[LOGO]
NOTE
$700,000.00 SAN DIEGO , California JANUARY 15, 1998
On JULY 15, 1998, and as hereinafter provided, for value received, the
undersigned promises to pay to IMPERIAL BANK ("Bank") a California banking
corporation, or order, at its SAN DIEGO REGIONAL office, the principal sum of
$700,000.00 or such sums up to the maximum if so stated, as the Bank may now
or hereafter advance to or for the benefit of the undersigned in accordance
with the terms hereof, together with interest from date of disbursement or
N/A, whichever is later, on the unpaid principal balance / / at the rate of
___% per year /x/ at the rate of 2.000% per year in excess of the rate of
interest which Bank has announced as its prime lending rate (the "Prime
Rate"), which shall vary concurrently with any change in such Prime Rate, or
$250.00, whichever is greater. Interest shall be computed at the above rate
on the basis of the actual number of days during which the principal balance
is outstanding, divided by 360, which shall, for interest computation
purposes, be considered one year.
Interest shall be payable /x/ monthly / / quarterly / / included with
principal / / in addition to principal / / beginning FEBRUARY 15, 1998, and
if not so paid shall become a part of the principal. All payments shall be
applied first to any late charges owing, then to interest and the remainder,
if any, to principal. / / (if checked), Principal shall be payable in
installments of $ , or more, each installment on the day of each
, beginning . Advances not to exceed any unpaid balance owing
at any one time equal to the maximum amount specified above, may be made at
the option of Bank.
Any partial prepayment shall be applied to the installments, if any, in
inverse order of maturity. Should default be made in the payment of principal
or interest when due, or in the performance or observance, when due, of any
item, covenant or condition of any deed of trust, security agreement or other
agreement (including amendments or extensions thereof) securing or pertaining
to this note, at the option of the holder hereof and without notice or
demand, the entire balance of principal and accrued interest then remaining
unpaid shall (a) become immediately due and payable, and (b) thereafter bear
interest, until paid in full, at the increased rate of 5% per year in excess
of the rate provided for above, as it may vary from time to time.
Defaults shall include, but not be limited to, the failure of the
maker(s) to pay principal or interest when due; the filing as to each person
obligated hereon, whether as maker, co-maker, endorser or guarantor
(individually or collectively referred to as the "Obligor") of a voluntary or
involuntary petition under the provisions of the Federal Bankruptcy Act; the
issuance of any attachment or execution against any asset of any Obligor; the
death of any Obligor; or any deterioration of the financial condition of any
Obligor which results in the holder hereof considering itself, in good faith,
insecure.
If any installment payment, interest payment, principal payment or
principal balance payment due hereunder is delinquent ten or more days,
Obligor agrees to pay Bank a late charge in the amount of 5% of the payment
so due and unpaid, in addition to the payment; but nothing in this paragraph
is to be construed as any obligation on the part of the holder of this note
to accept payment of any payment past due or less than the total unpaid
principal balance after maturity.
If this note is not paid when due, each Obligor promises to pay all
costs and expenses of collection and reasonable attorneys fees incurred by the
holder hereof on account of such collection, plus interest at the rate
applicable to principal, whether or not suit is filed hereon. Each Obligor
shall be jointly and severally liable hereon and consents to renewals,
replacements and extensions of time for payment hereof, before, at, or after
maturity; consents to the acceptance, release or substitution of security for
this note; and waives demand and protest and the right to assert any statute
of limitations. Any married person who signs this note agrees that recourse
may be had against separate property for any obligations hereunder. The
indebtedness evidenced hereby shall be payable in lawful money of the United
States. In any action brought under or arising out of this note, each
Obligor, including successor(s) or assign(s) hereby consents to the
application of California law, to the jurisdiction of any competent court
within the State of California, and to service of process by any means
authorized by California law.
No single or partial exercise of any power hereunder, or under any deed
of trust, security agreement or other agreement in connection herewith shall
preclude other or further exercises thereof or the exercise of any other such
power. The holder hereof shall at all times have the right to proceed against
any portion of the security for this note in such order and in such manner as
such holder may consider appropriate, without waiving any rights with respect
to any of the security. Any delay or omission on the part of the holder
hereof in exercising any right hereunder, or under any deed of trust,
security agreement or other agreement, shall not operate as a waiver of such
right, or of any other right, under this note or any deed of trust, security
agreement or other agreement in connection herewith.
THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS OF THE CREDIT TERMS AND
CONDITIONS AGREEMENT DATED JANUARY 15, 1998 AND ALL AMENDMENTS THERETO AND
REPLACEMENTS THEREFOR.
IMAGEWARE SOFTWARE, INC., A CALIFORNIA CORPORATION
- ------------------------ --------------------------------------------------
By: /s/ S. James Miller
- ------------------------ --------------------------------------------------
Chairman & CEO
- ------------------------ --------------------------------------------------
[LOGO]
January 15, 1998
701 B Street
San Diego, California 92101
Subject: CREDIT TERMS AND CONDITIONS
Gentlemen:
To induce you (herein sometimes referred to as "you" and sometimes as "Bank")
to make loans to ImageWare Software, Inc. (herein called "Borrower"), and in
consideration of any loan or loans you, in your sole discretion, may make to
Borrower, Borrower warrants and agrees as follows:
A. Borrower Represents and Warrants that:
1. EXISTENCE AND RIGHTS. Borrower is a Corporation. Borrower is duly
organized and existing and in good standing under the laws of the State of
California, without limit as to the duration of its existence and is
authorized and in good standing to do business in the State of California;
Borrower has powers and adequate authority, rights and franchises to own its
property and to carry on its business as now conducted, and is duly qualified
and in good standing in each State in which the character of the properties
owned by it therein or the conduct of its business makes such qualification
necessary; and Borrower has the power and adequate authority to make and carry
out this Agreement. Borrower has no investment in any other business entity.
2. AGREEMENT AUTHORIZED. The execution, delivery and performance of this
Agreement are duly authorized and do not require the consent or approval of
any governmental body or other regulatory authority; are not in contravention
of or in conflict with any law or regulation or any term or provision of
Borrower's articles of incorporation, by-laws, or Articles of Association, as
the case may be, and this Agreement is the valid, binding and legally
enforceable obligation of Borrower in accordance with its terms.
3. NO CONFLICT. The execution, delivery and performance of this Agreement
are not in contravention of or in conflict with any agreement, indenture or
undertaking to which Borrower is a party or by which it or any of its
property may be bound or affected, and do not cause any lien, charge or other
encumbrance to be created or imposed upon any such property by reason thereof.
4. LITIGATION. There is no litigation or other proceeding pending or
threatened against or affecting Borrower, and Borrower is not in default with
respect to any order, writ, injunction, decree or demand of any court or
other governmental or regulatory authority. Borrower shall notify you in
writing of any future litigation threatened or initiated against, or
affecting Borrower.
5. FINANCIAL CONDITION. The balance sheet of Borrower as of November 30,
1997 and the related profit and loss statement for the quarter ended on that
date, a copy of which has heretofore been delivered to you by Borrower, and
all other statements and data submitted in writing by Borrower to you in
connection with this request for credit are true and correct, and said
balance sheet and profit and loss statement truly present the financial
condition of Borrower as of the date thereof and the results of operations
for the period covered thereby, and has been prepared in accordance with
generally accepted accounting principles on a basis consistently maintained.
Since such date there have been no material adverse changes in the ordinary
course of business. Borrower has no knowledge or any liabilities, contingent
or otherwise, at such date not reflected in said balance sheet, and Borrower
has not entered
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into any special commitments or substantial contracts which are not reflected
in said balance sheet, other than in the ordinary and normal course of its
business, which may have a materially adverse effect upon its financial
condition, operations or business as not conducted.
6. TITLE TO ASSETS. Borrower has good title to its assets, and the same
are not subject to any liens or encumbrances other than those permitted by
Section C.3 hereof.
7. TAX STATUS. Borrower has no liability for any delinquent state, local
or federal taxes, and, if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
8. TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license
rights of others.
9. REGULATION U. The proceeds of the notes have not been used to purchase
or carry margin stock (as defined within Regulation U of the Board of
Governors of the Federal Reserve system).
B. Borrower agrees that so long as it is indebted to you, under borrowings,
or other indebtedness, it will, unless you shall otherwise consent in writing:
1. RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises and
other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
2. INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against
fire and other hazards with responsible insurance carriers to the extent
usually maintained by similar businesses and/or in the exercise of good
business judgment.
3. TAXES AND OTHER LIABILITIES. Pay and discharge, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments and
governmental charges upon or against it or any of its properties, and all its
other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse effect
upon its financial condition or the loss of any right of redemption from
any sale thereunder; and
(b) It shall have set aside on its books reserves (segregated to the
extent required by generally accepted accounting practice) deemed by
it adequate with respect thereto.
4. RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit your representatives to have access to,
and to examine its properties, books and records at all reasonable times
during normal business hours; and furnish you:
(a) As soon as available, and in any event within 30 days after the
close of each month of each fiscal year of Borrower, commencing with the
next ending, a consolidating balance sheet, profit and loss statement
and reconciliation of Borrower's capital accounts as of the close of
such period and covering operations for the portion of Borrower's fiscal
year ending on the last day of such period, all in reasonable detail and
stating in comparative form the figures for the corresponding date and
period in the previous fiscal year, prepared in
3
accordance with generally accepted accounting principles on a basis
consistently maintained by Borrower and certified by an appropriate
officer of Borrower, subject, however, to year-end audit adjustments;
(b) As soon as available, and in any event within 90 days after the
close of each fiscal year of Borrower, a report of compilation of
Company as of the close of and for such fiscal year, all in reasonable
detail and stating in comparative form the figures as of the close of
and for the previous fiscal year, with the unqualified audit opinion of
accountants satisfactory to you;
(c) Promptly after the receipt thereof by Borrower, copies of any
detailed reports submitted to Borrower by independent accountants in
connection with each annual or interim compilation of the accounts of
Borrower made by such accountants.
(d) Promptly after the same are available, copies of all such proxy
statements, financial statements and reports as Borrower shall send to
its stockholders, if any, and copies of all reports which Borrower may
file with the Securities and Exchange Commission or any governmental
authority at any time substituted therefor; and
(e) Such other information relating to the affairs of Borrower as you
reasonably may request from time to time.
5. NOTICE OF DEFAULT. Promptly notify the Bank in writing of the
occurrence of any event of default hereunder or event which would be a
default upon the giving of notice and lapse of time.
C. Borrower agrees that so long as it is indebted to you, it will not,
without your written consent:
1. TYPE OF BUSINESS AND MANAGEMENT. Make any substantial change in the
character of its business; or make any change in its executive management.
2. OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness for borrowed moneys other than loans from you, moneys associated
with the XImage acquisition and purchase money indebtedness except obligations
now existing as shown in the financial statement dated November 30, 1997,
excluding those being refinanced by your bank; or sell or transfer, either
with or without recourse, any accounts or notes receivable or any moneys due
to become due.
3. LIENS AND ENCUMBRANCES. Create, incur, or assume any mortgage,
pledge, encumbrance, lien or charge of any kind, except purchase money liens,
upon any asset now owned or hereafter acquired by it, other than liens for
taxes not delinquent and liens in your favor.
4. LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or
advances to any person or other entity other than in the ordinary course and
normal course of its business as now conducted or make any investment in the
securities of any person or other entity other than the United States
Government and municipal bonds; or guarantee or otherwise become liable upon
the obligation of any person or other entity, except by endorsement of
negotiable instruments for deposit or collection in the ordinary and normal
course of its business.
5. ACQUISITION OR SALE OF BUSINESS, MERGER OR CONSOLIDATION. Purchase
or otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings
therefor; or sell any assets except XImage and in the ordinary and normal
course of its business as now conducted; or sell, lease, assign, or transfer
any substantial part of its business or fixed assets, or any property or
other assets necessary for the continuance of its business as now conducted,
including without limitation the selling of any property or other asset
accompanied by the leasing back of the same.
4
6. DIVIDENDS, STOCK PAYMENTS. If a corporation, declare or pay any
dividend (other than dividends payable in common stock of Borrower and
dividends payable on the Series B Preferred Stock) or make any other
distribution on any of its capital stock now outstanding or hereafter issued
or purchase, redeem or retire any of such stock.
D. The occurrence of any of the following events of default shall, at
your option, terminate your commitment to lend and make all sums of principal
and interest then remaining unpaid on all Borrower's indebtedness to you
immediately due and payable, all without demand, presentment or notice, all
of which are hereby expressly waived:
1. FAILURE TO PAY. Failure to pay any installment of principal of or
interest on any indebtedness of Borrower to you.
2. BREACH OF COVENANT. Failure of Borrrower to perform any other term
or condition of this Letter of Inducement binding upon Borrower.
3. BREACH OF WARRANTY. Any of Borrrower's representations or
warranties made herein or any statement or certificate at any time given in
writing pursuant hereto or in connection herewith shall be false or
misleading in any material respect.
4. INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent;
or admit its inability to pay its debts as they mature; or make an assignment
for the benefit of creditors; or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business.
5. JUDGMENTS, ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process shall be entered or filed against Borrower or
any of its assets and shall remain unvacated, unbonded or unstayed for a
period of 10 days or in any event later than five days prior to the date of
any proposed sale thereunder.
6. BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against Borrower and,
if instituted against it, shall be consented to.
E. Miscellaneous Provisions.
1. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
Imperial Bank or any holder of Notes issued hereunder, in the exercise
of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any
other right, power or privilege. All rights and remedies existing
under this agreement or any note issued in connection with a loan that
Imperial Bank may make hereunder, are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
2. GUARANTOR REPORTING. Each guarantor to submit annual personal financial
statement and copy of their Federal Income Tax Return within 10 days of
filing.
IMAGEWARE SOFTWARE, INC.
BY: /s/ S. James Miller, Jr. Date: January 20, 1998
--------------------- ------------------
MORTGAGE, ASSIGNMENT AND GRANT OF SECURITY INTEREST
WITH RESPECT TO PATENTS AND OTHER COLLATERAL
KNOW ALL MEN BY THESE PRESENTS, that for good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
undersigned, IMAGEWARE SOFTWARE, INC., a California corporation (the "Debtor"
or "Borrower"), having an office located at ___________________,
____________, does hereby irrevocably mortgage, pledge, assign and grant a
continuing security interest to IMPERIAL BANK, a California chartered bank
(the "Secured Party" or "Bank") having an office located at 701 B Street,
Suite 600, San Diego, California 92101, and to the Secured Party's successors
and assigns, in all right, title and interest of the Debtor, now owned or
hereafter acquired throughout the universe, in and to all of the collateral
described in Schedule A attached hereto including, without limitation, (a)
the "Patents" (as such term is defined in Schedule A attached hereto), and
(b) all accounts and accounts receivable generated by such Patents (all of
the foregoing collateral is hereinafter severally and collectively referred
to as the "Collateral"), as security for the payment and performance (whether
presently existing or hereafter arising) of any and all indebtedness and
obligations of the Debtor to the Bank (collectively, the "Obligations")
pursuant to the terms of (i) that certain Security and Loan Agreement dated
January 15, 1998, by and between the Debtor and the Secured Party, (ii) all
Credit Terms and Conditions between the Debtor and the Secured Party
(including, without limitation, the Credit Terms and Conditions dated January
15, 1998), (iii) that certain General Security Agreement dated January 15,
1998, by and between Debtor and Secured Party, (iv) all promissory notes of
the Debtor in favor of Secured Party (including, without limitation, that
certain Promissory Note dated January 15, 1998, in the original principal
amount of $700,000 made by the Debtor in favor of the Secured Party), and (v)
all other agreements and documents between the Debtor and Secured Party now
existing or hereafter entered into, as any of the foregoing may be amended,
modified, and/or restated from time to time (collectively, the "Loan
Documents"). The repayment of the Obligations are also secured by all other
personal property of the Debtor.
This Mortgage, Assignment and Grant of Security Interest With
Respect to Patents and Other Collateral is subject to all of the applicable
terms and conditions in the Loan Documents. Upon the occurrence of a default
or breach by the Debtor under any of the Loan Documents, the Bank may
exercise any and all rights and remedies of the Bank under the Loan
Documents, and the laws of the State of California and of the United States
of America and any other relevant jurisdictions.
The Debtor does hereby irrevocably appoint the Bank as the Debtor's
attorney in fact to do all acts and things permitted or contemplated by the
terms hereof and/or any of the Loan Documents. This power of attorney is
coupled with an interest and is irrevocable.
The Debtor agrees that if any person, corporation, partnership,
trust, limited liability company or other entity shall do or perform any acts
which the Bank believes infringes any right of the Debtor or any right of the
Bank to the extent granted hereby, then the Bank may and shall have the right
to take such steps and institute such suits or
proceedings as the Bank may deem advisable or necessary to prevent such acts
and conduct and to secure damages and other relief by reason thereof and to
generally take such steps as may be advisable or necessary or proper for the
full protection of the rights of the parties, but the Bank shall not be
obligated to do any of the foregoing. The Bank may take such steps or
institute such suits or proceedings in its own name or in the name of the
Debtor or in the names of the parties jointly.
The Debtor shall have the duty (i) to file and prosecute opposition of
cancellation proceedings, and (ii) to renew all Patents. The Debtor shall
not abandon any Patent without the consent of Secured Party, which consent
may be withheld in the Secured Party's sole and absolute discretion.
This Mortgage, Assignment and Grant of Security Interest With Respect to
Patents and Other Collateral shall in all respects be subject to, construed in
accordance with and governed by, the laws of the State of California without
giving effect to that State's choice of law rules.
Debtor agrees that until all Obligations have been indefeasibly paid in
full to the Bank, (i) whenever Debtor files a Patent application or is issued
a Patent or otherwise obtains a Patent, Debtor shall give prompt notice
thereof to the Bank and (ii) upon the filing of any such Patent applications
and/or the issuance or acquisition of any Patent, Debtor shall promptly
execute and deliver a mortgage, assignment and grant of security interest
with respect to Patents and other collateral substantially identical to this
instrument or any other instrument or document reasonably requested by the
Bank and Debtor shall take any and all other actions reasonable requested by
the Bank to perfect the Bank's security interest in such Patent application
or Patent.
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IN WITNESS WHEREOF, the undersigned has executed this instrument as of
the 20th day of January 1998.
IMAGEWARE SOFTWARE, INC.
a California corporation
By: /s/ S. James Miller, Jr.
-------------------------
Its: Chairman & CEO
-------------------------
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DEBTOR: IMAGEWARE SOFTWARE, INC., A CALIFORNIA CORPORATION
SECURED PARTY: IMPERIAL BANK, A CALIFORNIA CHARTERED BANK
SCHEDULE A
All of the following personal property of Debtor whether presently existing
or hereafter created, written, produced, issued or acquired, (i)(a) all
patents and patent applications filed in the United States Patent and
Trademark Office, (including, without limitation, the patents and/or patent
applications listed on Schedule 1 attached hereto), and interests under
patent license agreements, including, without limitation, the inventions and
improvements described and claimed therein, (b) licenses pertaining to any
patent whether Debtor is licensor or licensee, (c) all income, royalties,
damages, payments, accounts and accounts receivable now or hereafter due
and/or payable under and with respect thereto, including, without limitation,
damages and payments for past, present or future infringements thereof, (d)
all rights corresponding thereto throughout the world in all jurisdictions in
which such patents have been issued or applied for, and (e) the reissues,
divisions, continuations, renewals, extensions and continuations-in-part with
any of the foregoing (all of the foregoing patents and applications and
interests under patent license agreements, together with the items described
in clauses (a) through (e) in this paragraph are sometimes herein
individually and collectively referred to as the "Patents"), and (ii) all
products and proceeds including, without limitation, insurance proceeds, of
any of the foregoing.
1 of 2
DEBTOR: IMAGEWARE SOFTWARE, INC., A CALIFORNIA CORPORATION
SECURED PARTY: IMPERIAL BANK, A CALIFORNIA CHARTERED BANK
SCHEDULE 1
PATENTS
Patent or Date of
Application Number Description Issuance or Filing
------------------ ------------------
5,345,313 Image Editing for taking
a Background and Inserting
Part of Image Therein 9/6/94
5,469,536 Image Editing System Including
Masking Capability 11/21/95
5,577,179 Image Editing System 11/19/96
5,343,386 Apparatus for Making
Electronically Produced
Postcards and Method of
Operating Same 8/30/94
5,687,306 Image Editing System
Including Sizing Function 11/11/97
2 of 2
ALL-PURPOSE ACKNOWLEDGMENT
- -------------------------------------------------------------------------------
State of California ) CAPACITY CLAIMED
County of San Diego ) BY SIGNER
-----------------------
On January 20, 1998 before me, ANNE M. HOVERSTEN / /INDIVIDUAL(S)
----------- -- ----------------- /X/CORPORATE ______________
DATE OFFICER(S) Chairman & CEO
personally appeared S. James Miller, Jr. --------------
-------------------- TITLE(S)
NAME(S) OF SIGNER(S) / /PARTNER(S)
/ /ATTORNEY-IN-FACT
/X/ personally known to me -OR- / /TRUSTEE(S)
/ / proved to me on the basis of satisfactory / /SUBSCRIBING WITNESS
evidence to be the person(s) whose name(s) / /GUARDIAN/CONSERVATOR
is/are subscribed to the within instrument / /OTHER:______________
and acknowledged to me that he/she/they _______________________
executed the same in his/her/their _______________________
authorized capacity(ies), and that by
his/her/their signature(s) on the
instrument the person(s), or the entity
upon behalf of which the person(s) acted,
executed the instrument.
Witness my hand and official seal.
SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
/s/ Anne M. Hoversten
------------------------ Image Ware Software, Inc.
SIGNATURE OF NOTARY -------------------------------
[SEAL] -------------------------------
-------------------------------
- -------------------------------------------------------------------------------
OPTIONAL SECTION
THIS CERTIFICATE MUST BE TITLE OR TYPE OF DOCUMENT: Mortgage,
ATTACHED TO THE DOCUMENT --------------
DESCRIBED AT RIGHT: Assignment and Grant of Security Interest
- -------------------------- -----------------------------------------
With Respect to Copyrights and Other
-----------------------------------------
Collateral
----------
Though the data requested here is
not required by law, it could NUMBER OF PAGES_____ DATE OF DOCUMENT_____
prevent fraudulent reattachment of
this form.
SIGNER(S) OTHER THAN NAMED ABOVE xxx
---
- -------------------------------------------------------------------------------
GENERAL SECURITY AGREEMENT
(TANGIBLE AND INTANGIBLE PERSONAL PROPERTY)
[LOGO]
This Agreement is executed on JANUARY 15, 1998 ,by
IMAGEWARE SOFTWARE, INC., A CALIFORNIA CORPORATION (hereinafter
called "Obligor").
In consideration of financial accommodations given, to be given or continued,
the Obligor grants to IMPERIAL BANK (hereinafter called "Bank") a security
interest in (a) all property (i) delivered to Bank by Obligor, (ii) which
shall be in Bank's possession or control in any matter or for any purpose,
(iii) described below, (iv) now owned or hereafter acquired by Obligor of the
type or class described below and/or in any supplementary schedule hereto, or
in any financing statement filed by Bank and executed by or on behalf of
Obligor; (b) all deposits accounts of Obligor at Bank and (c) the proceeds,
increase and products of such property, all accessions thereto, and all
property which Obligor may receive on account of such collateral which
Obligor will immediately deliver to Bank (collectively referred to as
"Collateral") to secure payment and performance of all of Obligor's present
or future debts or obligations to Bank, whether absolute or contingent
(hereafter referred to as "Debt"). Unless otherwise defined, words used
herein have the meanings given them in the California Uniform Commercial Code.
Collateral:
A. VEHICLE, VESSEL, AIRCRAFT:
- -------------------------------------------------------------------------------
Identification License or
Year Make/Manufacturer Model and Serial No. Registration No. New or Used
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Engine or other equipment:_____________________________________________________
(FOR AIRCRAFT - ORIGINAL INK SIGNATURE ON COPY TO FAA)
B. DEPOSIT ACCOUNTS:
Type________________ Account Number________________ Amount $_________________
In name of______________________________ Depository___________________________
AND ALL EXTENSIONS OR RENEWALS THEREOF.
C. ACCOUNTS, INTANGIBLES AND OTHER: (DESCRIBE)
All personal property of Obligor (herein referred to as "Obligor" or
"Debtor") whether presently existing or hereafter created, written,
produced or acquired, including, but not limited to: (i) all accounts
receivable, accounts, chattel paper, contract rights (including, without
limitation, royalty agreements, license agreements and distribution
agreements), documents, instruments, money, deposit accounts and general
intangibles including, without limitation, returns, repossessions, books
and records relating thereto, and equipment containing said books and
records, all investment property including securities and securities
entitlements, (ii) all software, computer source codes and other computer
programs (collectively, the "Software Products"), and all common law and
statutory copyrights and copyright registrations, applications for
registration, now existing or hereafter arising, United States of America
and foreign, obtained or to be obtained on or in connection with the
Software Products, or any parts thereof or any underlying or component
elements of the Software Products together with the right to copyright and
all rights to renew or extend such copyrights and the right (but not the
obligation) of Bank (herein referred to as "Bank" or "Secured Party") to
sue in its own name and/or in the name of the Debtor for past, present and
future infringements of copyright, (iii) all goods including, without
limitation, equipment and inventory (including, without limitation, all
export inventory), (iv) all guarantees and other security therefor, (v) all
trademarks, service marks, trade names and service names and the goodwill
associated therewith, (vi) (a) all patents and patent applications filed in
the United States Patent and Trademark Office or any similar office of any
foreign jurisdiction, and interests under patent license agreements,
including, without limitation, the inventions and improvements described
and claimed therein, (b) licenses pertaining to any patent whether Debtor
is licensor or licensee, (c) all income, royalties, damages, payments,
accounts and accounts receivable now or hereafter due and/or payable under
and with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (d) the right
(but not the obligation) to sue for past, present and future infringements
thereof, (e) all rights corresponding thereto throughout the world in all
jurisdictions in which such patents have been issued or applied for, and
(f) the reissues, divisions, continuations, renewals, extensions and
continuations-in-part with any of the foregoing (all of the foregoing
patents and applications and interests under patent license agreements,
together with the items described in clauses (a) through (f) in this
paragraph are sometimes herein individually and collectively referred to as
the "Patents"), and (vii) all products and proceeds including, without
limitation, insurance proceeds, of any of the foregoing.
The collateral not in Bank's possession will be located at: 15373
INNOVATION DRIVE, SUITE 120, SAN DIEGO, CA 92128
/ / If checked, the Obligor is executing this Agreement as an Accommodation
Debtor only and the Obligor's liability is limited to the security interest
granted in the Collateral described herein. The party being accommodated is
[STAMP] ("Borrower")
All the terms and provisions on page 2 hereof are incorporated herein as
though set forth in full, and constitute a part of this Agreement.
SEE ADDENDUM ATTACHED HERETO AND MADE A PART HEREOF BY THIS REFERENCE
Signature
Name (indicated title, if applicable) Address
IMAGEWARE SOFTWARE, INC., BY: /s/ S. JAMES MILLER, Jr. 15373 INNOVATION DRIVE, SUITE 120
- -------------------------- ---------------------------------------- ---------------------------------
A CALIFORNIA CORPORATION SAN DIEGO, CA 92128
- -------------------------- ---------------------------------------- ---------------------------------
- -------------------------- ---------------------------------------- --------------------
Page 1 of 2
SECURITY AGREEMENT (CONTINUED)
Obligor represents, warrants and agrees:
1. Obligor will immediately pay (a) any Debt when due, (b) Bank's costs of
collecting the Debt, of [illegible], insuring or realizing on Collateral,
and any expenditure of Bank pursuant hereto, including attorneys' fees and
expenses, with interest at the rate of 24% per year, or the rate applicable
to the Debt, whichever is less, from the date of expenditure, and (c) any
deficiency after realization of Collateral.
2. Obligor will use the proceeds of any loan that becomes Debt hereunder
for the purpose indicated on the application therefore, and will promptly
contract to purchase and pay the purchase price of any property which becomes
Collateral hereunder from the proceeds of any loan made for that purpose.
3. As to all Collateral in Obligor's possession (unless specifically
otherwise agreed to by Bank in writing), Obligor will:
(a) Have, or has, possession of the Collateral at the location disclosed
to Bank and will not remove the Collateral from the location.
(b) Keep the Collateral separate and identifiable.
(c) Maintain the Collateral in good and saleable condition, repair it if
necessary, clean, feed, shelter, water, medicate, fertilize, cultivate,
irrigate, prune and otherwise deal with the Collateral in all such ways
as are considered good practice by owners of like property, use it
lawfully and only as permitted by insurance policies, and permit Bank to
inspect the Collateral at any reasonable time.
(d) Not sell, contract to sell, lease, encumber or transfer the
Collateral (other than inventory Collateral) until the Debt has been
paid, even though Bank has a security interest in proceeds of such
Collateral.
4. As to Collateral which is inventory and accounts, Obligor:
(a) May, until notice from Bank, sell, lease or otherwise dispose of
inventory Collateral in the ordinary course of business only, and
collect the cash proceeds thereof.
(b) Will, upon notice from Bank, deposit all cash proceeds as received
in a demand deposit account with Bank, containing only such proceeds and
deliver statements identifying units of inventory disposed of, accounts
which gave rise to proceeds, and all acquisitions and returns of
inventory as required by Bank.
(c) Will receive in trust, schedule on forms satisfactory to the Bank
and deliver to Bank all non-cash proceeds other than inventory received
in trade.
(d) If not in default, may obtain release of Bank's interest in
individual units of inventory upon request, therefore, payment to Bank
of the release price of such units shown on any Collateral schedule
supplementary hereto, and compliance herewith as to proceeds thereof.
5. As to Collateral which are accounts, chattel paper, general intangibles
and proceeds described in 4(c) above, Obligor warrants, represents and
agrees:
(a) All such Collateral is genuine, enforceable in accordance with its
terms, free from default, prepayment, defense and conditions precedent
(except as disclosed to and accepted by Bank in writing), and is
supported by consecutively numbered invoices to, or rights against, the
debtors thereon. Obligor will supply Bank with duplicate invoices or
other evidence of Obligor's rights on Bank's request:
(b) All persons appearing to be obligated on such Collateral have
authority and capacity to contract;
(c) All chattel paper is in compliance with law as to form, content and
manner of preparation and execution and has been properly registered,
recorded, and/or filed to protect Obligor's interest thereunder;
(d) If an account debtor shall also be indebted to Obligor on another
obligation, any payment made by him not specifically designated to be
applied on any particular obligation shall be considered to be a payment
on the account in which Bank has a security interest. Should any
remittance include a payment not on an account, it shall be delivered to
Bank and, if no event of default has occurred, Bank shall pay Obligor
the amount of such payment;
(e) Obligor agrees not to compromise, settle or adjust any account or
renew or extend the time of payment thereof without Bank's prior
written consent.
6. Obligor owns all Collateral absolutely, and no other person has or
claims any interest in any Collateral, except as disclosed to and accepted by
Bank in writing. Obligor will defend any proceeding which may affect title to
or Bank's security interest in any Collateral, and will indemnify and hold
Bank free and harmless from all costs and expenses of Bank's defense.
7. Obligor will pay when due all existing or future charges, liens or
encumbrances on and all taxes and assessments now or hereafter imposed on or
affecting the Collateral and, if the Collateral is in Obligor's possession,
the realty on which the Collateral is located.
8. Obligor will insure the Collateral with Bank as loss payee in form and
amounts with companies, and against risks and liability satisfactory to Bank,
and hereby assigns such policies to Bank, agrees to deliver them to Bank at
Bank's request, and authorizes Bank to make any claim thereunder, to cancel
the insurance on Obligor's default, and to receive payment of and endorse any
instrument in payment of any loss or return premium. If Obligor should fail
to deliver the required policy or policies to the Bank, Bank may, at
Obligor's cost and expense, without any duty to do so, get and pay for
insurance naming as the insured, at Bank's option, either both Obligor and
Bank, or only Bank, and the cost thereof shall be secured by this Security
Agreement, and shall be repayable as provided in Paragraph 1 above.
9. Obligor will give Bank any information it requires. All information at
any time supplied to Bank by Obligor (including, but not limited to, the value
and condition of Collateral, financial statements, financing statements, and
statements made in documentary Collateral) is correct and complete, and
Obligor will notify Bank of any adverse change in such information. Obligor
will promptly notify Bank of any change of Obligor's residence, chief
executive office or mailing address.
10. Bank is irrevocably appointed Obligor's attorney-in-fact to do any act
which Obligor is obligated hereby to do, to exercise such rights as Obligor
may exercise, to use such equipment as Obligor might use, to enter Obligor's
premises to give notice of Bank's security interest, and to collect
Collateral and proceeds and to execute and file in Obligor's name any
financing statements and amendments thereto required to perfect Bank's
security interest hereunder, all to protect and preserve the Collateral and
Bank's rights hereunder. Bank may:
(a) Endorse, collect and receive delivery or payment of instruments and
documents constituting Collateral;
(b) Make extension agreements with respect to or affecting Collateral,
exchange it for other Collateral, release persons liable thereon or take
security for the payment thereof, and compromise disputes in connection
therewith;
(c) Use or operate Collateral for the purpose of preserving Collateral
or its value and for preserving or liquidating Collateral.
11. If more than one Obligor signs this Agreement, their liability is joint
and several. Any Obligor who is married agrees that recourse may be had
against separate property for the Debt. Discharge of any Obligor except for
full payment, or any extension, forbearance, change of rate of interest, or
acceptance, release or substitution of Collateral or any impairment or
suspension of Bank's rights against an Obligor, or any transfer of an
Obligor's interest to another shall not affect the liability of any other
Obligor. Until the Debt shall have been paid or performed in full, Bank's
rights shall continue even if the Debt is outlawed. All Obligors waive: (a)
any right to require Bank to proceed against any Obligor before any other, or
to pursue any other remedy; (b) presentment, protest and notice of protest,
demand and notice of nonpayment, demand or performance, notice of sale and
advertisement of sale; (c) any right to the benefit of or to direct the
application of any Collateral until the Debt shall have been paid; (d) and
any right of subrogation to Bank until Debt shall have been paid or performed
in full.
12. Upon default, at Bank's option, without demand or notice, all or any
part of the Debt shall immediately become due. Bank shall have all rights
given by law, and may sell, in one or more sales, Collateral in any county
where Bank has an office. Bank may purchase at such sale. Sales for cash or on
credit to a wholesaler, retailer or user of the Collateral, or at public or
private auction, are all to be considered commercially reasonable. Bank may
require Obligor to assemble the Collateral and make it available to Bank at
the entrance to the location of the Collateral, or a place designated by Bank.
Defaults shall include:
(a) Obligor's failure to pay or perform this or any agreement with
Bank or breach of any warranty herein, or Borrower's failure to pay or
perform any agreement with Bank.
(b) Any change in Obligor's or Borrower's financial condition which in
Bank's judgment impairs the prospect of Borrower's payment or
performance. (c) Any actual or reasonably anticipated deterioration of
the Collateral or in the market price thereof which causes it, in the
Bank's judgment, to become unsatisfactory as security.
(d) Any levy or seizure against Borrower or any of the Collateral.
(e) Death, termination of business, assignment for creditors,
insolvency, appointment of receiver, or the filing of any petition under
bankruptcy or debtor's relief laws of, by or against Obligor or
Borrower or any guarantor of the Debt.
(f) Any warranty or representation which is false or is believed in good
faith by Bank to be false.
13. Bank's acceptance of partial or delinquent payments or the failure of
Bank to exercise any right or remedy shall not waive any obligation of
Obligor or Borrower or right of Bank to modify this Agreement, or waive any
other similar default.
14. On transfer of all or any part of the Debt, Bank may transfer all or
any part of the Collateral. Bank may deliver all or any part of the
Collateral to any Obligor at any time. Any such transfer or delivery shall
discharge Bank from all liability and responsibility with respect to such
Collateral transferred or delivered. This Agreement benefits Bank's
successors and assigns and binds Obligor's heirs, legatees, personal
representatives, successors and assigns. Obligor agrees not to assert against
any assignee of Bank any claim or defense that may exist against Bank. Time
is of the essence. This Agreement and supplementary schedules hereto contain
the entire security agreement between Bank and Obligor. Obligor will execute
any additional agreements, assignments or documents reasonably required by
Bank to carry this Agreement into effect.
15. This Agreement shall be governed by and construed in accordance with the
laws of the State of California, to the jurisdiction of whose courts the
Obligor hereby agrees to submit. Obligor agrees that service of process may
be accomplished by any means authorized by California law. All words used
herein in the singular shall be considered to have been used in the plural
where the context and construction so require.
16. To the extent that Obligor acquires any trademarks, service marks,
trade names and service names and/or the goodwill associated therewith,
copyrights, patents and/or patent applications (collectively "Intellectual
Property"), Obligor shall give prompt notice thereof to Bank and shall take
any and all actions requested from time to time by Bank to perfect Obligor's
interest in such Intellectual Property and to perfect Bank's first priority
interest therein. Without limiting the generality of the foregoing, the
Obligor agrees as follows: Upon Obligor creating, writing, producing or
acquiring any software, computer source codes or other computer programs
(collectively, the "Software"), Obligor shall promptly register such Software
with the U.S. Copyright Office and to the extent Obligor's rights therein are
acquired from any third party, Obligor shall promptly upon such acquisition
file with the U.S. Copyright Office any and all documents necessary to
perfect Obligor's rights therein. Upon Obligor creating, writing, producing
or otherwise acquiring any Software, Obligor shall give prompt notice thereof
to Bank. Obligor shall execute and deliver to Bank any and all copyright
mortgages, UCC financing statements and other documents and instruments which
Bank may request in connection with the Bank perfecting its first priority
security interest in such Software.
Page 2 of 2
PROMISSORY NOTE
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
$500,000.00 09-18-1998 01-15-1999 711062569 622787 PD [ILLEGIBLE]
- ----------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
- ----------------------------------------------------------------------------------------------------------------------------------
BORROWER: IMAGEWARE SOFTWARE, INC. LENDER: IMPERIAL BANK
15373 INNOVATION DRIVE, SUITE 120 SAN DIEGO REGIONAL OFFICE
SAN DIEGO, CA 92128 701 B STREET, SUITE 600
SAN DIEGO, CA 92112-4168
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT: $500,000.00 INITIAL RATE: 10.500% DATE OF NOTE: SEPTEMBER 18, 1998
PROMISE TO PAY. IMAGEWARE SOFTWARE, INC. ("BORROWER") PROMISES TO PAY TO
IMPERIAL BANK ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF
AMERICA, THE PRINCIPAL AMOUNT OF FIVE HUNDRED THOUSAND & 00/100 DOLLARS
($500,000.00), TOGETHER WITH INTEREST ON THE UNPAID PRINCIPAL BALANCE FROM
SEPTEMBER 18, 1998, UNTIL PAID IN FULL.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PRINCIPAL PAYMENT OF $500,000.00
PLUS INTEREST ON JANUARY 15, 1999. THIS PAYMENT DUE JANUARY 15, 1999, WILL BE
FOR ALL PRINCIPAL AND ACCRUED INTEREST NOT YET PAID. IN ADDITION, BORROWER
WILL PAY REGULAR MONTHLY PAYMENTS OF ALL ACCRUED UNPAID INTEREST DUE AS OF
EACH PAYMENT DATE, BEGINNING OCTOBER 15, 1998, WITH ALL SUBSEQUENT INTEREST
PAYMENTS TO BE DUE ON THE SAME DAY OF EACH MONTH AFTER THAT. The annual
interest rate for this Note is computed on a 365/360 basis; that is, by
applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender
at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to any unpaid collection costs and any late
charges, then to any unpaid interest, and any remaining amount to principal.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the Imperial Bank
Prime Rate (the "Index"). The Prime Rate is the rate announced by Lender as
its Prime Rate of interest from time to time. Lender will tell Borrower the
current Index rate upon Borrower's request. Borrower understands that Lender
may make loans based on other rates as well. The interest rate change will
not occur more often than each day. THE INDEX CURRENTLY IS 8.500%. THE
INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL BALANCE OF THIS NOTE WILL
BE AT A RATE OF 2,000 PERCENTAGE POINTS OVER THE INDEX, RESULTING IN AN
INITIAL RATE OF 10.500%. NOTICE: Under no circumstances will the interest
rate on this Note be more than the maximum rate allowed by applicable law.
PREPAYMENT: MINIMUM INTEREST CHARGE. In any event, even upon full prepayment
of this Note, Borrower understands that Lender is entitled to a MINIMUM
INTEREST CHARGE OF $250.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless
agreed to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments under the payment schedule. Rather, they will
reduce the principal balance due.
LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULED PAYMENT.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Any representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect either now or at the time made or
furnished. (d) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws. (e) Any creditor tries to
take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with
Lender. (f) Any guarantor dies or any of the other events described in this
default section occurs with respect to any guarantor of this Note. (g) A
material adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the indebtedness is
impaired. (h) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower
has not been given a notice of a breach of the same provision of this Note
within the preceding twelve (12) months, it may be cured (and no event of
default will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default: (a) cures the default within ten (10)
days; or (b) if the cure requires more than ten (10) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to
pay all amounts declared due pursuant to this section, including failure to
pay upon final maturity, Lender, at this option, may also, if permitted under
applicable law, do one or both of the following: (a) increase the variable
interest rate on this Note to 7.000 percentage points over the Index, and (b)
add any unpaid accrued interest to principal and such sum will bear interest
therefrom until paid at the rate provided in this Note (including any
increased rate). Lender may hire or pay someone else to help collect this
Note if Borrower does not pay. Borrower also will pay Lender that amount.
This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES
UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF LOS
ANGELES COUNTY, THE STATE OF CALIFORNIA. LENDER AND BORROWER HEREBY WAIVE THE
RIGHT TO ANY JURY TRIAL IF ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY
EITHER LENDER OR BORROWER AGAINST THE OTHER. (INITIAL HERE [ILLEGIBLE]). THIS
NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest
in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender
all Borrower's right, title and interest in and to, Borrower's accounts with
Lender (whether checking, savings, or some other account), including without
limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh
accounts, and all trust accounts for which the grant of a security interest
would be prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on this Note
against any and all such accounts.
CREDIT TERMS AND CONDITIONS AGREEMENT. This Note is subject to the provisions
of the Credit Terms and Conditions Agreement dated January 15, 1998 and all
amendments thereto and replacements therefor.
YEAR 2000 COMPLIANCE. Borrower affirmatively covenants that it will perform
all acts reasonably necessary to ensure that (a) Borrower and any business in
which Borrower holds a substantial interest, and (b) all customers, suppliers
and vendors that are material to Borrower's business, become Year 2000
Compliant in a timely manner. Such acts shall include, without limitation,
performing a comprehensive review and assessment of all Borrower's systems
and adopting a detailed plan, with itemized budget, for the remediation,
monitoring and testing of such systems. As used in this paragraph, "Year 2000
Compliant" shall mean, in regard to any entity, that all software, hardware,
firmware, equipment, goods or systems utilized by or material to the business
operations or financial condition of such entity, will properly perform date
sensitive functions before, during and after the year 2000. Borrower shall,
immediately upon request, provide to Bank such certifications or other
evidence of Borrower's compliance with the terms of this paragraph as Bank
may from time to time require.
REPRESENTATION REGARDING YEAR 2000 COMPLIANCE. Borrower and its subsidiaries,
as applicable, represent and warrant that they have reviewed the areas within
their operations and business which could be adversely affected by, and have
developed or are developing a program to address on a timely basis, the Year
2000 Problem and have made related appropriate inquiry of material suppliers
and vendors, and based on such review and program, the Year 2000 Problem will
not have a material adverse effect upon their financial condition, operations
or business as now conducted. "Year 2000 Problem" means the possibility that
any computer applications or equipment used by Borrower may be unable to
recognize and properly perform date sensitive functions involving certain
dates prior to and any dates on or after December 31, 1999.
PAGE 2
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person
who signs, guarantees or endorses this Note, to the extent allowed by law,
waive any applicable statute of limitations, presentment, demand for payment,
protest and notice of dishonor. Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who signs this
Note, whether as maker, guarantor, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY
OF THE NOTE.
BORROWER:
IMAGEWARE SOFTWARE, INC.
By: /s/ [ILLEGIBLE]
----------------------------------------
AUTHORIZED OFFICER
GENERAL SECURITY AGREEMENT
IMPERIAL BANK (TANGIBLE AND INTANGIBLE PERSONAL PROPERTY)
Member FDIC
This Agreement is executed on SEPTEMBER 18, 1998 , by
XIMAGE CORPORATION (hereinafter called "Obligor").
In consideration of financial accommodations given, to be given or continued,
the Obligor grants to IMPERIAL BANK (hereinafter called "Bank") a security
interest in (a) all property (i) delivered to Bank by Obligor, (ii) which
shall be in Bank's possession or control in any matter or for any purpose,
(iii) described below, (iv) now owned or hereafter acquired by Obligor of the
type or class described below and/or in any supplementary schedule hereto, or
in any financing statement filed by Bank and executed by or on behalf of
Obligor; (b) all deposits accounts of Obligor at Bank and (c) the proceeds,
increase and products of such property, all accessions thereto, and all
property which Obligor may receive on account of such collateral which
Obligor will immediately deliver to Bank (collectively referred to as
"Collateral") to secure payment and performance of all of Obligor's present
or future debts or obligations to Bank, whether absolute or contingent
(hereafter referred to as "Debt"). Unless otherwise defined, words used
herein have the meanings given them in the California Uniform Commercial Code.
Collateral:
A. VEHICLE, VESSEL, AIRCRAFT:
- -------------------------------------------------------------------------------
Identification License or New or
Year Make/Manufacturer Model and Serial No. Registration No. Used
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Engine or other equipment: ____________________________________________________
(FOR AIRCRAFT - ORIGINAL INK SIGNATURE ON COPY TO FAA)
B. DEPOSIT ACCOUNTS:
Type_____________ Account Number______________________ Amount $_______________
In name of____________________________ Depository_____________________________
AND ALL EXTENSIONS OR RENEWALS THEREOF.
C. ACCOUNTS, INTANGIBLES AND (DESCRIBE)
All personal property, whether presently existing or hereafter created or
acquired, including but not limited to:
All accounts, chattel paper, documents, instruments, money, deposit
accounts and general intangibles including returns, repossessions, books
and records relating thereto, and equipment containing said books and
records. All investment property including securities and securities
entitlements. All goods including equipment and inventory. All proceeds
including, without limitation, insurance proceeds. All guarantees and
other security therefor.
The collateral not in Bank's possession will be located at: 10883 THORNMINT
ROAD, SAN DIEGO, CA. 92127
/ / If checked, the Obligor is executing this Agreement as an Accommodation
Debtor only and the Obligor's liability is limited to the security interest
granted in the Collateral described herein. The party being accommodated is
("Borrower").
All the terms and provisions on page 2 hereof are incorporated herein as
though set forth in full, and constitute a part of this Agreement.
Signature
Name (indicate title, if applicable) Address
XIMAGE CORPORATION 10883 THORNMINT ROAD
SAN DIEGO, CA. 92127
- ------------------ --------------------------------- --------------------
BY: [ILLEGIBLE]
- ------------------ --------------------------------- --------------------
AUTHORIZED OFFICER
- ------------------ --------------------------------- --------------------
SECURITY AGREEMENT (CONTINUED)
Obligor represents, warrants and agrees:
1. Obligor will immediately pay (a) any Debt when due, (b) Bank's costs of
collecting the Debt, of [ILLEGIBLE], insuring or realizing on Collateral, and
any expenditure of Bank pursuant hereto, including attorneys' fees and
expenses, with interest at the rate of 24% per year, or the rate applicable
to the Debt, whichever is less, from the date of expenditure, and (c) any
deficiency after realization of Collateral.
2. Obligor will use the proceeds of any loan that becomes Debt hereunder
for the purpose indicated on the application therefore, and will promptly
contract to purchase and pay the purchase price of any property which becomes
Collateral hereunder from the proceeds of any loan made for that purpose.
3. As to all Collateral in Obligor's Possession (unless specifically
otherwise agreed to by Bank in writing), Obligor will:
(a) Have, or has, possession of the Collateral at the location disclosed
to Bank and will not remove the Collateral from the location.
(b) Keep the Collateral separate and identifiable.
(c) Maintain the Collateral in good and saleable condition, repair it if
necessary, clean, feed, shelter, water, medicate, fertilize, cultivate,
irrigate, prune and otherwise deal with the Collateral in all such ways as
are considered good practice by owners of like property, use it lawfully
and only as permitted by insurance policies, and permit Bank to inspect
the Collateral at any reasonable time.
(d) Not sell, contract to sell, lease, encumber or transfer the
Collateral (other than inventory Collateral) until the Debt has been
paid, even though Bank has a security interest in proceeds of such
Collateral.
4. As to Collateral which is inventory and accounts, Obligor:
(a) May, until notice from Bank, sell, lease or otherwise dispose of
inventory Collateral in the ordinary course of business only, and
collect the cash proceeds thereof.
(b) Will, upon notice from Bank, deposit all cash proceeds as received
in a demand deposit account with Bank, containing only such proceeds and
deliver statements identifying units of inventory disposed of, accounts
which gave rise to proceeds, and all acquisitions and returns of
inventory as required by Bank.
(c) Will receive in trust, schedule on forms satisfactory to the Bank
and deliver to Bank all non-cash proceeds other than inventory received
in trade.
(d) If not in default, may obtain release of Bank's interest in
individual units of inventory upon request, therefore, payment to Bank
of the release price of such units shown on any Collateral schedule
supplementary hereto, and compliance herewith as to proceeds thereof.
5. As to Collateral which are accounts, chattel paper, general intangibles
and proceeds described in 4(c) above, Obligor warrants, represents and agrees:
(a) All such Collateral is genuine, enforceable in accordance with its
terms, free from default, prepayment, defense and conditions precedent
(except as disclosed to and accepted by Bank in writing), and is
supported by consecutively numbered invoices to, or rights against, the
debtors thereon. Obligor will supply Bank with duplicate invoices or
other evidence of Obligor's rights on Bank's request;
(b) All persons appearing to be obligated on such Collateral have
authority and capacity to contract;
(c) All chattel paper is in compliance with law as to form, content and
manner of preparation and execution and has been properly registered,
recorded and/or filed to protect Obligor's interest thereunder;
(d) If an account debtor shall also be indebted to Obligor on another
obligation, any payment made by him not specifically designated to be
applied on any particular obligation shall be considered to be a payment
on the account in which Bank has a security interest. Should any
remittance include a payment not on an account, it shall be delivered to
Bank and, if no event of default has occurred, Bank shall pay Obligor
the amount of such payment;
(e) Obligor agrees not to compromise, settle or adjust any account or
renew or extend the time of payment thereof without Bank's prior written
consent.
6. Obligor owns all Collateral absolutely, and no other person has or claims
any interest in any Collateral, except as disclosed to and accepted by Bank in
writing. Obligor will defend any proceeding which may affect title to or
Bank's security interest in any Collateral, and will indemnify and hold Bank
free and harmless from all costs and expenses of Bank's defense.
7. Obligor will pay when due all existing or future charges, liens or
encumbrances on and all taxes and assessments now or hereafter imposed on or
affecting the Collateral and, if the Collateral is in Obligor's possession,
the realty on which the Collateral is located.
8. Obligor will insure the Collateral with Bank as loss payee in form and
amounts with companies, and against risks and liability satisfactory to Bank,
and hereby assigns such policies to Bank, agrees to deliver them to Bank at
Bank's request, and authorizes Bank to make any claim thereunder, to cancel
the insurance on Obligor's default, and to receive payment of and endorse any
instrument in payment of any loss or return premium. If Obligor should fail
to deliver the required policy or policies to the Bank, Bank may, at
Obligor's cost and expense, without any duty to do so, get and pay for
insurance naming as the insured, at Bank's option, either both Obligor and
Bank, or only Bank, and the cost thereof shall be secured by this Security
Agreement, and shall be repayable as provided in Paragraph 1 above.
9. Obligor will give Bank any information it requires. All information at any
time supplied to Bank by Obligor (including, but not limited to, the value
and condition of Collateral, financial statements, financing statements, and
statements made in documentary Collateral) is correct and complete, and
Obligor will notify Bank of any adverse change in such information. Obligor
will promptly notify Bank of any change of Obligor's residence, chief
executive office or mailing address.
10. Bank is irrevocably appointed Obligor's attorney-in-fact to do any act
which Obligor is obligated hereby to do, to exercise such rights as Obligor
may exercise, to use such equipment as Obligor might use, to enter Obligor's
premises to give notice of Bank's security interest, and to collect
Collateral and proceeds and to execute and file in Obligor's name any
financing statements and amendments thereto required to perfect Bank's
security interest hereunder, all to protect and preserve the Collateral and
Bank's rights hereunder. Bank may:
(a) Endorse, collect and receive delivery or payment of instruments and
documents constituting Collateral;
(b) Make extension agreements with respect to or affecting Collateral,
exchange it for other Collateral, release persons liable thereon or take
security for the payment thereof, and compromise disputes in connection
therewith;
(c) Use or operate Collateral for the purpose of preserving Collateral
or its value and for preserving or liquidating Collateral.
11. If more than one Obligor signs this Agreement, their liability is joint
and several. Any Obligor who is married agrees that recourse may be had
against separate property for the Debt. Discharge of any Obligor except for
full payment, or any extension, forbearance, change of rate of interest, or
acceptance, release or substitution of Collateral or any impairment or
suspension of Bank's rights against an Obligor, or any transfer of an
Obligor's interest to another shall not affect the liability of any other
Obligor. Until the Debt shall have been paid or performed in full, Bank's
rights shall continue even if the Debt is outlawed. All Obligors waive: (a)
any right to require Bank to proceed against any Obligor before any other, or
to pursue any other remedy; (b) presentment, protest and notice of protest,
demand and notice of nonpayment, demand or performance, notice of sale, and
advertisement of sale; (c) any right to the benefit of or to direct the
application of any Collateral until the Debt shall have been paid; (d) and
any right of subrogation to Bank until Debt shall have been paid or performed
in full.
12. Upon default, at Bank's option, without demand or notice, all or any part
of the Debt shall immediately become due. Bank shall have all rights given by
law, and may sell, in one or more sales, Collateral in any county where Bank
has an office. Bank may purchase at such sale. Sales for cash or on credit to
a wholesaler, retailer or user of the Collateral, or at public or private
auction, are all to be considered commercially reasonable. Bank may require
Obligor to assemble the Collateral and make it available to Bank at the
entrance to the location of the Collateral, or a place designated by Bank.
Defaults shall include:
(a) Obligor's failure to pay or perform this or any agreement with Bank
or breach of any warranty herein, or Borrower's failure to pay or perform
any agreement with Bank.
(b) Any change in Obligor's or Borrower's financial condition which in
Bank's judgment impairs the prospect of Borrower's payment or
performance.
(c) Any actual or reasonably anticipated deterioration of the Collateral
or in the market price thereof which causes it, in Bank's judgment, to
become unsatisfactory as security.
(d) Any levy or seizure against Borrower or any of the Collateral.
(e) Death, termination of business, assignment for creditors,
insolvency, appointment of receiver, or the filing of any petition under
bankruptcy or debtor's relief laws of, by or against Obligor or Borrower
or any guarantor of the Debt.
(f) Any warranty or representation which is false or is believed in good
faith by Bank to be false.
13. Bank's acceptance of partial or delinquent payments or the failure of
Bank to exercise any right or remedy shall not waive any obligation of
Obligor or Borrower or right of Bank to modify this Agreement, or waive any
other similar default.
14. On transfer of all or any part of the Debt, Bank may transfer all or
any part of the Collateral. Bank may deliver all or any part of the
Collateral to any Obligor at any time. Any such transfer or delivery shall
discharge Bank from all liability and responsibility with respect to such
Collateral transferred or delivered. This Agreement benefits Bank's
successors and assigns and binds Obligor's heirs, legatees, personal
representatives, successors and assigns. Obligor agrees not to assert against
any assignee of Bank any claim or defense that may exist against Bank. Time
is of the essence. This Agreement and supplementary schedules hereto contain
the entire security agreement between Bank and Obligor. Obligor will execute
any additional agreements, assignments or documents reasonably required by
Bank to carry this Agreement into effect.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of California, to the jurisdiction of whose courts the
Obligor hereby agrees to submit. Obligor agrees that service of process may
be accomplished by any means authorized by California law. All words used
herein in the singular shall be considered to have been used in the plural
where the context and construction so require.
16. To the extent that Obligor acquires any trademarks, service marks,
trade names and service names and/or the goodwill associated therewith,
copyrights, patents and/or patent applications (collectively "Intellectual
Property"), Obligor shall give prompt notice thereof to Bank and shall take
any and all actions requested from time to time by Bank to perfect Obligor's
interest in such Intellectual Property and to perfect Bank's first priority
interest therein. Without limiting the generality of the foregoing, the
Obligor agrees as follows: Upon Obligor creating, writing, producing or
acquiring any software, computer source codes or other computer programs
(collectively, the "Software"). Obligor shall promptly register such Software
with the U.S. Copyright Office and to the extent Obligor's rights therein are
acquired from any third party, Obligor shall promptly upon such acquisition
file with the U.S. Copyright Office any and all documents necessary to
perfect Obligor's rights therein. Upon Obligor creating, writing, producing
or otherwise acquiring any Software, Obligor shall give prompt notice thereof
to Bank. Obligor shall execute and deliver to Bank any and all copyright
mortgages, UCC financing statements and other documents and instruments which
Bank may request in connection with the Bank perfecting its first priority
security interest in such Software.