and the results of
Borrower's operations for the periods then ended.
5.7 No Litigation. Other than as disclosed in the SEC Filings, there are
no actions, suits or proceedings at law or in equity or by or before any
governmental authority now pending or, to the knowledge of Borrower, threatened
against or affecting Borrower or any property or
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rights of Borrower which purport to challenge the legality, validity or
enforceability of this Agreement or which may materially impair the ability of
Borrower to carry on business substantially as now being conducted or which may
materially and adversely affect the condition (financial or otherwise),
operations or properties of Borrower.
5.8 Contracts; Indebtedness.
(a) True, complete and correct copies of all material contracts and
agreements of Borrower have heretofore been furnished or made available to
Lender. Other than as set forth in Schedule 5.8(a), all such material contracts
and agreements are in full force and effect and enforceable in accordance with
their respective terms, and, to Borrower's knowledge, the parties thereto other
than Borrower have complied, and are complying, with all of their material
obligations and are not in material violation or default under (nor does there
exist any condition which upon the passage of time or the giving of notice
would cause such a material violation of or default under) any of such material
contracts or agreements. Other than as set forth in Schedule 5.8(a), Borrower
is not in violation of or in default under (nor does there exist any condition
which upon the passage of time or the giving of notice would cause such a
violation of or default under) any material contract to which it is a party or
by which it or any of its properties or assets is bound. For purposes of this
Agreement, "material contract" means any material contract, whether or not made
within the ordinary course of business, within the meaning of Item 601 (10) of
Regulation S-K under the Securities Act of 1933, as amended, or which is
described in the SEC Filings.
(b) True, complete and correct copies of all loan or credit
agreements, notes, bonds, mortgages, indentures and other agreements and
instruments pursuant to which any Indebtedness of Borrower is outstanding or
may be incurred have heretofore been furnished to or made available to Lender.
"Indebtedness" shall mean, with respect to any person, without duplication, (a)
all obligations of such person for borrowed money, or with respect to deposits
or advances of any kind to such person, (b) all obligations of such person
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such person upon which interest charges are customarily paid,
(d) all obligations of such person under conditional sale or other title
retention agreements relating to property purchased by such person, (e) all
obligations of such person issued or assumed as the deferred purchase price of
property or services (excluding obligations of such person to creditors for raw
materials, inventory, services and supplies incurred in the ordinary course of
such person's business), (f) all capitalized lease obligations of such person,
(g) all obligations of others secured by any lien on property or assets owned
or acquired by such person, whether or not the obligations secured thereby have
been assumed, (h) all obligations of such person under interest rate or
currency hedging transactions (valued at the termination value thereof), (i)
all letters of credit issued for the account of such person and (j) all
guarantees and arrangements having the economic effect of a guarantee of such
person of any indebtedness of any other person.
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5.9 Accuracy of Information. All certificates, reports, financial
statements and similar writings furnished by or on behalf of Borrower to Lender
at any time pursuant to any requirement of, or in response to any written
request of Lender or its agents under, this Agreement or any transaction
contemplated hereby, have been, and all such certificates, reports, financial
statements and similar writings hereafter furnished by Borrower to Lender will
be, true, complete and accurate in every respect material to the transactions
contemplated hereby on the date as of which any such certificate, report,
financial statement or similar writing was or will be delivered, and taken as a
whole, as of such date of delivery, such materials shall not omit to state any
material facts or any facts necessary to make the statements contained therein
not materially misleading.
5.10 Margin Regulations. Borrower is not engaged, principally or as one of
its important activities, in the business of extending credit for the purpose
of "purchasing" or "carrying" any "margin stock" (as each of the quoted terms
is defined or used in Regulation G, T, U or X). No part of the proceeds of any
of the Advances will be used for so purchasing or carrying margin stock or for
any purpose which violates, or which would be inconsistent with, the provisions
of Regulation G, T, U or X.
5.11 Taxes. Other than as disclosed in Schedule 5.11, Borrower has filed
or caused to be filed all federal, state and local tax returns which are
required to be filed by it, and has paid or caused to be paid all taxes shown
to be due and payable on such returns or on any assessments received by it,
other than any taxes or assessments, the validity of which are being contested
in good faith by appropriate proceedings and with respect to which the Borrower
has set aside adequate reserves on its books in accordance with GAAP.
5.12 ERISA. Other than as disclosed in Schedule 5.12, Borrower does not
currently maintain or contribute to, nor has it ever maintained or contributed
to, any "employee benefit plan," as such term is defined in Section 3 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), with
respect to which the Company is required to file Internal Revenue Service Form
5500, and the Company does not currently contribute to, nor has it ever
contributed to, any "multiemployer plan," as that term is defined in Section 3
of ERISA.
5.13 Compliance with Applicable Laws.
(a) Borrower has in effect all federal, state, local and foreign
governmental approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights ("Permits") necessary for it to own,
lease or operate its properties and assets and to carry on its business as now
conducted, and there has occurred no material default under any such Permit.
Borrower is in material compliance with all applicable statutes, laws,
ordinances, rules, orders and regulations of any Governmental Entity.
(b) Borrower is, and has been, in material compliance with all
applicable "Environmental Laws". The term "Environmental Laws" means any
federal, state or local statute, code, ordinance, rule, regulation, policy,
guideline, permit, consent, approval, license, judgment,
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order, writ, decree, directive, injunction or other authorization, including
the requirement to register underground storage tanks, relating to: (i)
"Releases" (as defined below) or threatened Releases of "Hazardous Material"
(as defined below) into the environment, including into ambient air, soil,
sediments, land surface or subsurface, buildings or facilities, surface water,
groundwater, publicly-owned treatment works, septic systems or land; or (ii)
the generation, treatment, storage, disposal, use, handling, manufacturing,
transportation or shipment of Hazardous Material.
(c) During the period of ownership or operation by Borrower of any of
its current or previously owned or leased properties, there have been no
Releases of Hazardous Material in, on, under or affecting such properties or
any surrounding site, and Borrower has not disposed of any Hazardous Material
or any other substance in a manner that could reasonably be anticipated to lead
to a Release. To the best of the Borrower's knowledge, prior to the period of
ownership or operation by Borrower of any of its current or previously owned or
leased properties, no Hazardous Material was generated, treated, stored,
disposed of, used, handled or manufactured at, or transported, shipped or
disposed of from, such current or previously owned properties, and there were
no Releases of Hazardous Material in, on, under or affecting any such property
or any surrounding site. The term "Release" has the meaning set forth in 42
U.S.C. Section 9601(22). The term "Hazardous Material" means (i) hazardous
materials, pollutants, contaminants, constituents, medical or infectious
wastes, hazardous wastes and hazardous substances as those terms are defined in
the following statutes and their implementing regulations: the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. Section
9601 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq. and the Clean Air Act,
42 U.S.C. Section 7401 et seq., (ii) petroleum, including crude oil and any
fractions thereof, (iii) natural gas, synthetic gas and any mixtures thereof,
(iv) asbestos and/or asbestos-containing material, (v) radon and (vi) PCBs, or
materials or fluids containing PCBs.
5.14 Intellectual Property Matters. Except as set forth in Schedule 5.14
or in the SEC Filings, (i) Borrower owns or has the right to use, free and
clear of all Liens, charges, claims and restrictions, all know-how, processes,
patents, patent applications, trade secrets, confidential information,
trademarks and service marks (and registrations and applications therefor),
trade names, copyrights (and registrations and applications therefor),
licenses, proprietary rights and other rights and information materially
necessary to its business as heretofore or now conducted or under development
(the "Borrower Intellectual Property Rights"), (ii) there is no litigation,
threatened or pending, related to the Borrower Intellectual Property Rights,
and (iii) the Borrower Intellectual Property have been properly maintained and
are valid and subsisting. Borrower is not infringing upon or otherwise acting
adversely to any actual or claimed know-how, process, patent, trade secret,
trademark, service ▇▇▇▇, trade name, copyright, information, proprietary right
or other right of any person. There are no outstanding options, licenses or
agreements of any kind relating to any Borrower Intellectual Property Rights in
favor of any third party (other than license agreements on Borrower's standard
form entered into in the ordinary course of business).
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Borrower has not received any communications alleging that Borrower has
violated or, by conducting its business as now conducted or currently proposed
to be conducted by Borrower, would violate any patent, trade secret, trademark,
service ▇▇▇▇, trade name, copyright, license, information, proprietary right or
other right of any other person or entity, and, to the best of Borrower's
knowledge, there is no basis for any such allegation. Borrower has taken
reasonable steps to protect its trade secrets and confidential information.
Other than as set forth in the SEC Filings, there is no actual or threatened
infringement or adverse use of Borrower's rights to or in any material
know-how, processes, trade secrets, trademarks, service marks, trade names,
copyrights, licenses, information, proprietary rights or other material rights
of Borrower. To the best of Borrower's knowledge, neither the execution nor
delivery of this Agreement, nor the carrying on of Borrower's business as now
conducted or under development by Borrower, will conflict with or result in a
material breach of the terms, conditions or provisions of, or constitute a
material default under or a material violation of, any fiduciary duty or any
contract, covenant or instrument under which any of Borrower's employees is now
obligated.
ARTICLE 6 - COVENANTS OF BORROWER
6.1 Affirmative Covenants. From the Effective Date until the Collection
Date, Borrower will, unless Lender shall otherwise consent in writing:
(a) Use of Proceeds. Use the proceeds of the Advances (i) as to the
Initial Advance, to pay necessary and reasonable operating expenses required to
keep it operating as a going concern through the Termination Date, and (ii) as
to any subsequent Advance, only for the purposes set forth in the applicable
Funding Request. Borrower shall deposit the proceeds of the Initial Advance and
any subsequent Advance at the bank, and in the account, set forth on Schedule
6.1(a) (the "Borrower Bank Account"). Borrower shall maintain the proceeds of
the Initial Advance and any subsequent Advance in the Borrower Bank Account
until such time as such proceeds are utilized in accordance with the purposes
set forth herein or in the applicable Funding Request, as the case may be.
(b) Compliance with Laws, Etc. Comply in all material respects with
all applicable laws, rules, regulations and orders with respect to it, its
business and properties.
(c) Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where the nature of its business
requires it to be so qualified or where the ownership of its properties or the
nature of its activities makes such qualification necessary, except where the
failure to be so qualified would not materially adversely affect the
enforceability of this Agreement and any Note, the business, properties,
operations, profits or condition (financial or otherwise) of Borrower or the
ability of Borrower to perform its obligations hereunder.
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(d) Keeping of Records and Books of Account. Maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing accounts receivable in the event of the
destruction of the originals thereof) and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all accounts receivable (including, without limitation, records
adequate to permit the daily identification of all collections of and
adjustments to each account).
(e) Location of Records. Keep its chief place of business and chief
executive office, and the offices where it keeps the records, at the address of
Borrower referred to in Schedule 3.5 hereto and notify lender 60 days in
advance prior to a change of Borrower's principal executive office or in the
location of any Collateral.
(f) Accounts. Collect its accounts and sell its inventory only in the
ordinary course of business.
(g) Maintenance of Properties. Maintain its inventory, equipment, real
estate and other properties, whether owned or leased, in good condition and
repair (normal wear and tear excepted), and will pay and discharge or cause to
be paid and discharged, when due, the cost of repairs to or maintenance of the
same.
(h) Insurance. Insure and keep insured with reputable insurance
companies so much of its properties as presently maintained by Borrower.
(i) Taxes. File or cause to be filed all federal, state and local tax
returns which are required to be filed by it. Borrower shall pay or cause to be
paid all taxes shown to be due and payable on such returns or on any
assessments received by it, other than any taxes or assessments, the validity
of which are being contested in good faith by appropriate proceedings and with
respect to which Borrower shall have set aside adequate reserves on its books
in accordance with GAAP and which proceedings could not reasonably be expected
to have a material adverse effect on the ability of the Borrower to perform its
obligations hereunder.
(j) Reporting Requirements of Borrower. From the Effective Date until
the Collection Date, will furnish to Lender:
(i) as soon as available and in any event within 30 days after the
end of each fiscal quarter of Borrower, balance sheets of Borrower as of the
end of such quarter, and (to the extent available) statements of income and
retained earnings of Borrower for the period commencing at the end of the
previous fiscal quarter and ending with the end of such quarter, certified by
the chief financial officer, chief accounting officer or treasurer of Borrower;
(ii) as soon as possible and in any event within five Business Days
after the occurrence of each Event of Default or Unmatured Event of Default,
the statement of the chief financial officer, chief accounting officer or
treasurer of Borrower setting forth details of such
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Event of Default or Unmatured Event of Default and the action which the
Borrower proposes to make with respect thereto;
(iii) promptly from time to time, such other information,
documents, records or reports respecting the accounts or the conditions or
operations, financial or otherwise, of Borrower as Lender may from time to time
reasonably request in order to protect the interests of Lender under or as
contemplated by this Agreement.
(k) Performance of Obligations. Perform, pay and discharge, as and
when due, all of Borrower's obligations (both monetary and non-monetary) (i)
under this Agreement; and (ii) under any agreement that encumbers any part of
the Collateral if (as to ii) the failure to do so could result in a material
adverse effect on the properties, operations, profits or condition (financial
or otherwise) of Borrower.
(l) Material Adverse Changes. Immediately notify Lender of (i) the
occurrence or likely occurrence of any event which causes or could reasonably
be expected to cause (A) a material adverse effect on the properties,
operations, prospects, profits or condition (financial or otherwise) of
Borrower; (B) any representation, warranty made by Borrower hereunder to be
untrue, incomplete or misleading in any material respect; or (C) the occurrence
of any other Event of Default or Unmatured Event of Default hereunder or of any
other development, financial or otherwise, which might reasonably be expected
to materially adversely affect its Business, properties or affairs or the
ability of Borrower to repay the Obligations; (ii) the institution of, or the
issuance of any order, judgment, decree or other process in, any litigation,
investigation, prosecution, proceeding or other action by any governmental
authority or other Person against Borrower or related to the Business and that
does, or could reasonably be expected to, have a material adverse effect on the
properties, operations, profits or condition (financial or otherwise) of
Borrower; (iii) any material casualty to any property of Borrower, whether or
not insured; and (iv) any change of Borrower's directors.
(m) Business. Maintain the general character of Borrower's Business in
which it is engaged as of the Effective Date.
(n) Patents. As soon as practicable following the execution of this
Agreement, shall pay the maintenance fees with respect to, and take all other
necessary action to revive, U.S. Patent No.5,124,797. Borrower shall take all
necessary action to maintain the effectiveness of all patents owned by Borrower
or used or to be used in the Business.
(o) Indemnification. Borrower hereby indemnifies and agrees to
protect, defend and hold harmless Lender and Lender's directors, officers,
employees, agents, attorneys and shareholders from and against any and all
losses, damages, expenses or liabilities of any kind or nature from any suits,
claims, or demands, including counsel fees incurred in evaluating or defending
any such claim, suffered by any of them and caused by, relating to, arising out
of, resulting from, or in any way connected with this Agreement or the Note and
any transaction
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contemplated therein. If Borrower shall have knowledge of any claim or
liability hereby indemnified against, it shall promptly give written notice
thereof to Lender. Lender shall promptly give Borrower written notice of all
suits or actions instituted against Lender, and Borrower shall timely proceed
to defend any such suit or action. Lender shall also have the right, at the
expense of Borrower, to participate in, or at Lender's election, assume the
defense or prosecution of such suit, action or proceeding, and in the latter
event Borrower may employ counsel and participate therein. Lender shall have
the right to adjust, settle, or compromise any claim, suit, or judgment. The
right of Lender to indemnification under this Agreement shall extend to any
money paid by Lender in settlement or compromise of any such claims, suits, and
judgments in good faith. THIS COVENANT SHALL SURVIVE PAYMENT OF THE OBLIGATIONS
AND THE TERMINATION OR SATISFACTION OF THIS AGREEMENT.
6.2 Negative Covenants. From the Effective Date until the Collection Date,
Borrower will not, without the written consent of Lender:
(a) Debts, Liens and Encumbrances. Create, assume or permit to exist
any mortgage, lien, pledge, charge, security interest or other encumbrance upon
any of the Collateral, or any of its other properties or assets, whether now
owned or hereafter acquired other than (i) security interests with respect to
money borrowed from Lender; and (ii) Permitted Liens.
(b) Transfer of Collateral. Other than with respect to Permitted
Liens, transfers between the entities constituting Borrower and sales of assets
in the ordinary course of business, sell, enter into an agreement of sale for,
convey, lease, assign, transfer, pledge, grant a security interest, mortgage or
lien in, or otherwise dispose of the Collateral or its assets.
(c) Stock, Merger, Consolidation, Etc. Sell any shares of any class of
its capital stock to any Person other than Lender or consolidate with or merge
into or with any Person other than Lender, or purchase or otherwise acquire all
or substantially all of the assets or capital stock, or other ownership
interest of, any Person or sell, transfer, lease or otherwise dispose of all or
substantially all of its assets to any Person other than Lender, or enter into
any agreement or make any public announcement with respect to any of the
foregoing, except for the conveyances of a security interest in favor of Lender
as expressly permitted under the terms of this Agreement.
(d) Change in Corporate Name. Make any change to its corporate name or
use any trade name, fictitious names, assumed names or "doing business as"
names.
(e) Guarantees. Other than cross-guarantees between the entities
constituting Borrower, guarantee, endorse or otherwise be or become
contingently liable (including by agreement to maintain balance sheet tests) in
connection with the obligations of any other Person, except endorsements of
negotiable instruments for collection in the ordinary course of business and
reimbursement or indemnification obligations in favor of Lender as provided for
under this Agreement.
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(f) Limitation on Transactions with Affiliates. Other than
transactions between the entities constituting Borrower or transactions at
arms' length in the ordinary course of business, enter into, or be a party to,
any transaction with any Affiliate.
(g) Charter and By-Laws. Amend or otherwise modify its certificate of
incorporation or by-laws in any manner.
(h) Limitation on Investments. Other than investments between the
entities constituting Borrower, make or suffer to exist any loans or advances
to, or extend any credit to, or make any investments (by way of transfer of
property, contributions to capital, purchase of stock or securities or
evidences of indebtedness, acquisition of the business or assets, or otherwise)
in, any Affiliate or any other Person.
(i) Capital Expenditures. Expend, or be committed to expend, in excess
of $50,000 in the acquisition of fixed assets from the Effective Date until the
Collection Date.
(j) Licenses and Government Approvals. Fail to maintain in full force
and effect or fail to be in material compliance with (or permit its officers,
directors or shareholders to fail to maintain or fail to be in material
compliance with) any permit or license necessary or desirable in connection
with Borrower or the Business.
(k) Ordinary Course. Alter or amend any material provision of, or
terminate or permit termination of any agreement integral or necessary to the
Business, or in any manner conduct the Business other than in ordinary course.
(l) Indebtedness. Incur, create, assume, or permit to exist any
indebtedness except (i) the indebtedness under this Agreement and the Note,
(ii) the indebtedness existing on the dates shown on Schedule 6.2 hereto and
(iii) as between the entities constituting Borrower.
ARTICLE 7 - DEFAULT
7.1 Events of Default. The occurrence of any one or more of the following
events, conditions or state of affairs shall constitute an Event of Default
hereunder and under the Note:
(a) Borrower shall fail to pay as and when due any principal or
interest hereunder or under the Note, or use the proceeds of the Advances in
violation of Article 6.1(a);
(b) Borrower shall fail to observe or perform any Obligation or any
covenant to be observed or performed by it hereunder or under the Note or in
any other agreement between Lender and Borrower;
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(c) Borrower shall default after the date hereof in the payment or
performance of any material obligation or material Indebtedness to another
Person whether now existing or hereafter incurred including, without
limitation, any event of default as defined in the Coast Agreement which is not
then subject to Coast's forbearance under the terms of the Forbearance Letter;
(d) Any material statement, certificate, report, representation or
warranty made or furnished by Borrower in this Agreement or in compliance with
the provisions hereof shall prove to have been false or misleading in any
material respect at the time when made, deemed made or furnished;
(e) (i) Any money judgment, writ or warrant of attachment or similar
process involving an amount in excess of U.S. $50,000 shall be entered or filed
against Borrower or any of its assets or properties and shall remain
undischarged for a period of 30 days, or (ii) any judgment or order of any
court or administrative agency awarding damages under the federal securities
laws or in any action seeking reimbursement, indemnification or contribution
with respect to payment of any such claim;
(f) Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee or liquidator of itself or of its property, (ii) be unable,
or admit in writing inability, to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt
or insolvent, (v) file a voluntary petition in bankruptcy, or a petition or
answer seeking reorganization or an arrangement with creditors to take
advantage of any insolvency law, or an answer admitting the material
allegations of a bankruptcy, reorganization or insolvency petition filed
against it, (vi) take corporate action for the purpose of effecting any of the
foregoing, or (vii) have an order for relief entered against it in any
proceeding under the United States Bankruptcy Code;
(g) An order, judgment or decree shall be entered, without the
application, approval or consent of Borrower by any court of competent
jurisdiction, approving a petition seeking reorganization of Borrower or
appointing a receiver, trustee or liquidator of Borrower or of all or a
substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of 30 consecutive days;
(h) If (i) any person or group within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended (the "1934 Act") and the
rules and regulations promulgated thereunder other than Lender shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the 1934
Act), directly or indirectly, of securities of the Company (or other securities
convertible into such securities) representing twenty percent (20%) of the
combined voting power of all securities of the Company entitled to vote in the
election of directors (hereinafter called a "Controlling Person"); or (ii) a
majority of the Board of Directors of the Company shall cease for any reason to
consist of (A) individuals who on December 10, 1996 were serving as directors of
the Company and (B) individuals who subsequently become members of the Board if
such individuals' nomination for election or election to the Board is
recommended or approved by a majority of the
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Board of Directors of the Company. For purposes of clause (i) above, a person
or group shall not be a Controlling Person if such person or group holds voting
power in good faith and not for the purpose of circumventing this Section
7.1(h) as an agent, bank, broker, nominee, trustee, or holder of revocable
proxies given in response to a solicitation pursuant to the 1934 Act, for one
or more beneficial owners who do not individually, or, if they are a group
acting in concert, as a group have the voting power specified in clause (i);
(i) This Agreement shall cease for any reason to be in full force and
effect or shall be declared to be null and void or unenforceable in whole or in
part;
(j) There shall occur any material adverse change in the business,
properties, operations or condition (financial or otherwise) of Borrower;
(k) Other than Permitted Liens or Liens in favor of Lender or Liens
otherwise consented to in writing by Lender, imposition of any Lien or series
of Liens against Borrower or any of the Collateral whether by operation of law
or by consent except where the result of such Lien does not have a material
adverse effect on the properties, operations, profits or condition (financial
or otherwise) of Borrower; or
(l) Borrower shall cease to conduct its Business substantially as it
is conducted as of the Effective Date, or Borrower shall change the nature of
its Business.
7.2 Remedies on Default. Upon the occurrence of an Event of Default:
(a) In addition to the rights specifically granted hereunder or now or
hereafter existing in equity, at law, by virtue of statute or otherwise (each
of which rights may be exercised at any time and from time to time), Lender may
at its election forthwith declare all principal and interest to be immediately
due and payable, without protest, demand or other notice (which are hereby
expressly waived by Borrower). Upon the occurrence of an Event of Default
specified in Article 7.1(f) or (g) above, all obligations, including all
principal and interest, shall be immediately due and payable without any
declaration by Lender.
(b) Lender shall have all the rights of a secured creditor under the
Uniform Commercial Code.
(c) Borrower will pay, as part of the Obligations secured hereunder,
Lender's administrative fees and all other amounts (including but not limited
to Lender's attorneys' and other professional fees) paid by Lender: (i) for
taxes, levies and insurance on, or maintenance of, the Collateral; and (ii) in
taking possession of, disposing of, or preserving such Collateral.
(d) Borrower hereby designates and appoints Lender and its designees
or agents as attorneys-in-fact of Borrower upon the occurrence and continuation
of an Event of Default, irrevocably and with power of substitution, with
authority to sign Borrower's name on any
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Financing Statements relating to the Collateral; to endorse the name of
Borrower on any notes, acceptances, checks, drafts, money orders or other
evidence of payment or proceeds of the Collateral that come into Lender's
possession; to sign the name of Borrower on any invoices, documents, drafts
against and notices to account debtors of Borrower, assignments and request for
verification of accounts; to execute proofs of claim and loss; to execute any
endorsements, assignments or other instruments of conveyance or transfer; and
to do any and all acts and things necessary or advisable in the sole discretion
of Lender to carry out and enforce this Agreement. All acts of said attorney or
designee are hereby ratified and approved and said attorney or designee shall
not be liable for any acts of commission or omission, nor for any error of
judgment or mistake of fact or law. This power of attorney being coupled with
an interest is irrevocable while any of the Obligations shall remain unpaid or
Lender has any obligation or ability to make Advances hereunder.
(e) Any cash proceeds of sale, lease or other disposition of
Collateral upon an Event of Default shall be applied in the following order:
(i) to Lender's costs; (ii) to the payment of interest due pursuant to this
Agreement or the Note; (iii) to the payment of principal due pursuant to this
Agreement or the Note; and (iv) any surplus then remaining to Borrower or
whomever may be lawfully entitled thereto.
(f) The remedies provided herein or in the Note or otherwise available
to Lender at law or in equity shall be cumulative and concurrent, and may be
pursued singly, successively or together at the sole discretion of Lender, and
may be exercised as often as occasion therefor shall occur; and the failure to
exercise any such right or remedy shall in no event be construed as a waiver or
release of the same.
ARTICLE 8 - MISCELLANEOUS
8.1 Amendments, Etc. No amendment to or waiver of any provision of this
Agreement nor consent to any departure by Borrower, shall in any event be
effective unless (a) the same shall be in writing and signed by Lender and
Borrower (with respect to an amendment) or Lender (with respect to a waiver or
consent by it) or Borrower (with respect to a waiver or consent by it), as the
case may be, and such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. This Agreement contains
a final and complete integration of all prior expressions by the parties hereto
with respect to the subject matter hereof and shall constitute the entire
agreement (together with the Schedules hereto) among the parties hereto with
respect to the subject matter hereof, superseding all prior oral or written
understandings.
8.2 Notices, Etc. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including
communication by facsimile copy) and mailed, return receipt requested,
transmitted or delivered, as to each party hereto, at its address or facsimile
number set forth under its name on the signature pages hereof or at such other
address
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as shall be designated by such party in a written notice to the other parties.
All such notices and communications shall be effective, upon receipt, or in the
case of delivery by mail, five days after being deposited in the mails, or, in
the case of notice by facsimile copy, when verbal communication of receipt is
obtained.
8.3 Binding Effect; Assignability. This Agreement shall be binding upon
and inure to the benefit of Borrower and Lender and their respective successors
and permitted assigns (which successors of Borrower shall include a trustee in
bankruptcy). Borrower may not assign any of its rights and obligations
hereunder or any interest herein without the prior written consent of Lender.
Lender may assign at any time its rights and obligations hereunder and
interests herein to any other Person without the consent of Borrower. Borrower
hereby consents to the foregoing and agrees to cooperate with any such Person
electing to exercise Lender's rights under this Agreement. This Agreement shall
create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until such
time as the Collection Date shall occur; provided, however, that the rights and
remedies with respect to any breach of any representation and warranty or
covenant made by the Borrower pursuant to Article 5 and Article 6 shall be
continuing and shall survive until all Obligations are satisfied in full.
8.4 GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT AND THE NOTE SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH
OF PENNSYLVANIA WITHOUT REGARD TO CONFLICT OF LAWS. BORROWER HEREBY AGREES TO
THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE COMMONWEALTH OF PENNSYLVANIA
FOR THE COUNTY OF YORK AND THE UNITED STATES DISTRICT COURT OF THE MIDDLE
DISTRICT OF PENNSYLVANIA AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED
MAIL DIRECTED TO BORROWER AT THE ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF
AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE
SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID. BORROWER
HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN BORROWER AND LENDER
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED
IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY. WITH RESPECT TO THE
FOREGOING CONSENT TO JURISDICTION, LENDER HEREBY WAIVES ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS ARTICLE 8.4 SHALL AFFECT THE
RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF LENDER TO
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BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS
OF ANY OTHER JURISDICTION.
8.5 Execution in Counterparts; Severability. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
8.6 Joint and Several Liability. Each entity constituting Borrower hereby
unconditionally and absolutely guarantees to and for the Lender the due
performance, including without limitation the prompt payment when due or within
any applicable grace period, whether at stated maturity, by acceleration or
otherwise and at all times thereafter, of any and all Obligations of Borrower
owed to the Lender irrespective of (a) any lack of enforceability of any
Obligation, (b) any change of the time, manner, place of payment, or any other
term of any Obligation, (c) any exchange, release or non-perfection of any
collateral securing payment of any Obligation, (d) any law, regulation or order
of any jurisdiction affecting the genuineness, validity, or rights of the
Lender with respect to the Obligations or any instruments evidencing any of the
Obligations, or (e) any other circumstance which might otherwise constitute a
defense to or discharge of an entity constituting Borrower. Each entity
constituting Borrower agrees that its obligations hereunder are irrevocable;
that a separate action or actions may be brought and prosecuted against it
regardless of whether the other entity constituting Borrower is joined in any
such action or actions; and that it waives the benefit of any statute of
limitations affecting its liabilities hereunder or the enforcement hereof.
Each entity constituting Borrower agrees that its obligations as a
guarantor shall not be impaired, modified, changed, released, or limited in any
manner whatsoever by any impairment, modification, change, release or
limitation of the liability of the other's estate in bankruptcy, resulting from
the operation of any present or future provision of the bankruptcy laws or
other similar statute, or from the decision of any court in a bankruptcy
proceeding.
This is a continuing guarantee and shall remain in full force and effect
and be binding upon each entity constituting Borrower, their respective
successors and assigns until payment in full of all of the Obligations and no
partial payment hereunder shall entitle either of them, by subrogation or
otherwise, to any payment by the other out of its property.
Each entity constituting Borrower hereby waives all notices of any
character whatsoever with respect to this guarantee and the Obligations,
including but not limited to notice of the acceptance hereof and reliance
hereon, of the present existence or future incurring of any Obligations, of the
amounts, terms and conditions thereof, and of any defaults thereon and further
waives the defenses of diligence, presentment for payment, protest, demand or
extensions of time for payment. Each entity constituting Borrower hereby
consents to the taking of, or failure to take, from time to time
23
25
without notice to it, any such action of any nature whatsoever with respect to
the Obligations and with respect to any rights against any person or persons or
in any property, including but not limited to any renewals, extensions,
modifications, postponements, compromises, settlements, substitutions, refusals
or failures to exercise or enforce, indulgences, waivers, surrenders, exchanges
and releases, and each such entity will remain fully liable hereon
notwithstanding any of the foregoing. Each entity constituting Borrower hereby
waives the benefit of all laws now or hereafter in effect in any way limiting
or restricting the liability of such entity hereunder, including without
limitation (a) all defenses whatsoever to such entity's liability hereunder
except the defense of payment made on account of the Obligations to the Lender
and such entity's liability hereunder; and (b) all right to stay of execution
and exemption of property in any action to enforce the liability of such entity
hereunder; and (c) all rights accorded such entity under any other statutory
provisions of any other applicable jurisdiction affecting the rights of the
Lender to enforce the obligations of such guarantee under this guarantee.
Each entity constituting Borrower hereby consents and agrees that without
further notice to or assent from it, the time of payment of any or all of the
Obligations may be changed, any other term or condition relating to any or all
of the Obligations may be changed, the other entity constituting Borrower may
be discharged from any or all of the Obligations, any composition or settlement
relating thereto may be consummated and accepted, and that such entity will
remain bound upon this guarantee notwithstanding any or all of the foregoing.
No failure on the part of the Lender to exercise, and no delay in
exercising, any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by the Lender of any right, power or
remedy preclude any other further exercise thereof or the exercise of any other
right, power or remedy. The rights and remedies provided herein shall be in
addition to and not exclusive of any rights or remedies provided at law or in
equity.
24
26
IN WITNESS WHEREOF, the parties below have caused this Agreement to be
duly executed by their duly authorized officers and delivered as of the day and
year first above written.
New Image Industries, Inc.
By: /s/ ▇▇▇ ▇▇▇
--------------------------------
Title: Chief Financial Officer
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
Facsimile:
Insight Imaging Systems, Inc.
By: /s/ ▇▇▇ ▇▇▇
--------------------------------
Title: Chief Financial Officer
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
Facsimile:
DENTSPLY International Inc.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Title: Senior Vice President
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
Facsimile:
27
SCHEDULE 2.3(b)
FORM OF FUNDING REQUEST
BY
NEW IMAGE INDUSTRIES, INC. AND INSIGHT IMAGING SYSTEMS, INC.
_________________, 199_
DENTSPLY International Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
This Funding Request is provided to DENTSPLY International Inc. to evidence the
desire of New Image Industries, Inc. and Insight Imaging Systems, Inc. to
borrow funds under the Credit Agreement, dated as of December 24, 1996, by and
between Borrower and Lender (the "Agreement"). All capitalized terms not
defined herein shall have the same meaning ascribed to such terms in the
Agreement.
Please transfer the amount of $_____ to [account] on [date].
The Advance shall be used only for the specific purposes and in the particular
amounts as set forth on Exhibit A hereto.
Borrower hereby certifies that no Event of Default or Unmatured Event of
Default under the Agreement or the Note has occurred and is continuing (other
than events of default which have been waived or which are the subject of a
forbearance agreement).
New Image Industries, Inc. Insight Imaging Systems, Inc.
By:____________________ By:_____________________
Name: Name:
Title: Title:
28
SCHEDULE 2.3(c)
FORM OF NOTE
SUBJECT TO THAT CERTAIN SUBORDINATION AND INTERCREDITOR AGREEMENT EXECUTED
BY AND AMONG COAST BUSINESS CREDIT, DENTSPLY INTERNATIONAL INC., AND
NEW IMAGE INDUSTRIES, INC. AND INSIGHT IMAGING SYSTEMS, INC.,
DATED AS OF DECEMBER 24, 1996
U.S. $3,000,000 December 24, 1996
FOR VALUE RECEIVED, New Image Industries, Inc., a Delaware corporation, and
Insight Imaging Systems, Inc., a California corporation, with a principal place
of business at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (collectively, the
"Maker"), hereby, promise to pay, jointly and severally, to the order of
DENTSPLY International Inc. (the "Payee") the principal sum of $3,000,000 or
such lesser amount as shall have been advanced and remain outstanding under the
terms of the Agreement defined below (the "Principal Sum"), together with
interest from the date of this Note on the unpaid balance of Principal Sum at
the floating interest rate of four percent (4%) per annum in excess of the
prime rate (the "Prime Rate") of interest set forth in the Money Rates Section
of the New York edition of the Wall Street Journal, rounded up to the nearest
one-eighth (the "Line Interest Rate") or such lesser rate permitted by
applicable law, if the Line Interest Rate would violate applicable law, as
follows:
1. Incorporation of the Credit Agreement. The Payee and the Maker are parties
to that certain Credit Agreement (the "Agreement") dated as of December 24,
1996. The terms and conditions of the Agreement are hereby incorporated in
this Note by reference and the Payee and the Maker are entitled to all rights
and benefits of the Agreement.
2. Payment of Principal and Interest. Subject to Section 6 hereof, the
Principal Sum shall be payable in full, together with any and all accrued
interest and unpaid interest thereon, on March 25, 1997. Interest shall accrue
on the principal balance of the Note from time to time at the Line Interest
Rate or such lesser rate permitted by applicable law, if the Line Interest Rate
would violate applicable law. All sums payable hereunder shall be payable in
lawful money of the United States and shall be applied first to accrued and
unpaid interest and then in payment of the Principal Sum. The Line Interest
Rate shall be changed automatically on and as of the effective date of each
change in the Prime Rate. Interest shall be calculated on the basis of a
360-day year, but charged for the actual number of days elapsed. Without in any
way limiting Lender's rights and remedies hereunder and under the Note in the
case of Events of Default, any principal payments on the Note not paid when due
and, to the extent permitted by applicable law, any interest payment on the
Note not paid when due, shall thereafter bear interest payable upon demand at a
rate which is three percent (3%) per annum in excess of the applicable Line
Interest Rate.
29
3. Place of Payment. The Principal Sum together with and all accrued and unpaid
interest thereon shall be payable Payee's principal executive offices at ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇, ▇▇ ▇▇▇▇▇, or at such other place as Payee, from time
to time, may designate in writing.
4. Prepayment. Maker shall have the right to prepay, without notice and without
prepayment penalty or premium, at any time, the entire unpaid balance of the
Principal Sum or any part thereof. Each prepayment of the Principal Sum shall
be accompanied by accrued interest on the unpaid balance of the Principal Sum.
5. Presentment. Maker hereby waives diligence, demand, presentment for payment,
protest and notice of protest, notice of acceleration, and all other notices or
demands of any kind except as expressly provided herein.
6. Default and Termination Event. Upon the occurrence of any Event of Default
or upon the occurrence of a Termination Event (as such terms are defined in the
Agreement) prior to March 25, 1997, Payee may at its election, in addition to
any other rights it may have under the Agreement or hereunder, forthwith
declare all principal and interest to be immediately due and payable, without
protest, demand or other notice (which are hereby expressly waived by Maker).
7. Costs and Expenses. In addition to all other sums payable under this Note,
Maker also agrees to pay to Payee, on demand, all reasonable costs and expenses
(including attorneys' fees and legal expenses) incurred by Payee in the
enforcement of Maker's obligations under this Note.
8. Severability. If any provision of this Note is held to be invalid or
unenforceable by a court of competent jurisdiction, the other provisions of
this Note shall remain in full force and effect and shall be construed
liberally in favor of Payee in order to effectuate the purposes and intent of
this Note.
9. Governing Law. This instrument shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, excluding its
conflicts of laws rules. MAKER HEREBY AGREES TO THE EXCLUSIVE JURISDICTION OF
THE COURTS OF THE COMMONWEALTH OF PENNSYLVANIA FOR THE COUNTY OF YORK AND THE
UNITED STATES DISTRICT COURT OF THE MIDDLE DISTRICT OF PENNSYLVANIA AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO BORROWER AT THE
ADDRESS SET FORTH ON THE SIGNATURE PAGE OF THE AGREEMENT AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN
DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID.
10. Successors and Assigns. The provisions of this Note shall be binding upon
and inure to the benefit of Maker and Payee and their respective heirs,
executors or administrators and assigns. Maker may not assign any of its rights
and obligations hereunder and interests herein to any other person without the
consent of Payee. Payee may assign at any time its rights and obligations
hereunder and interests herein to any other person without the consent of
Maker. Maker hereby
30
consents to the foregoing and agrees to cooperate with any such person electing
to exercise Payee's rights hereunder.
IN WITNESS WHEREOF, the Maker has executed this Note as of the date first
above written.
New Image Industries, Inc.
By:_______________________
Name:
Title:
Insight Imaging Systems, Inc.
By:________________________
Name:
Title: