LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION
as Lender
and
IVC INDUSTRIES, INC.
as Borrower
Dated: October 16, 2000
TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS......................................................1
SECTION 2. CREDIT FACILITIES...............................................22
2.1 Revolving Loans.................................................22
2.2 Letter of Credit Accommodations.................................23
2.3 Term Loan......................................................26
SECTION 3. INTEREST AND FEES...............................................26
3.1 Interest........................................................26
3.2 Unused Line Fee.................................................27
3.3 Fees...........................................................28
3.4 Changes in Laws and Increased Costs of Loans....................28
SECTION 4. CONDITIONS PRECEDENT............................................28
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations .................................................28
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations .................................................30
SECTION 5. GRANT OF SECURITY INTEREST......................................31
SECTION 6. COLLECTION AND ADMINISTRATION...................................32
6.1 Borrower's Loan Account.........................................32
6.2 Statements......................................................32
6.3 Collection of Accounts..........................................33
6.4 Payments........................................................34
6.5 Payment Indemnity. .............................................35
6.6 Authorization to Make Loans.....................................35
6.7 Use of Proceeds.................................................36
SECTION 7. COLLATERAL REPORTING AND COVENANTS..............................36
7.1 Collateral Reporting............................................36
7.2 Accounts Covenants..............................................37
7.3 Inventory Covenants.............................................39
7.4 Equipment and Real Property Covenants...........................40
7.5 Power of Attorney...............................................40
7.6 Right to Cure..................................................41
7.7 Access to Premises..............................................41
SECTION 8. REPRESENTATIONS AND WARRANTIES..................................42
8.1 Corporate Existence, Power and Authority; Subsidiaries..........42
8.2 Financial Statements; No Material Adverse Change.................42
8.3 Chief Executive Office; Collateral Locations.....................43
(i)
8.4 Priority of Liens; Title to Properties...........................43
8.5 Tax Returns......................................................43
8.6 Litigation.......................................................43
8.7 Compliance with Other Agreements and Applicable Laws.............43
8.8 Environmental Compliance.........................................44
8.9 Employee Benefits................................................44
8.10 Bank Accounts...................................................45
8.11 Intellectual Property...........................................46
8.12 Capitalization..................................................46
8.13 Labor Disputes..................................................47
8.14 Corporate Name; Prior Transactions..............................47
8.15 Restrictions on Subsidiaries....................................47
8.16 Material Contracts..............................................47
8.17 Payable Practices...............................................47
8.18 Accuracy and Completeness of Information........................48
8.19 Survival of Warranties; Cumulative..............................48
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS..............................48
9.1 Maintenance of Existence........................................48
9.2 New Collateral Locations........................................48
9.3 Compliance with Laws, Regulations, Etc..........................48
9.4 Payment of Taxes and Claims.....................................50
9.5 Insurance.......................................................50
9.6 Financial Statements and Other Information......................51
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.........52
9.8 Encumbrances....................................................54
9.9 Indebtedness....................................................55
9.10 Loans, Investments, Guarantees, Etc.............................57
9.11 Dividends and Redemptions.......................................59
9.12 Transactions with Affiliates....................................59
9.13 Additional Bank Accounts........................................59
9.14 Compliance with ERISA. ........................................59
9.15 End of Fiscal Years; Fiscal Quarters............................60
9.16 Change in Business..............................................60
9.17 Limitation of Restrictions Affecting Subsidiaries...............60
9.18 Adjusted Tangible Net Worth.....................................61
9.20 Costs and Expenses..............................................62
9.21 Further Assurances..............................................62
SECTION 10. EVENTS OF DEFAULT AND REMEDIES..................................63
10.1 Events of Default...............................................63
10.2 Remedies........................................................65
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERSAND CONSENTS; GOVERNING LAW ....67
11.1 Governing Law; Choice of Forum; Service of Process; Jury
Trial Waiver ...................................................67
(ii)
11.2 Waiver of Notices...............................................69
11.3 Amendments and Waivers..........................................69
11.4 Waiver of Counterclaims.........................................69
11.5 Indemnification.................................................69
11.6 Currency Indemnity..............................................69
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS................................70
12.1 Term............................................................70
12.2 Interpretative Provisions.......................................72
12.3 Notices.........................................................73
12.4 Partial Invalidity..............................................73
12.5 Successors......................................................73
12.7 Entire Agreement................................................74
(iii)
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit B Compliance Certificate
Schedule 1.67 Permitted Holders
Schedule 6.6 Persons Authorized to Request Loans
Schedule 8.4 Existing Liens
Schedule 8.8 Environmental Matters
Schedule 8.10 Bank Accounts
Schedule 8.11 Licensed Intellectual Property
Schedule 8.13 Labor Matters
Schedule 8.16 Material Contracts
Schedule 9.8(f) Freehold, New Jersey Fixed Rate Bond Collateral
Schedule 9.9(h) Vitamin Specialties Lease Obligations
Schedule 9.9(i) Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
Schedule 9.12 Permitted Consulting Fees
(i)
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated October 16, 2000 is entered into by
and between Congress Financial Corporation, a Delaware corporation ("Lender")
and IVC Industries, Inc., a Delaware corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower and
Guarantor to payment for goods sold or leased or for services rendered, whether
or not evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by
dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage
equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
"Reserve Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the Reference Bank actually holds
or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.
1.3 "Adjusted Tangible Net Worth" shall mean as to any Person, at any
time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its Subsidiaries (if any),
the amount equal to the difference between: (a) the aggregate net book value of
all assets of such Person and its Subsidiaries (excluding the value of patents,
trademarks, tradenames, copyrights, licenses, goodwill, leasehold improvements,
prepaid assets and other intangible assets), calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (b) the aggregate amount of the Indebtedness and other liabilities of such
Person and its Subsidiaries (including tax and other proper accruals).
1.4 "Affiliate" shall mean, with respect to a specified Person, any other
Person (a) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
person; (b) which beneficially owns or holds five (5%) percent or more of any
class of the Voting Stock or other equity interest of such specified person; or
(c) of which five (5%) percent or more of the Voting Stock or other equity
interest is beneficially owned or held by such specified person or a Subsidiary
of such specified person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling", "controlled by" and "under
common control with") when used with respect to any specified person shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of Voting Stock, by agreement or otherwise.
1.5 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.6 "Borrowing Base" shall mean, at any time, the amount equal to: (a)
eighty-five (85%) percent of the Net Amount of Eligible Accounts of Borrower and
Guarantor, plus (b) the lesser of: (i) sixty (60%) percent of the Value of
Eligible Inventory consisting of finished goods and Bulk Inventory and raw
materials for such finished goods and Bulk Inventory, (ii) eighty-five (85%)
percent of the Net Recovery Percentage with respect to Eligible Inventory
consisting of finished goods and Bulk Inventory and raw materials for such
finished goods and Bulk Inventory or (iii) $16,000,000, less (c) any Reserves.
1.7 "Bulk Inventory" shall mean Inventory in the form of tablets,
capsules, soft gelatins or any other single dosage vitamin, diet supplements
and/or over-the-counter non-drug products in barrels, bags, boxes or other
appropriate container to be sold as is, to be repackaged or to be converted to
finished goods.
1.8 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York or the State of North Carolina, and a day on
which the Reference Bank and Lender are open for the transaction of business,
except that if a determination of a Business Day shall relate to any Eurodollar
Rate Loans, the term Business Day shall also exclude any day on which banks are
2
closed for dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
1.9 "Canadian Dollars" and "C$" shall each mean the lawful currency of
Canada.
1.10"Canadian Pension Plan" shall mean any plan, program or arrangement
that is a pension plan for the purposes of any applicable pension benefits
legislation or any tax laws of Canada or a Province thereof, whether or not
registered under any such laws, which is maintained or contributed to by, or to
which there is or may be an obligation to contribute by, Borrower or Guarantor
in respect of any Person's employment in Canada with Borrower or Guarantor.
1.11 "Capital Leases" shall mean, as applied to any Person, any lease of
(or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.12 "Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock, partnership interests or limited liability company
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock or other interests (but
excluding any debt security that is exchangeable for or convertible into such
capital stock).
1.13 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of one hundred eighty (180) days or less
issued or directly and fully guaranteed or insured by the United States of
America of any agency or instrumentality thereof; provided, that, the full faith
and credit of the United States of America is pledged in support thereof; (b)
certificates of deposit or bankers' acceptances with a maturity of one hundred
eighty (180) days or less of any financial institution that is a member of the
Federal Reserve System having combined capital and surplus and undivided profits
of not less than $250,000,000; (c) commercial paper (including variable rate
demand notes) with a maturity of one hundred eighty (180) days or less issued by
a corporation (except an Affiliate of Borrower) organized under the laws of any
State of the United States of America or the District of Columbia and rated at
least A-1 by Standard & Poor's Ratings Service, a division of The XxXxxx-Xxxx
Companies, Inc. or at least P-1 by Xxxxx'x Investors Service, Inc.; (d)
repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the types described in clause (a) above entered into
with any financial institution having combined capital and surplus and undivided
profits of not less than $250,000,000; (e) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States of America or issued by any
governmental agency thereof and backed by the full faith and credit to the
United States of America, in each case maturing within one hundred eighty (180)
days or less from the date of acquisition; provided, that, the terms of such
agreements comply
3
with the guidelines set forth in the Federal Financial Agreements of Depository
Institutions with Securities Dealers and Others, as adopted by the Comptroller
of the Currency on October 31, 1985; and (f) investments in money market funds
and mutual funds which invest substantially all of their assets in securities of
the types described in clauses (a) through (e) above.
1.14 "Change of Control" shall mean (a) the transfer (in one transaction
or a series of transactions) of all or substantially all of the assets of
Borrower or Guarantor to any Person or group (as such term is used in Section
13(d)(3) of the Exchange Act); (b) the liquidation or dissolution of Borrower or
Guarantor or the adoption of a plan by the stockholders of Borrower or Guarantor
relating to the dissolution or liquidation of Borrower or Guarantor; (c) the
acquisition by any Person or group (as such term is used in Section 13(d)(3) of
the Exchange Act), except for one or more Permitted Holders, of beneficial
ownership, directly or indirectly, of fifty (50%) percent or more of the voting
power of the total outstanding Voting Stock of Borrower or the Board of
Directors of Borrower; (d) during any period of two (2) consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of Borrower (together with any new directors who have been appointed
by any Permitted Holder, or whose nomination for election by the stockholders of
Borrower, as the case may be, was approved by a vote of at least sixty-six and
two-thirds (66 2/3%) percent of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of Borrower then still in office; (e) the
failure of the Permitted Holders to own more than fifty (50%) percent of the
voting power of the total outstanding Voting Stock of Borrower or (f) the
failure of Borrower to own one hundred (100%) percent of the voting power of the
total outstanding Voting Stock of Guarantor.
1.15 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together, with all rules and regulations thereunder or related
thereto.
1.16 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.17 "Collateral Access Agreement" shall mean an agreement in writing, in
form and substance satisfactory to Lender, from any lessor of premises to
Borrower or Guarantor, or any other person to whom any Collateral (including
Inventory, Equipment, bills of lading or other documents of title) is consigned
or who has custody, control or possession of any such Collateral or is otherwise
the owner or operator of any premises on which any of such Collateral is
located, pursuant to which such lessor, consignee or other person, inter alia,
acknowledges the first priority security interest of Lender in such Collateral,
agrees to waive any and all claims such lessor, consignee or other person may,
at any time, have against such Collateral, whether for processing, storage or
otherwise, and agrees to permit Lender access to, and the right to remain on,
the premises of such lessor, consignee or other person so as to exercise
Lender's rights and remedies and otherwise deal with such Collateral and in the
case of any person who at any time has custody, control or possession of any
bills of lading or other documents of title, agrees to
4
hold such bills of lading or other documents as bailee for Lender and to follow
all instructions of Lender with respect thereto.
1.18 "Consolidated Pre-Tax Net Income" shall mean, with respect to any
Person for any period, the aggregate of the net income (loss) of such Person and
its Subsidiaries, on a consolidated basis, for such period (excluding to the
extent included therein any extraordinary and/or unusual or non-recurring gains)
after deducting all charges which should be deducted before arriving at the net
income (loss) for such period and, without duplication, before deducting the
Provision for Taxes for such period, all as determined in accordance with GAAP,
provided, that, (a) the net income of any Person that is not a wholly-owned
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid or
payable to such Person or wholly-owned Subsidiary of such Person; (b) except to
the extent included pursuant to the foregoing clause, the net income of any
Person accrued prior to the date it becomes a wholly-owned Subsidiary of such
Person or is merged into or consolidated with such Person or any of its
wholly-owned Subsidiaries or that Person's assets are acquired by such Person or
by its wholly-owned Subsidiaries shall be excluded; and (c) the net income (if
positive) of any wholly-owned Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such wholly-owned Subsidiary to
such Person or to any other wholly-owned Subsidiary of such Person is not at the
time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such wholly-owned Subsidiary shall be excluded. For the purposes
of this definition, net income excludes any gain together with any related
Provision for Taxes for such gain realized upon the sale or other disposition of
any assets that are not sold in the ordinary course of business (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
of any Capital Stock of such Person or Subsidiary of such Person and any net
income realized or loss incurred as a result of changes in accounting principles
or in the application thereof to such Person.
1.19 "Currency Exchange Convention" shall mean, in the calculation of the
US Dollar Equivalent, a procedure used by Lender to value in US Dollars (i) the
obligations or assets of Borrower or Guarantor that are originally measured in
Canadian Dollars and (ii) any other amount expressed in Canadian Dollars or any
other currency, other than US Dollars, in each case by using the spot price for
the purchase of US Dollars with Canadian Dollars (or such other currency)
provided to Lender by the Reference Bank (or such other bank as Lender may
specify for such purpose) for the immediately preceding Business Day.
1.20 "Dilution" shall mean, for any period, the fraction, expressed as a
percentage, the numerator of which is the aggregate amount of non-cash
reductions in the Accounts of Borrower or Guarantor for such period and the
denominator of which is the aggregate dollar amount of the sales of Borrower and
Guarantor for such period.
5
1.21 "Dilution Reserve" shall mean a Reserve in amounts established by
Lender in good faith to reflect that Dilution with respect to any category of
Eligible Accounts as calculated by Lender for any period is or is reasonably
anticipated to be greater than five (5%) percent.
1.22 "Eligible Accounts" shall mean Accounts created by Borrower or
Guarantor which are and continue to be acceptable to Lender in good faith based
on the criteria set forth below. In general, Accounts shall be Eligible Accounts
if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or Guarantor or rendition of services by Borrower
or Guarantor in the ordinary course of its business which transactions are
completed in accordance with the terms and provisions contained in any documents
related thereto;
(b) such Accounts are not unpaid more than the ninety (90) days
after the date of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America or Canada (provided,
that, at any time promptly upon Lender's request, Borrower or Guarantor shall
execute and deliver, or cause to be executed and delivered, such other
agreements, documents and instruments as may be required by Lender to perfect
the security interests of Lender in those Accounts of an account debtor with its
chief executive office or principal place of business in Canada in accordance
with the applicable laws of the Province of Canada in which such chief executive
office or principal place of business is located and take or cause to be taken
such other and further actions as Lender may request to enable Lender as secured
party with respect thereto to collect such Accounts under the applicable Federal
or Provincial laws of Canada) or, at Lender's option, if the chief executive
office and principal place of business of the account debtor with respect to
such Accounts is located other than in the United States of America or Canada,
then if either: (i) the account debtor has delivered to Borrower or Guarantor
(as the case may be) an irrevocable letter of credit issued or confirmed by a
bank satisfactory to Lender and payable only in the United States of America and
in U.S. Dollars, sufficient to cover such Account, in form and substance
satisfactory to Lender and if required by Lender, the original of such letter of
credit has been delivered to Lender or Lender's agent and the issuer thereof
notified of the assignment of the proceeds of such letter of credit to Lender,
or (ii) such Account is subject to credit insurance payable to Lender issued by
an insurer and on terms and in an amount acceptable to Lender, or (iii) such
Account is otherwise
6
acceptable in all respects to Lender (subject to such lending formula with
respect thereto as Lender may determine);
(f) such Accounts do not consist of progress xxxxxxxx (such that the
obligation of the account debtors with respect to such Accounts is conditioned
upon the satisfactory completion by Borrower or Guarantor, as the case may be,
of any further performance under the agreement giving rise thereto), xxxx and
hold invoices or retainage invoices, except as to xxxx and hold invoices, if
Lender shall have received an agreement in writing from the account debtor, in
form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;
(g) the account debtor with respect to such Accounts (i) has not
asserted a counterclaim, defense or dispute and (ii) does not have, and does not
engage in transactions which may give rise to any right of setoff or recoupment
against such Accounts, other than (A) pursuant to the agreement of Borrower with
such account debtor as in effect on the date hereof arising in the ordinary
course of the business of Borrower and (B) pursuant to the agreement of Borrower
with such account debtor arising after the date hereof, to the extent Borrower
has obtained the prior written consent of Lender to such agreement (but the
portion of the Accounts of such account debtor in excess of the amount at any
time and from time to time owed by Borrower or Guarantor, as the case may be, to
such account debtor or claimed owed by such account debtor may be deemed
Eligible Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder (other than setoffs in the ordinary course
of business otherwise permitted hereunder);
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of Borrower or Guarantor;
(k) if (i) the account debtor is the United States of America or any
state or local governmental entity, or any department, agency or instrumentality
thereof, then Borrower or Guarantor, as the case may be, has assigned its rights
to payment of such Account to Lender pursuant to and in accordance with the
Assignment of Claims Act of 1940, as amended, or pursuant to any similar state
or local law, regulation or requirement or (ii) the account debtor is Her
Majesty in right of Canada or any provincial or local governmental entity, or
any ministry, Borrower or Guarantor, as the case may be, has assigned its rights
to payment of such Account to Lender pursuant to and in accordance with the
Financial Administration Act, R.S.C. 185, c.F-11, as amended, or any similar
applicable provincial or local law, regulation or requirement;
7
(l) there are no proceedings or actions known to Borrower or
Guarantor which are threatened or pending against the account debtors with
respect to such Accounts which might result in any material adverse change in
any such account debtor's financial condition;
(m) such Accounts are not owed by an account debtor who has Accounts
unpaid more than ninety (90) days after the original invoice date for them which
constitute more than fifty (50%) percent of the total Accounts of such account
debtor;
(n) such Accounts are not evidenced by or arising under any
instrument or chattel paper;
(o) the account debtor is not located in a state requiring the
filing of a Notice of Business Activities Report or substantially similar report
in order to permit Borrower or Guarantor, as the case may be, to seek judicial
enforcement in such State of payment of such Account, unless Borrower or
Guarantor, as the case may be, has qualified to do business in such state or has
filed a Notice of Business Activities Report or equivalent report for the then
current year or such failure to file and inability to seek judicial enforcement
is capable of being remedied without any material delay or material cost, as
determined by Lender in good faith;
(p) such Accounts are owed by account debtors whose total
indebtedness to Borrower or Guarantor (as the case may be) does not exceed the
credit limit with respect to such account debtors as determined by Borrower or
Guarantor (as the case may be) from time to time and as is reasonably acceptable
to Lender (but the portion of the Accounts not in excess of such credit limit
may be deemed Eligible Accounts); and
(q) such Accounts are owed by account debtors deemed creditworthy at
all times by Borrower or Guarantor, as the case may be, consistent with its
current practice and who are reasonably acceptable to Lender.
General criteria for Eligible Accounts may be established and revised by Lender
in good faith from time to time as to any type or category of Accounts after
notice to Borrower based on an event, condition or other circumstance arising
after the date hereof, or existing on the date hereof to the extent Lender has
no written notice thereof from Borrower, which adversely affects or could
reasonably be expected to adversely affect such type or category of Accounts in
the good faith determination of Lender. Any Accounts which are not Eligible
Accounts shall nevertheless be part of the Collateral.
1.23 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower and
Guarantor, Bulk Inventory of Borrower and Guarantor and raw materials for such
finished goods and Bulk Inventory, in each case which are acceptable to Lender
in good faith based on the criteria set forth below. In
8
general, Eligible Inventory shall not include (a) work-in-process; (b)
components which are not part of finished goods; (c) spare parts for equipment;
(d) packaging and shipping materials; (e) supplies used or consumed in
Borrower's or Guarantor's business; (f) Inventory at premises other than those
owned and controlled by Borrower or Guarantor, except that any Inventory which
would otherwise be deemed Eligible Inventory at locations in the United States
of America or Canada which are not owned and operated by Borrower or Guarantor
may nevertheless be considered Eligible Inventory: (i) as to locations which are
leased by Borrower or Guarantor if Lender shall have received a Collateral
Access Agreement from the owner and lessor of such location, duly authorized,
executed and delivered by such owner and lessor, except that notwithstanding
that Lender shall not have received such an agreement for a particular leased
location, Lender will consider Inventory at such leased location which would
otherwise be Eligible Inventory to be Eligible Inventory provided, that, (A)
Lender may, at any time, establish such Reserves as Lender may determine in good
faith in respect of amounts at any time payable by Borrower to the owner or
lessor of such location, without limiting any other rights and remedies of
Lender under this Agreement or under the other Financing Agreements with respect
to the establishment of Reserves or otherwise, and (B) the Reserves established
pursuant to clause (f)(i)(A) hereof shall not exceed at any time the aggregate
of amounts payable to such owners and lessors for the next three (3) months from
any such time and including amounts if any, then outstanding and unpaid owed by
Borrower to such owners and lessors, provided, that, such limitation on the
amount of the Reserves pursuant to this Section shall only apply so long as: (1)
no Event of Default, or act, condition or event which with notice or passage of
time or both would constitute an Event of Default shall exist or have occurred
and be continuing, (2) neither Borrower, Guarantor nor Lender shall have
received notice of any default or event of default by the lessee under the lease
with respect to such location and (3) Lender shall have received evidence, in
form and substance satisfactory to Lender, that Borrower has not granted to the
owner and lessor a security interest or lien upon any assets of Borrower and
(ii) as to locations owned and operated by a third person, if Lender shall have
received a Collateral Access Agreement from such owner and operator with respect
to such location, duly authorized, executed and delivered by such owner and
operator, except that notwithstanding that Lender shall not have received such
an agreement as to a particular third party location, Lender may consider
Inventory at such location which would otherwise be Eligible Inventory to be
Eligible Inventory provided, that, Lender may, at any time, establish such
Reserves as Lender may determine in good faith in respect of amounts at any time
payable by Borrower to such third party, without limiting any other rights or
remedies of Lender under this Agreement or under the other Financing Agreements
with respect to the establishment of Reserves or otherwise (provided, that, the
Reserves established pursuant to clause (f)(ii) shall not exceed at any time the
aggregate of amounts payable to such third person for the next three (3) months
from any such time and including amounts if any, then outstanding and unpaid
owed by Borrower to such third person, provided, that, such limitation on the
amount of the Reserves pursuant to this Section shall only apply so long as: (A)
no Event of Default, or act, condition or event which with notice or passage of
time or both would constitute an Event of Default, shall exist or have occurred
and be continuing, (B) neither Borrower, Guarantor nor Lender shall have
received notice of any default or event of default by Borrower or Guarantor
under its arrangements with such third
9
person and (C) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Borrower has not granted to such third person a
security interest or lien upon any assets of Borrower), and, in addition, if
required by Lender: (A) UCC-1 financing statements (or PPSA financing statements
or the equivalent in Canada) between the owner and operator, as consignee or
bailee and Borrower or Guarantor (as the case may be), as consignor or xxxxxx,
in form and substance satisfactory to Lender, which are duly assigned to Lender
and (B) a written notice to any lender to the owner and operator of the first
priority security interest in such Inventory of Lender; (g) Inventory subject to
a security interest or lien in favor of any person other than Lender except
those permitted in this Agreement; (h) xxxx and hold goods; (i) unserviceable,
obsolete or slow moving Inventory; (j) Inventory which is not subject to the
first priority, valid and perfected security interest and lien of Lender; (k)
damaged and/or defective Inventory; (l) returned Inventory which is not held for
resale in the ordinary course of business; (m) Inventory purchased or sold on
consignment; (n) Inventory held after the applicable expiration date; (o)
samples; (p) Inventory the use of which by Borrower or Guarantor, as the case
may be, or the manufacture or sale thereof by Borrower or Guarantor, as the case
may be, involves the use by Borrower or Guarantor of any Intellectual Property
owned by any other Person, unless Borrower or Guarantor, as the case may be, has
the right to use such Intellectual Property for such purposes pursuant to an
agreement listed on Schedule 8.11 hereto, provided, that, (i) such agreement is
in full force and effect and constitutes the legal, valid, binding and
enforceable obligations of the parties thereto, (ii) no default or event of
default exists or has occurred thereunder and is continuing, and (iii) no party
thereto has sent any notice of default or its intention to terminate or not
renew such agreement (unless such notice has been rescinded); and (q) Inventory
which may become subject to the claims of a supplier pursuant to Section 81.1 of
the Bankruptcy and Insolvency Act (Canada), R.S.C. 1985, c.B-3, as amended, or
any applicable provincial laws granting revendication or similar rights to
unpaid suppliers. General criteria for Eligible Inventory may be established and
revised by Lender in good faith from time to time as to any type or category of
Inventory after notice to Borrower based on an event, condition or other
circumstance arising after the date hereof, or existing on the date hereof to
the extent Lender has no written notice thereof from Borrower, which adversely
affects or could reasonably be expected to adversely affect such type or
category of Inventory in the good faith determination of Lender. Any Inventory
which is not Eligible Inventory shall nevertheless be part of the Collateral.
1.24 "Environmental Laws" shall mean all foreign, Federal, State,
Provincial and local laws (including common law), legislation, rules, codes,
licenses, permits (including any conditions imposed therein), injunctions or
agreements between Borrower and any Governmental Authority, (a) relating to the
protection, preservation or restoration of the environment (including air,
water, surface water, ground water, drinking water, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety, (b) relating to the exposure to, or the
use, storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (c) relating to all
laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous
10
Materials. The term "Environmental Laws" includes (i) the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Federal
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal Act and
the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, and (ii) other
laws that may impose liability or obligations for injuries or damages due to, or
as a result of, the presence of or exposure to any Hazardous Materials.
1.25 "Equipment" shall mean all of Borrower's and Guarantor's now owned
and hereafter acquired equipment, machinery, computers and computer hardware and
software (whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.26 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules and regulations thereunder or
related thereto.
1.27 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.28 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Plan; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412 of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the occurrence of a "prohibited
transaction" with respect to which Borrower or any of its Subsidiaries is a
"disqualified person" (within the meaning of Section 4975 of the Code) or with
respect to which Borrower or any of its Subsidiaries could otherwise be liable;
(f) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from
a Multiemployer Plan or a cessation of operations which is treated as such a
withdrawal or notification that a Multiemployer Plan is in reorganization; (g)
the filing of a notice of intent to terminate, the treatment of a Plan amendment
as a termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan or
Multiemployer Plan; (h) an event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan or Multiemployer Plan; (i) the
imposition of any liability under Title IV of ERISA, other than the Pension
Benefit Guaranty Corporation premiums due but not delinquent under Section 4007
of ERISA, upon Borrower or any ERISA Affiliate; and (j) any other event or
condition with respect to a Plan or Multiemployer Plan or any Plan subject to
Title
11
IV of ERISA maintained, or contributed to, by any ERISA Affiliate that could
reasonably be expected to result in liability of Borrower.
1.29 "Eurodollar Rate" shall mean with respect to the Interest Period for
a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.
1.30 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.31 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.32 "Excess Availability" shall mean the amount, as determined by Lender
in accordance with the terms hereof, calculated at any time, equal to: (a) the
lesser of: (i) the Borrowing Base and (ii) the Revolving Loan Limit, minus (b)
the sum of: (i) the amount of all then outstanding and unpaid Obligations (but
not including for this purpose the then outstanding principal amount of the Term
Loan), plus (ii) the aggregate amount of all then outstanding and unpaid trade
payables and other obligations of Borrower which are more than sixty (60) days
past due as of such time, plus (iii) the amount of checks issued by Borrower to
pay trade payables and other obligations which are more than sixty (60) days
past due as of such time, but not yet sent and the book overdraft of Borrower.
1.33 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules and regulations thereunder or related thereto.
1.34 "Fee Letter" shall mean the letter agreement, dated on or about the
date hereof, by and among Borrower and Lender, setting forth certain fees
payable by Borrower to Lender, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced from
time to time.
1.35 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor in connection with this Agreement.
12
1.36 "Fixed Rate NJEDA Bond Agreements" shall mean collectively, the
following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced): (a) the Trust Indenture,
dated as of December 1, 1991, between the Fixed Rate NJEDA Bond Trustee and the
NJEDA; (b) the Loan Agreement, dated as of December 1, 1991, between Hidel
Partners and the NJEDA; (c) the Reimbursement Agreement, dated as of December 1,
1991, by and among Hidel Partners, Borrower and Banque Nationale de Paris,
Houston Agency; and as amended pursuant to the Modification Agreement, dated as
of November 1, 1999, by and among Banque Nationale de Paris, Houston Agency, the
Fixed Rate NJEDA Bond Trustee and the NJEDA; (d) Mortgage and Security
Agreement, dated as of December 1, 1991, from Hidel Partners, as mortgagor to
the NJEDA and Banque Nationale de Paris, Houston Agency, as mortgagees, with
respect to the Real Property located in Freehold, New Jersey described as Xxx 0,
Xxxxx 00 xx xxx Xxxxxxxx Xxxxxxxx Xxx Xxx); (e) the Mortgage and Security
Agreement, dated as of December 1, 1991, from Hidel Partners, as mortgagor to
the NJEDA and Banque Nationale de Paris, Houston Agency, as mortgagees with
respect to the Real Property located in Freehold, New Jersey described as Lot
8.01, Block 78 in the Freehold Township Tax Map; (f) the Assumption and
Ratification Agreement, dated May 3, 1995, by and among Borrower, Banque
Nationale de Paris, Houston Agency, the NJEDA and the Fixed Rate NJEDA Bond
Trustee; and (g) all agreements, documents and instruments at any time executed
and/or delivered by Borrower or Guarantor in connection with any of the
foregoing.
1.37 "Fixed Rate NJEDA Bond Letter of Credit" shall mean letter of credit
no. 10183 dated December 27, 1991, issued by Banque Nationale de Paris, Houston
Agency for the account of Borrower payable to the Fixed Rate NJEDA Bond Trustee,
as beneficiary, in the amount of up to $5,825,400, as adjusted from time to time
in accordance with the terms thereof, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.38 "Fixed Rate NJEDA Bonds" shall mean, collectively, New Jersey
Economic Development Bonds (Composite Issue) Series 1991 F, issued by the NJEDA
subject to the Fixed Rate NJEDA Bond Agreements in the original principal amount
of $5,600,000, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.39 "Fixed Rate NJEDA Bond Trustee" shall mean First Union National Bank
(formerly First Fidelity Bank, New Jersey), in its capacity as trustee for the
holders of the Fixed Rate NJEDA Bonds, and any successor, replacement or
additional trustee, and their respective successors and assigns.
1.40 "Floating Rate NJEDA Bond Agreements" shall mean collectively, the
following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced): (a) the Bond Agreement,
dated as of October 1, 1995, between the NJEDA and Borrower; (b) the Trust
Indenture, dated as of October 1, 1995, between the NJEDA and the Floating Rate
NJEDA Bond Trustee; and (c) all agreements, documents and instruments at any
13
time executed and/or delivered by Borrower or Guarantor in connection with any
of the foregoing.
1.41 "Floating Rate NJEDA Bond Letter of Credit" shall mean the letter of
credit originally issued as no. PC 801162 (and now referred to as P263431),
dated April 30, 1996, issued by The Chase Manhattan Bank for the account of
Borrower payable to the Floating Rate NJEDA Bond Trustee, as beneficiary, in the
amount of up to $5,106,850 (for which the current amount is $2,155,577.13), as
adjusted from time to time in accordance with the terms thereof, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.42 "Floating Rate NJEDA Bonds" shall mean, collectively, Economic
Development Bonds (International Vitamin Corporation Project) Series 1995 issued
by the NJEDA subject to the Floating Rate NJEDA Bond Agreements in the original
principal amount of $5,000,000, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.43 "Floating Rate NJEDA Bonds Trustee" shall mean First Union National
Bank (formerly First Fidelity Bank, New Jersey), in its capacity as trustee
pursuant to the Floating Rate NJEDA Bond Agreements for the holders of the
Floating Rate NJEDA Bonds, and any successor, replacement or additional trustee,
and their respective successors and assigns.
1.44 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.18 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with those used in
the preparation of the most recent audited financial statements delivered to
Lender prior to the date hereof.
1.45 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
1.46 "Guarantor" shall mean Hall Laboratories Ltd., a corporation
organized under the laws of the Province of Yukon, Canada and its successors and
assigns.
1.47 "Hazardous Materials" shall mean substances included within the
definitions of "hazardous substances", "hazardous materials", "toxic
substances", or "solid waste" in the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (42 U.S.C.
14
Section 9601 et seq.), as amended by Superfund Amendments and Reauthorization
Act of 1986 (Pub. L. 00-000 000 Stat. 1613), the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. Section 1801 et seq.), and in the regulations
promulgated pursuant to such laws, all as amended, and in any event shall
include medical wastes, infectious wastes, asbestos, paint containing lead, and
urea formaldehyde.
1.48 "Indebtedness" shall mean, with respect to any Person, any liability,
whether or not contingent, (a) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof) or evidenced by bonds, notes, debentures or similar
instruments; (b) representing the balance deferred and unpaid of the purchase
price of any property or services (except any such balance that constitutes an
account payable to a trade creditor (whether or not an Affiliate) created,
incurred, assumed or guaranteed by such Person in the ordinary course of
business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition;
(e) all obligations with respect to redeemable stock and redemption or
repurchase obligations under any Capital Stock or other equity securities issued
by such Person; (f) all reimbursement obligations and other liabilities of such
Person with respect to surety bonds (whether bid, performance or otherwise),
letters of credit, banker's acceptances or similar documents or instruments
issued for such Person's account; and (g) all indebtedness of such Person in
respect of indebtedness of another Person for borrowed money or indebtedness of
another Person otherwise described in this definition which is secured by any
consensual lien, security interest, collateral assignment, conditional sale,
mortgage, deed of trust, or other encumbrance on any asset of such Person,
whether or not such obligations, liabilities or indebtedness are assumed by or
are a personal liability of such Person, all as of such time.
1.49 "Information Certificate" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.50 "Intellectual Property" shall mean Borrower's and Guarantor's now
owned and hereafter arising or acquired: patents, patent rights, patent
applications, copyrights, works which are the subject matter of copyrights,
copyright registrations, trademarks, trade names, trade styles, trademark and
service xxxx applications, and licenses and rights to use any of the foregoing;
all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part
15
of any of the foregoing; all rights to xxx for past, present and future
infringement of any of the foregoing; inventions, trade secrets, formulae,
processes, compounds, drawings, designs, blueprints, surveys, reports, manuals,
and operating standards; goodwill; customer and other lists in whatever form
maintained; and trade secret rights, copyright rights, rights in works of
authorship, and contract rights relating to computer software programs, in
whatever form created or maintained.
1.51 "Interest Period" shall mean for any Eurodollar Rate Loan, a period
of approximately one (1), two (2), or three (3) months duration as Borrower may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrower may
not elect an Interest Period which will end after the last day of the
then-current term of this Agreement.
1.52 "Interest Rate" shall mean:
(a) Subject to clauses (b) and (c) below, (i) as to Revolving Loans
which are Prime Rate Loans, a rate equal to three-quarters (3/4%) percent per
annum in excess of the Prime Rate and as to Revolving Loans which are Eurodollar
Rate Loans, a rate equal to two and three quarters (2 3/4 %) percent per annum
in excess of the Adjusted Eurodollar Rate (based on the Adjusted Eurodollar Rate
applicable for the Interest Period selected by Borrower as in effect three (3)
Business Days after the date of receipt by Lender of the request of Borrower for
such Eurodollar Rate Loans in accordance with the terms hereof, whether such
rate is higher or lower than any rate previously quoted to Borrower) and (ii) as
to the portion of the Term Loan which may be Prime Rate Loans, a rate equal to
one (1%) percent per annum in excess of the Prime Rate and as to the portion of
the Term Loan which maybe Eurodollar Rate Loans, three (3%) percent per annum in
excess of the Adjusted Eurodollar Rate (calculated as described in clause (a)(i)
above)
(b) Notwithstanding anything to the contrary set forth in clause (a)
above, (i) the Interest Rate shall mean, as to Revolving Loans which are Prime
Rate Loans, a rate equal to one-half (1/2%) percent per annum in excess of the
Prime Rate and as to Revolving Loans which are Eurodollar Rate Loans, a rate
equal to two and one-half (2 1/2 %) percent per annum in excess of the Adjusted
Eurodollar Rate (calculated as described in clause (a)(i) above) and (ii) as to
the portion of the Term Loan which may be Prime Rate Loans, a rate equal to
three-quarters (3/4%) percent per annum in excess of the Prime Rate and as to
the portion of the Term Loan which may be Eurodollar Rate Loans, two and
three-quarters (2 3/4%) percent per annum in excess of the Adjusted Eurodollar
Rate (calculated as described in clause (a)(i) above), in each case, effective
as of the first day of the month after each of the following conditions is
satisfied as determined by Lender in good faith: (i) the Consolidated Pre-Tax
Net Income of Borrower for the fiscal year ending on July 31, 2001 calculated
based on the audited financial statements of Borrower and its Subsidiaries for
such fiscal year delivered to Lender, together with the unqualified opinion of
the independent certified accountants, in accordance with Section 9.6 hereof,
shall be not less than $4,000,000 and (ii) no Event of Default, or act,
condition or event which with notice or passage
16
of time or both would constitute an Event of Default, shall exist or have
occurred and be continuing.
(c) Notwithstanding anything to the contrary contained in clause (a)
or clause (b) above, the Interest Rate shall mean, at Lender's option, as to
Prime Rate Loans, a rate equal to three (3%) percent per annum in excess of the
Prime Rate, and as to Eurodollar Rate Loans, the rate of five (5%) percent per
annum in excess of the Adjusted Eurodollar Rate, without notice (i) for the
period (A) from and after the date of termination or non-renewal hereof until
Lender has received full and final payment of all Obligations (notwithstanding
entry of a judgement against Borrower) and (B) from and after the date of the
occurrence of an Event of Default for so long as such Event of Default
continuing, and (ii) on Loans to Borrower at any time outstanding in excess of
the Borrowing Base or the Revolving Loan Limit (whether or not such excess(es)
arise or are made with or without Lender's knowledge or consent and whether made
before or after an Event of Default).
1.53 "Inventory" shall mean all of Borrower's and Guarantor's now owned
and hereafter existing or acquired raw materials, work in process, finished
goods and all other inventory of whatsoever kind or nature, wherever located.
1.54 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of Borrower, Guarantor or any other
Obligor or (b) with respect to which Lender has agreed to indemnify the issuer
or guaranteed to the issuer the performance by Borrower or Guarantor of its
obligations to such issuer (including the Floating Rate NJEDA Bond Letter of
Credit).
1.55 "Loans" shall mean the Revolving Loans and the Term Loan.
1.56 "Material Adverse Effect" shall mean a material adverse effect on (a)
the financial condition, business, performance, operations or prospects of
Borrower or Guarantor; (b) the legality, validity or enforceability of this
Agreement or any of the other Financing Agreements; (c the legality, validity,
enforceability, perfection or priority of the security interests and liens of
Lender upon the Collateral; (d) the Collateral or the value of the Collateral;
(e) the ability of Borrower or Guarantor to repay the Obligations or of Borrower
or Guarantor to perform its or their obligations under this Agreement or any of
the other Financing Agreements; or (f) the ability of Lender to enforce the
Obligations or realize upon the Collateral or otherwise with respect to the
rights and remedies of Lender under this Agreement or any of the other Financing
Agreements.
1.57 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of Borrower or Guarantor
involving monetary liability of or to any Person in an amount in excess of
$500,000 in any fiscal year in the case of Borrower, or $100,000 in any fiscal
year in the case of Guarantor, and (b) any other written contract or other
17
written agreement (other than the Financing Agreements), to which Borrower or
Guarantor is a party as to which the breach, nonperformance, cancellation or
failure to renew by any party thereto would have a material adverse effect on
the business, assets, condition (financial or otherwise) or results of
operations of Borrower or Guarantor or the validity or enforceability of this
Agreement, any of the other Financing Agreements, or any of the rights and
remedies of Lender hereunder or thereunder.
1.58 "Maximum Credit" shall mean the amount of $30,500,000.
1.59 "Mortgage" shall mean the Mortgage, Security Agreement and Assignment
of Leases and Rents, to be executed by Borrower in favor of Lender with respect
to the undeveloped, vacant land of Hidel Partners and Borrower located on
Xxxxxxxx Road adjacent to the facility used by Borrower at 000 Xxxxx Xxxx Xxxx,
Xxxxxxxx, Xxx Xxxxxx (referred to as Xxx 0, Xxxxx 00 xx xxx Xxxxxxxx Xxxxxxxx
Xxx Xxx) and related assets, as the same may hereafter exist and be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.60 "Multiemployer Plan" shall mean a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by Borrower or any
ERISA Affiliate.
1.61 "Net Amount of Eligible Accounts" shall mean the US Dollar Equivalent
of the gross amount of Eligible Accounts less (a) sales, excise, goods and
services taxes or other value added taxes or similar taxes included in the
amount thereof and (b) returns, discounts, claims, credits and allowances of any
nature at any time issued, owing, granted, outstanding, available or claimed
with respect thereto.
1.62 "Net Recovery Percentage" shall mean the fraction, expressed as a
percentage, (a) the numerator of which is the amount equal to the amount of the
recovery in respect of the Inventory at such time on an orderly liquidation
value basis (after conversion of Bulk Inventory to finished goods) as set forth
in the most recent acceptable appraisal of Inventory received by Lender in
accordance with Section 7.3, net of operating expenses, liquidation expenses and
commissions, and (b) the denominator of which is the original cost of the
aggregate amount of the Inventory subject to such appraisal.
1.63 "NJEDA" shall mean the New Jersey Economic Development Authority, a
public body corporate and politic constituting an instrumentality of the State
of New Jersey, and its successors and assigns.
1.64 "Obligations" shall mean any and all Revolving Loans, the Term Loan,
Letter of Credit Accommodations and all other obligations, liabilities and
indebtedness of every kind, nature and description owing by Borrower or
Guarantor to Lender and/or its affiliates, including principal, interest,
charges, fees, costs and expenses, however evidenced, whether as principal,
surety, endorser, guarantor or otherwise, whether arising under this Agreement
or otherwise,
18
whether now existing or hereafter arising, whether arising before, during or
after the initial or any renewal term of this Agreement or after the
commencement of any case or proceeding with respect to Borrower or Guarantor
under the United States Bankruptcy Code, the Bankruptcy and Insolvency Act
(Canada), the Companies' Creditors Arrangement Act (Canada) or any similar
statute (including the payment of interest and other amounts which would accrue
and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case or
proceeding), whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, and however acquired by Lender.
1.65 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations (including Guarantor)
or who is the owner of any property which is security for the Obligations, other
than Borrower.
1.66 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.67 "Permitted Holders" shall mean the persons listed on Schedule 1.67
hereto and their respective successors and assigns and including as to any
Permitted Holder which is an individual, the heirs, executors, administrators,
testamentary trustees, legatees or beneficiaries of such individual or trust or
custodian ship, to the extent that the beneficiaries includes such individual or
his or her spouse and former spouse and former spouse and ancestors or lineal
descendants (by blood or adoption).
1.68 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.69 "Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which Borrower sponsors, maintains, or to which it makes, is making, or
is obligated to make contributions, or in the case of a Multiemployer Plan has
made contributions at any time during the immediately preceding six (6) plan
years.
1.70 "PPSA" shall mean the Personal Property Security Act as in effect in
the Province of Ontario, the Civil Code of Quebec as in effect in the Province
of Quebec, or any other Canadian Federal or Provincial statute pertaining to the
granting, perfecting, ranking or priority of security interests, liens or
hypothecs on personal property (i.e. movable property), and any successor
statutes, together with any regulations thereunder, in each case as in effect
from time to time.
1.71 "Priority Payables" shall mean, at any time, the full amount of the
liabilities at such time which have a trust imposed to provide for payment or a
security interest, lien or charge ranking or capable of ranking senior to or
pari passu with security interests, liens or charges
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securing the Obligations on any of the Collateral under Federal, Provincial,
State, county, district, municipal, or local law including, but not limited to,
claims for unremitted and/or accelerated rents, taxes, wages, employee
withholdings or deductions and vacation pay, workers' compensation obligations,
government royalties or pension fund obligations, together with the aggregate
value, determined in accordance with GAAP, of all Eligible Inventory which
Lender, in good faith, considers may be or may become subject to a right of a
supplier to recover possession thereof under any Federal or Provincial law,
where such supplier's right may have priority over the security interests, liens
or charges securing the Obligations including, without limitation, Eligible
Inventory subject to a right of a supplier to repossess goods pursuant to
Section 81.1 of the Bankruptcy and Insolvency Act (Canada) or any applicable
provincial laws granting revendication or similar rights to unpaid suppliers.
1.72 "Prime Rate" shall mean the rate from time to time publicly announced
by First Union National Bank, or its successors, as its prime rate, whether or
not such announced rate is the best rate available at such bank.
1.73 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.74 "Real Property" shall mean all now owned and hereafter acquired real
property of Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.
1.75 "Receivables" shall mean: (a) all Accounts; (b) all amounts at any
time payable to Borrower in respect of the sale or other disposition by Borrower
of any Account or other obligation for the payment of money; (c) all interest,
fees, late charges, penalties, collection fees and other amounts due or to
become due or otherwise payable in connection with any Account; (d all letters
of credit, indemnities, guarantees, security or other deposits and proceeds
thereof issued payable to Borrower or otherwise in favor of or delivered to
Borrower in connection with any Account; or (e) all other contract rights,
chattel paper, instruments, notes, general intangibles and other forms of
obligations owing to Borrower, whether from the sale and lease of goods or other
property, licensing of any property (including Intellectual Property or other
general intangibles), rendition of services or from loans or advances by
Borrower or to or for the benefit of any third person (including loans or
advances to any Affiliates or Subsidiaries of Borrower) or otherwise associated
with any Accounts, Inventory or general intangibles of Borrower (including,
without limitation, choses in action, causes of action, tax refunds, tax refund
claims, any funds which may become payable to Borrower in connection with the
termination of any Plan or other employee benefit plan and any other amounts
payable to Borrower from any Plan or other employee benefit plan, rights and
claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, casualty or any similar types of
insurance and any proceeds thereof and proceeds of insurance covering the lives
of employees on which Borrower is beneficiary).
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1.76 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.77 "Reference Bank" shall mean First Union National Bank, or such other
bank as Lender may from time to time designate after notice to Borrower.
1.78 "Renewal Date" shall the meaning set forth in Section 12.1 hereof.
1.79 "Reserves" shall mean as of any date of determination, such amounts
as Lender may from time to time establish and revise in good faith reducing the
amount of Revolving Loans and Letter of Credit Accommodations which would
otherwise be available to Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, adversely affect, or would have a reasonable
likelihood of adversely affecting, either (i) the Collateral or any other
property which is security for the Obligations or its value, (ii) the assets or
business of Borrower or any Obligor or (iii) the security interests and other
rights of Lender in the Collateral (including the enforceability, perfection and
priority thereof) or (b) after notice to Borrower, to reflect Lender's good
faith belief that any collateral report or financial information furnished by or
on behalf of Borrower or any Obligor to Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (c) to reflect Priority
Payables or (d) to reflect the Dilution Reserve or (e) to reflect outstanding
Letter of Credit Accommodations as provided in Section 2.2 hereof or (f) in
respect of any state of facts which Lender determines in good faith constitutes
an Event of Default or may, with notice or passage of time or both, constitute
an Event of Default. Without limiting the generality of the foregoing Reserves
may be established for contract allowances, volume rebates and promotional
accrual accounting funds. To the extent Lender may revise the lending formulas
used to determine the Borrowing Base or establish new criteria or revise
existing criteria for Eligible Accounts or Eligible Inventory so as to address
any circumstances, condition, event or contingency in an manner satisfactory to
Lender, Lender shall not establish a Reserve for the same purpose. The amount of
any Reserve established by Lender shall have a reasonable relationship to the
event, condition or other matter which is the basis for such reserve as
determined by Lender in good faith.
1.80 "Revolving Loan Limit" shall mean, at any time, the amount equal to
the Maximum Credit minus the then outstanding principal amount of the Term Loan.
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1.81 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.82 "Subsidiary" or "subsidiary" shall mean, with respect to any Person,
any corporation, limited liability company, limited liability partnership or
other limited or general partnership, trust, association or other business
entity of which an aggregate of at least a majority of the outstanding Capital
Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person and/or
one or more subsidiaries of such Person.
1.83 "Term Loan" shall mean the term loan made by Lender to Borrower as
provided for in Section 2.3 hereof.
1.84 "US Dollar Equivalent" shall mean at any time (a) as to any amount
denominated in US Dollars, the amount thereof at such time, and (b) as to any
amount denominated in Canadian Dollars or any other currency, the equivalent
amount in US Dollars calculated by Lender at such time using the Currency
Exchange Convention in effect on the Business Day of determination.
1.85 "US Dollars", "US$" and "$" shall each mean the lawful currency of
the United States of America.
1.86 "Value" shall mean the US Dollar Equivalent, as determined by Lender
in good faith, with respect to Inventory, the lower of (a) cost computed on a
first-in first-out basis in accordance with GAAP or (b) market value, provided,
that, for purposes of the calculation of the Borrowing Base, the Value of
Inventory shall not include (i) the portion of the Value equal to the profit
earned by any Affiliate on the sale thereof to Borrower or Guarantor (and
including any sale by Borrower to Guarantor) or (ii) write-ups in value with
respect to currency exchange rates.
1.87 "Voting Stock" shall mean with respect to any Person, (a) one (1) or
more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
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SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a Subject to and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to the lesser of: (i) the Borrowing
Base or (ii) the Revolving Loan Limit.
(b Lender may, in its discretion, from time to time, upon not less
than five (5) Business Days' prior notice to Borrower, (i) reduce the lending
formula with respect to Eligible Accounts to the extent that Lender determines
in good faith that the general creditworthiness of account debtors has declined,
or (ii) reduce the lending formula(s) with respect to Eligible Inventory to the
extent that Lender determines that: (A) the turnover of the Inventory for any
twelve (12) consecutive month period as of the end of any month as calculated by
Lender is more than two (2) times for such twelve (12) consecutive month period;
or (B) the liquidation value of the Eligible Inventory, or any category thereof,
has decreased, or (C) the mix of the Inventory has changed such that the
percentages of the Inventory consisting of Bulk Inventory, raw materials and
finished goods, in each case relative to the total amount of Inventory, has
changed by more than ten (10%) percent of the percentage of total Inventory for
such category as set forth in the appraisal by Hilco Appraisal Services LLC of
the Inventory dated August, 2000. The amount of any decrease in the lending
formulas shall have a reasonable relationship to the event, condition or
circumstance which is the basis for such decrease as determined by Lender in
good faith. In determining whether to reduce the lending formula(s), Lender may
consider events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Eligible Inventory or in establishing Reserves.
(c Except in Lender's discretion, (i) the aggregate amount of the
Revolving Loans outstanding at any time shall not exceed the Revolving Loan
Limit and (ii) the aggregate amount of the Loans and the Letter of Credit
Accommodations outstanding at any time shall not exceed the Maximum Credit. In
the event that the outstanding amount of any component of the Loans, or the
aggregate amount of the outstanding Loans and Letter of Credit Accommodations,
exceed the Borrowing Base, the Revolving Loan Limit, the sublimits for Letter of
Credit Accommodations set forth in Section 2.2(e) or the Maximum Credit, as
applicable, such event shall not limit, waive or otherwise affect any rights of
Lender in that circumstance or on any future occasions and Borrower shall,
within five (5) Business Days after demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
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2.2 Letter of Credit Accommodations.
(a Subject to and upon the terms and conditions contained herein, at
the request of Borrower, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrower pursuant to this Section 2.
(b In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrower shall
pay to Lender a letter of credit fee at a rate equal to one and one-quarter (1
1/4%) percent per annum on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month, except that Borrower shall
pay to Lender such letter of credit fee, at Lender's option, upon notice to
Borrower, at a rate equal to three and one-quarter (3 1/4%) percent per annum on
such daily outstanding balance for: (i) the period from and after the date of
termination or non-renewal hereof until Lender has received full and final
payment of all Obligations (notwithstanding entry of a judgment against
Borrower) and (ii) the period from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing as
determined by Lender. Such letter of credit fee shall be calculated on the basis
of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrower to pay such fee shall survive the termination or
non-renewal of this Agreement.
(c Borrower shall give Lender two (2) Business Days' prior written
of Borrower's request for the issuance of a Letter of Credit Accommodation. Such
notice shall be irrevocable and shall specify the original face amount of the
Letter of Credit Accommodation requested, the effective date (which date shall
be a Business Day) of issuance of such requested Letter of Credit Accommodation,
whether such Letter of Credit Accommodations may be drawn in a single or in
partial draws, the date on which such requested Letter of Credit Accommodation
is to expire (which date shall be a Business Day), the purpose for which such
Letter of Credit Accommodation is to be issued, and the beneficiary of the
requested Letter of Credit Accommodation. Borrower shall attach to such notice
the proposed form of the Letter of Credit Accommodation.
(d In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations shall
be available unless each of the following conditions precedent have been
satisfied in a manner satisfactory to Lender: (i) Borrower shall have delivered
to the proposed issuer of such Letter of Credit Accommodation at such times and
in such manner as such proposed issuer may require, an application in form and
substance satisfactory to such proposed issuer and Lender for the issuance of
the Letter of Credit Accommodation and such other documents as may be required
pursuant to the terms thereof, and
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the form and terms of the proposed Letter of Credit Accommodation shall be
satisfactory to Lender and such proposed issuer, (ii) as of the date of
issuance, no order of any court, arbitrator or other Governmental Authority
shall purport by its terms to enjoin or restrain money center banks generally
from issuing letters of credit of the type and in the amount of the proposed
Letter of Credit Accommodation, and no law, rule or regulation applicable to
money center banks generally and no request or directive (whether or not having
the force of law) from any Governmental Authority with jurisdiction over money
center banks generally shall prohibit, or request that the proposed issuer of
such Letter of Credit Accommodation refrain from, the issuance of letters of
credit generally or the issuance of such Letters of Credit Accommodation; and
(iii) the Excess Availability, prior to giving effect to any Reserves with
respect to such Letter of Credit Accommodations, on the date of the proposed
issuance of any Letter of Credit Accommodations, shall be equal to or greater
than one hundred (100%) percent of the face amount thereof and all other
commitments and obligations made or incurred by Lender with respect thereto.
Effective on the issuance of each Letter of Credit Accommodation, a Reserve
shall be established in the applicable amount set forth in Section 2.2(d)(iii).
(e Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$2,500,000. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrower will either furnish cash collateral
to secure the reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations.
(f Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation. Borrower assumes all risks with respect to the acts or
omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
Borrower's agent. Borrower assumes all risks for, and agrees to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder. Borrower hereby releases and holds Lender harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation, except for the gross negligence
or wilful misconduct of Lender as determined pursuant to a final, non-appealable
order of a court of competent jurisdiction. The provisions of this Section
2.2(e) shall survive the payment of Obligations and the termination or
non-renewal of this Agreement.
(g In connection with Inventory purchased pursuant to Letter of
Credit Accommodations, Borrower will, at Lender's request, instruct all
suppliers, carriers, forwarders,
25
customs brokers, warehouses or others receiving or holding cash, checks,
Inventory, documents or instruments in which Lender holds a security interest to
deliver them to Lender and/or subject to Lender's order, and if they shall come
into Borrower's possession, to deliver them, upon Lender's request, to Lender in
their original form. Borrower shall also, at Lender's request, designate Lender
as the consignee on all bills of lading and other negotiable and non-negotiable
documents.
(h Borrower hereby irrevocably authorizes and directs any issuer of
a Letter of Credit Accommodation to name Borrower as the account party therein
and to deliver to Lender all instruments, documents and other writings and
property received by issuer pursuant to the Letter of Credit Accommodations and
to accept and rely upon Lender's instructions and agreements with respect to all
matters arising in connection with the Letter of Credit Accommodations or the
applications therefor. Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrower shall not: (i) at any time an Event of Default exists
or has occurred and is continuing, (A) approve or resolve any questions of
non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may, after notice to Borrower, take
such actions either in its own name or in Borrower's name.
(i Any rights, remedies, duties or obligations granted or undertaken
by Borrower to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
2.3 Term Loan. Lender is making a Term Loan to Borrower in the
original principal amount of $5,500,000. The Term Loan is (a) evidenced by a
Term Promissory Note in such
26
original principal amount duly executed and delivered by Borrower to Lender
concurrently herewith; (b) to be repaid, together with interest and other
amounts, in accordance with this Agreement, the Term Promissory Note, and the
other Financing Agreements and (c) secured by all of the Collateral.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a Borrower shall pay to Lender interest on the outstanding
principal amount of the Loans at the Interest Rate. All interest accruing
hereunder on and after the date of any Event of Default or termination or
non-renewal hereof shall be payable on demand.
(b Borrower may from time to time request Eurodollar Rate Loans or
that Prime Rate Loans be converted to Eurodollar Rate Loans or that any existing
Eurodollar Rate Loans continue for an additional Interest Period. Such request
from Borrower shall specify the amount of the Eurodollar Rate Loans or the
amount of the Eurodollar Rate Loan or the amount of the Prime Rate Loans to be
converted or Eurodollar Rate Loans to be continued (subject to the limits set
forth below) and the Interest Period to be applicable to such Eurodollar Rate
Loans. Subject to the terms and conditions contained herein, three (3) Business
Days after receipt by Lender of such a request from Borrower, such Eurodollar
Rate Loans shall be made or Prime Rate Loans shall be converted to Eurodollar
Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be,
provided, that, (i) no Event of Default shall exist or have occurred and be
continuing, (ii) no party hereto shall have sent any notice of termination or
non-renewal of this Agreement, (iii) Borrower shall have complied with such
customary procedures as are established by Lender and specified by Lender to
Borrower from time to time for requests by Borrower for Eurodollar Rate Loans,
(iv) no more than six (6) Interest Periods may be in effect at any one time, (v)
the aggregate amount of the Eurodollar Rate Loans must be in an amount not less
than $5,000,000 or an integral multiple of $500,000 in excess thereof, (vi) the
maximum amount of the Eurodollar Rate Loans at any time requested by Borrower
shall not exceed the amount equal to (A) the principal amount of the Term Loan
which it is anticipated will be outstanding as of the last day of the applicable
Interest Period plus (B) eighty (80%) percent of the lowest principal amount of
the Revolving Loans which it is anticipated will be outstanding during the
applicable Interest Period, in each case as determined by Lender (but with no
obligation of Lender to make such Loans), and (vii) Lender shall have determined
that the Interest Period or Adjusted Eurodollar Rate is available to Lender
through the Reference Bank and can be readily determined as of the date of the
request for such Eurodollar Rate Loan by Borrower. Any request by Borrower for
Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar Rate Loans or
to continue any existing Eurodollar Rate Loans shall be irrevocable.
Notwithstanding anything to the contrary contained herein, Lender and Reference
Bank shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof
27
shall be deemed to apply as if Lender and Reference Bank had purchased such
deposits to fund the Eurodollar Rate Loans.
(c Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Lender
has received and approved a request to continue such Eurodollar Rate Loan at
least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrower, convert to Prime Rate Loans in the event that this
Agreement shall terminate or not be renewed. Borrower shall pay to Lender, upon
demand by Lender (or Lender may, at its option, charge any loan account of
Borrower) any amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any loss (including loss of profits), cost or
expense incurred by such person, as a result of the conversion of Eurodollar
Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrower to Lender exceed the maximum amount or
the rate permitted under any applicable law or regulation, and if any such part
or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.
3.2 Unused Line Fee. Borrower shall pay to Lender monthly an unused line
fee at a rate equal to one-half (1/2%) percent per annum calculated upon the
amount by which the Revolving Loan Limit exceeds the average daily principal
balance of the outstanding Revolving Loans and Letter of Credit Accommodations
during the immediately preceding month (or part thereof) while this Agreement is
in effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be payable on the first day of each month in arrears.
3.3 Fees. Borrower agrees to pay to Lender the fees and other amounts set
forth in the Fee Letter in the amounts and at the times specified therein.
3.4 Changes in Laws and Increased Costs of Loans.
(a Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to Prime
Rate Loans in the event that (i) any change in applicable law or regulation (or
the interpretation or administration thereof) shall either (A) make it unlawful
for Lender, Reference Bank or any participant with Lender to make or maintain
Eurodollar Rate Loans or to comply with the terms hereof in connection with the
Eurodollar Rate Loans, or (B) shall result in the increase in the costs to
Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans by an amount deemed by
28
Lender to be material, or (C) reduce the amounts received or receivable by
Lender in respect thereof, by an amount deemed by Lender to be material or (ii)
the cost to Lender, Reference Bank or any participant of making or maintaining
any Eurodollar Rate Loans shall otherwise increase by an amount deemed by Lender
to be material. Borrower shall pay to Lender, upon demand by Lender (or Lender
may, at its option, charge any loan account of Borrower) any amounts required to
compensate Lender, the Reference Bank or any participant with Lender for any
loss (including loss of profits), cost or expense incurred by such person as a
result of the foregoing, including, without limitation, any such loss, cost or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such person to make or maintain the Eurodollar Rate
Loans or any portion thereof. A certificate of Lender setting forth the basis
for the determination of such amount necessary to compensate Lender as aforesaid
shall be delivered to Borrower and shall be conclusive, absent manifest error.
(b If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral, Borrower shall
pay to Lender upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrower) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any additional loss (including
loss of profits), cost or expense incurred by such person as a result of such
prepayment or payment, including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such person to make or maintain such Eurodollar Rate Loans or any
portion thereof.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a Lender shall have received, in form and substance satisfactory to
Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by Canadian Imperial Bank of
Commerce of its financing arrangements with Guarantor, and the termination by
The Chase Manhattan Bank and Citizens Business Credit Company of their financing
arrangements with Borrower and the termination and release by it and them of any
interest in and to any assets and properties of Borrower, Guarantor and any
other Obligor, duly authorized, executed and delivered by each of them,
including, but not limited to, UCC and PPSA termination statements for all UCC
and PPSA financing statements previously filed by it or any of them or their
predecessors, as secured party and Borrower or any Obligor, as debtor;
29
(b all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or Governmental Authority;
(c no material adverse change shall have occurred in the asset or
business of Borrower or any Obligor since the date of Lender's latest field
examination and no change or event shall have occurred which would impair the
ability of Borrower or any Obligor to perform its obligations hereunder or under
any of the other Financing Agreements to which it is a party or of Lender to
enforce the Obligations or realize upon the Collateral;
(d Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require to
determine the amount of Revolving Loans available to Borrower (including,
without limitation, current perpetual inventory records and/or roll-forwards of
Accounts and Inventory through the date of closing and test counts of the
Inventory in a manner satisfactory to Lender, together with such supporting
documentation as may be necessary or appropriate, and other documents and
information that will enable Lender to accurately identify and verify the
Collateral), the results of which each case shall be satisfactory to Lender, not
more than three (3) Business Days prior to the date hereof;
(e Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from third
persons which Lender may deem necessary or, in Lender's good faith
determination, desirable in order to permit, protect and perfect its security
interests in and liens upon the Collateral or to effectuate the provisions or
purposes of this Agreement and the other Financing Agreements, including,
without limitation, (i Collateral Access Agreements by owners and lessors of
leased premises of Borrower and Guarantor and by warehouses at which Collateral
is located and (ii) the agreement of the issuer of the Fixed Rate NJEDA Bond
Letter of Credit to act on behalf of, and pursuant to the direction of, the
Lender with respect to the Fixed Rate NJEDA Bond Agreements;
(f the Excess Availability as determined by Lender, as of the date
hereof, shall be not less than $1,500,000 after giving effect to the initial
Loans made or to be made and Letter of Credit Accommodations issued or to be
issued in connection with the initial transactions hereunder;
(g Lender shall have received, in form and substance satisfactory to
Lender, all agreements with the depository banks and Borrower and Guarantor with
respect to the Blocked Accounts as Lender may require pursuant to Section 6.3
hereof, duly authorized, executed and delivered by such depository banks and
Borrower and Guarantor;
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(h Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first priority
security interest in all of the Collateral;
(i Lender shall have received and reviewed UCC and PPSA search
results for all jurisdictions in which assets of Borrower and Guarantor are
located, which search results shall be in form and substance satisfactory to
Lender;
(j Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee as its interests may
appear;
(k Lender shall have received, in form and substance satisfactory to
Lender, such opinion letters of counsel to Borrower with respect to the
Financing Agreements and such other matters as Lender may request; and
(l the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
Each of the following is an additional condition precedent to Lender making
Loans and/or providing Letter of Credit Accommodations to Borrower, including
the initial Loans and Letter of Credit Accommodations and any future Loans and
Letter of Credit Accommodations:
(a all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto, except to the
extent that such representations and warranties expressly relate solely to an
earlier date (in which case such representations and warranties shall have been
true and accurate on and as of such earlier date);
(b no law, regulation, order, judgment or decree of any Governmental
Authority shall exist, and no action, suit, investigation, litigation or
proceeding shall be pending or threatened in any court or before any arbitrator
or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or
otherwise affect (A) the making of the Loans or providing the Letter of Credit
Accommodations, or (B) the consummation of the transactions contemplated
pursuant to the terms hereof or the other Financing Agreements or (ii) has or
could reasonably be expected to have a Material Adverse Effect;
(c no requirement of the Minister of National Revenue for payment
pursuant to Section 224, or any successor section, of the Income Tax Act
(Canada) or Section 317, or any
00
xxxxxxxxx xxxxxxx xx xxx Xxxxxx Xxx (Xxxxxx) or any comparable provision of
similar legislation shall have been received by Lender or any other Person in
respect of Borrower or Guarantor or otherwise issued in respect of Borrower or
Guarantor; and
(d no Event of Default and no act, condition or event which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
5.1 To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property of Borrower, whether now owned or hereafter
acquired or existing, and wherever located (together with all other collateral
security for the Obligations at any time granted to or held or acquired by
Lender, collectively, the "Collateral"):
(a Receivables;
(b all other present and future general intangibles (including
Intellectual Property and existing and future leasehold interests in equipment,
chattel paper, documents, instruments, investment property (including
securities, whether certificated or uncertificated, securities accounts,
security entitlements, commodity contracts or commodity accounts), letters of
credit, bankers' acceptances and guaranties;
(c all present and future monies, securities and other investment
property, credit balances, deposits, deposit accounts and other property of
Borrower now or hereafter held or received by or in transit to Lender or its
Affiliates or at any other depository or other institution from or for the
account of Borrower, whether for safekeeping, pledge, custody, transmission,
collection or otherwise, and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Receivables and
other Collateral, including (i) rights and remedies under or relating to
guaranties, contracts of suretyship, letters of credit and credit and other
insurance related to the Collateral, (ii) rights of stoppage in transit,
replevin, repossession, reclamation and other rights and remedies of an unpaid
vendor, lien or secured party, (iii) goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or
evidencing, Receivables or other Collateral, including returned, repossessed and
reclaimed goods, and (iv) deposits by and property of account debtors or other
persons securing the obligations of account debtors;
(d) Inventory;
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(e) Equipment;
(f) Records; and
(g) all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of any or all of the foregoing.
5.2 Notwithstanding anything to the contrary set forth in Section 5.1
above, the types or items of Collateral described in such Section shall not
include any rights or interests in any contract, lease, permit, license, charter
or license agreement covering real or personal property, as such, if under the
terms of such contract, lease, permit, license, charter or license agreement, or
applicable law with respect thereto, the valid grant of a security interest or
lien therein to Lender is prohibited and such prohibition has not been or is not
waived or the consent of the other party to such contract, lease, permit,
license, charter or license agreement has not been or is not otherwise obtained
or under applicable law such prohibition cannot be waived; provided, that, the
foregoing exclusion shall in no way be construed (a) to apply if any such
prohibition is unenforceable under Section 9-318 of the UCC or other applicable
law or (b) so as to limit, impair or otherwise affect Lender's unconditional
continuing security interests in and liens upon any rights or interests of
Borrower in or to monies due or to become due under any such contract, lease,
permit, license, charter or license agreement (including any Receivables).
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
(but rebuttable) evidence of the amounts due and owing to Lender by Borrower.
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6.3 Collection of Accounts.
(a) Borrower shall, and shall cause Guarantor to, establish and
maintain, at their expense, blocked accounts or lockboxes and related blocked
accounts (in either case, "Blocked Accounts"), as Lender may specify, with such
banks as are acceptable to Lender into which each Borrower and Guarantor shall
promptly deposit and direct its account debtors to directly remit all payments
on Receivables and all payments constituting proceeds of Inventory or other
Collateral in the identical form in which such payments are made, whether by
cash, check or other manner. The banks at which the Blocked Accounts are
established shall enter into an agreement, in form and substance satisfactory to
Lender, providing that all items received or deposited in the Blocked Accounts
are the property of Lender, that the depository bank has no lien upon, or right
to setoff against, the Blocked Accounts, the items received for deposit therein,
or the funds from time to time on deposit therein and that the depository bank
will wire, or otherwise transfer, in immediately available funds, on a daily
basis, all funds received or deposited into the Blocked Accounts to such bank
account of Lender as Lender may from time to time designate for such purpose
("Payment Account"). With respect to the Blocked Accounts of Guarantor, the
depository banks at which such Blocked Accounts are maintained shall transfer
the funds on deposit in such Blocked Accounts to such operating bank account of
Guarantor as Borrower may specify in writing to Lender until such time as Lender
shall notify the depository bank otherwise. Upon notice from Lender at any time,
the depository banks at which such Blocked Accounts of Guarantor are maintained
shall transfer all funds received or deposited into such Blocked Accounts to the
Payment Account. Borrower agrees that all payments made to the Blocked Accounts
or other funds received and collected by Lender (except that as to the Blocked
Accounts of Guarantor, only after Lender has notified the depository account of
which to such Blocked Accounts are maintained to transfer funds therein to the
Payment Account), whether in respect of the Receivables, as proceeds of
Inventory or other Collateral or otherwise shall be treated as payments to
Lender in respect of the Obligations and therefore shall constitute the property
of Lender to the extent of the then outstanding Obligations.
(b) For purposes of calculating the amount of the Loans available to
Borrower, such payments will be applied (conditional upon final collection) to
the Obligations on the Business Day of receipt by Lender of immediately
available funds in the Payment Account provided such payments and notice thereof
are received in accordance with Lender's usual and customary practices as in
effect from time to time and within sufficient time to credit Borrower's loan
account on such day, and if not, then on the next Business Day. For the purposes
of calculating interest on the Obligations, such payments or other funds
received will be applied (conditional upon final collection) to the Obligations
one (1) Business Day following the date of receipt of immediately available
funds by Lender in the Payment Account provided such payments or other funds and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrower's loan account on such day, and if not, then on the next Business Day.
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(c) Borrower and all of its directors, employees, agents,
Subsidiaries or other Affiliates shall, acting as trustee for Lender, receive,
as the property of Lender, any monies, checks, notes, drafts or any other
payment relating to and/or proceeds of Accounts or other Collateral which come
into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrower's own funds.
Borrower agrees to reimburse Lender on demand for any amounts owed or paid by
Lender to any bank at which a Blocked Account is established or any other bank
or person involved in the transfer of funds to or from the Blocked Accounts
arising out of Lender's payments to or indemnification of such bank or person.
The obligation of Borrower to reimburse Lender for such amounts pursuant to this
Section 6.3 shall survive the termination or non-renewal of this Agreement.
6.4 Payments.4 Payments. All Obligations shall be payable to the
Payment Account as provided in Section 6.3 or such other place as Lender may
designate from time to time. Lender shall apply payments received or collected
from Borrower or for the account of Borrower (including the monetary proceeds of
collections or of realization upon any Collateral) as follows: first, to pay any
fees, indemnities or expense reimbursements then due to Lender from Borrower;
second, to pay interest due in respect of any Loans; third, to pay principal due
in respect of the Loans; fourth, to pay or prepay any other Obligations whether
or not then due, in such order and manner as Lender determines. Notwithstanding
anything to the contrary contained in this Agreement, unless so directed by
Borrower, or unless an Event of Default shall exist or have occurred and be
continuing, Lender shall not apply any payments which it receives to any
Eurodollar Rate Loans, except (a) on the expiration date of the Interest Period
applicable to any such Eurodollar Rate Loans, or (b) in the event that there are
no outstanding Prime Rate Loans. To the extent Lender receives any payments or
collections in respect of the Obligations in a currency other than US Dollars,
Lender may, at its option (but is not obligated to), convert such other currency
to US Dollars, pursuant to the Currency Exchange Convention on such date and in
such market as Lender may select (regardless as to whether such rate is the best
available rate). Borrower shall pay the costs of such conversion (or Lender may,
at its option, charge such costs to the loan account of Borrower maintained by
Lender). Payments and collections received in any currency other than the
currency in which any outstanding Obligations are denominated will be accepted
and/or applied at the discretion of Lender. At Lender's option, all principal,
interest, fees, costs, expenses and other charges provided for in this Agreement
or the other Financing Agreements may be charged directly to the loan account(s)
of Borrower. If after receipt of any payment of, or proceeds of Collateral
applied to the payment of, any of the Obligations, Lender is required to
surrender or return such payment or proceeds to any Person for any reason, then
the Obligations intended to be satisfied by such payment or proceeds shall be
reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Lender. Borrower
shall be liable to pay to Lender, and does hereby indemnify and hold Lender
harmless for the amount of any payments or proceeds surrendered or returned.
This Section 6.4 shall remain effective notwithstanding any contrary action
which may be taken by
35
Lender in reliance upon such payment or proceeds. This Section 6.4 shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
6.5 Payment Indemnity.
(a) If Borrower or Guarantor shall be required by law to deduct or
withhold any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto (excluding, in
the case of Lender, such taxes as are imposed on or measured by Lender's net
income by any jurisdiction or any political subdivision thereof) from or in
respect of any sum payable hereunder under or under any of the other Financing
Agreements to Lender, then:
(i) the sum payable shall be increased as necessary so that
after making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) Lender
receives an amount equal to the sum it would have received had no such
deductions or withholdings been made;
(ii) Borrower or Guarantor shall make such deductions and
withholdings;
(iii) Borrower or Guarantor shall pay the full amount deducted
or withheld to the relevant taxing authority or other authority in accordance
with applicable law; and
(iv) Borrower or Guarantor shall also pay to Lender, at the
time interest is paid, all additional amounts which Lender specifies as
necessary to preserve the after-tax yield Lender would have received if such
taxes or other amounts had not been imposed.
(b) Within thirty (30) days after the date of any payment by
Borrower or Guarantor of and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto.
Upon Lender's request, Borrower or Guarantor shall furnish to Lender the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to Lender.
6.6 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an authorized person listed
on Schedule 6.6 hereto or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations, provided that, so long as no Event of
Default, or act, condition or event which with notice or passage of time or both
would constitute an Event of Default shall exist or have occurred, Lender shall
give notice to Borrower of any such Loans made in excess of $100,000 in any one
case. All requests for Loans or Letter of Credit Accommodations hereunder shall
specify the date on which the requested advance is to be made or Letter of
Credit Accommodations established (which day shall be a Business Day) and the
amount of the requested Loan. Requests received after 11:00 a.m., New York City
time on any day shall be deemed to have been made as of the opening of business
on the immediately
36
following Business Day. All Loans and Letter of Credit Accommodations under this
Agreement shall be conclusively presumed to have been made to, and at the
request of and for the benefit of, Borrower when deposited to the credit of
Borrower or otherwise disbursed or established in accordance with the
instructions of Borrower or in accordance with the terms and conditions of this
Agreement.
6.7 Use of Proceeds. Borrower shall use the initial proceeds of the Loans
provided by Lender to Borrower hereunder only for: (a) payments to each of the
persons listed in the disbursement direction letter furnished by Borrower to
Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrower pursuant to the provisions
hereof shall be used by Borrower only for general operating, working capital and
other proper corporate purposes of Borrower not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
(a) Borrower shall provide Lender with the following documents in a
form satisfactory to Lender:
(i) on a regular basis as required by Lender, a schedule of
sales made, credits issued and cash received;
(ii) on a monthly basis or more frequently as Lender may
request (but in no event more frequently than weekly so long as no Event of
Default exists or has occurred), (A) perpetual inventory reports, (B) inventory
reports by location and category, (C) agings of accounts payable (and including
information indicating the status of payments to owners and lessors of the
leased premises of Borrower), (D) agings of accounts receivable (together with a
reconciliation to the previous month's aging and general ledger) and (E) the
cash balances of Guarantor in the Blocked Accounts and in any other deposit or
investment accounts of Guarantor;
(iii) upon Lender's request, (A) copies of customer statements
and credit memos, remittance advices and reports, and copies of deposit slips
and bank statements, (B) copies of shipping and delivery documents, and (C)
copies of purchase orders, invoices and delivery documents for Inventory and
Equipment acquired by Borrower;
37
(iv) such other reports as to the Collateral as Lender shall
request from time to time; and
(b) If any of Borrower's records or reports of the Collateral are
prepared or maintained by an accounting service, contractor, shipper or other
agent, Borrower hereby irrevocably authorizes such service, contractor, shipper
or agent to deliver upon Lender's request such records, reports, and related
documents to Lender and at any time that an Event of Default exists or has
occurred and is continuing, to follow Lender's instructions with respect to
further services.
(c) All of the documents, reports and schedules provided by Borrower
to Lender hereunder for Receivables (including Receivables of Guarantor) payable
in any currency other than US Dollars and Inventory (including Inventory of
Guarantor) located outside the United States of America shall set forth the US
Dollar Equivalent for the amount of the Receivables and Value of the Inventory
included in any such documents, reports or schedules. For purposes hereof,
Lender may, at its option, provide to Borrower, at least five (5) Business Days
prior to the date any such documents, reports or schedules are required to be
provided by Borrower to Lender hereunder, the exchange rates required to set
forth the US Dollar Equivalent in such documents, reports and schedules and in
the event Lender shall fail to do so, Borrower shall use such rates of exchange
with respect to the applicable currencies as Borrower uses for such purpose in
the ordinary course of business consistent with current practices as of the date
hereof and shall identify such rates of exchange in any such documents, reports
and schedules.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any material delay
in Borrower's performance of any of its obligations to any account debtor or the
assertion of any claims, offsets, defenses or counterclaims by any account
debtor involving amounts in excess of $75,000, or any disputes with account
debtors involving amounts in excess of $75,000, or any settlement, adjustment or
compromise thereof, (ii) all material adverse information known to Borrower or
Guarantor relating to the financial condition of any account debtor (except to
the extent Borrower or Guarantor, as the case may be, is expressly prohibited
from disclosing such information to Lender pursuant to a written agreement
between Borrower or Guarantor and such account debtor which is valid and binding
upon Borrower and Guarantor at the time that it obtains such information) and
(iii) any event or circumstance which, to Borrower's knowledge would cause
Lender to consider any then existing Accounts as no longer constituting Eligible
Accounts. No credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted to any account debtor without Lender's consent,
except in the ordinary course of Borrower's business in accordance with
practices and policies previously disclosed in writing to Lender. So long as no
Event of Default exists or has occurred and is continuing, Borrower shall
settle, adjust or compromise any claim, offset, counterclaim or dispute with any
account debtor. At any time that an Event of Default exists or has occurred and
is continuing, Lender shall, at its
38
option upon notice to Borrower, have the exclusive right to settle, adjust or
compromise any claim, offset, counterclaim or dispute with account debtors or
grant any credits, discounts or allowances (provided, that Lender shall only be
required to send a single notice to Borrower of Lender's election to exercise
such option).
(b) Without limiting the obligation of Borrower to deliver any other
information to Lender, Borrower shall promptly report to Lender any return of
Inventory by any one account debtor if the Inventory so returned in such case
has a value in excess of $50,000. At any time that Inventory is returned,
reclaimed or repossessed, the Account (or portion thereof) which arose from the
sale of such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible Account. In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrower shall, upon
Lender's request, (i) hold the returned Inventory in trust for Lender, (ii)
segregate all returned Inventory from all of its other property, (iii) dispose
of the returned Inventory solely according to Lender's instructions, and (iv)
not issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of Borrower's business in
accordance with practices and policies previously disclosed to Lender, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement and except in the ordinary course
of Borrower's business, (v) none of the transactions giving rise thereto will
violate any applicable Federal, State, Provincial or local laws or regulations,
all documentation relating thereto will be legally sufficient under such laws
and regulations and all such documentation will be legally enforceable in
accordance with its terms.
(d) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately upon Borrower's receipt thereof, except as Lender may otherwise
agree.
(f) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, (i) notify any or all account debtors that
the Accounts have been assigned to
39
Lender and that Lender has a security interest therein and Lender may direct any
or all accounts debtors to make payment of Accounts directly to Lender, (ii)
extend the time of payment of, compromise, settle or adjust for cash, credit,
return of merchandise or otherwise, and upon any terms or conditions, any and
all Accounts or other obligations included in the Collateral and thereby
discharge or release the account debtor or any other party or parties in any way
liable for payment thereof without affecting any of the Obligations, (iii)
demand, collect or enforce payment of any Accounts or such other obligations,
but without any duty to do so, and Lender shall not be liable for its failure to
collect or enforce the payment thereof nor for the negligence of its agents or
attorneys with respect thereto and (iv) take whatever other action Lender may
deem necessary or desirable for the protection of its interests. At any time
that an Event of Default exists or has occurred and is continuing, at Lender's
request, all invoices and statements sent to any account debtor shall state that
the Accounts and such other obligations have been assigned to Lender and are
payable directly and only to Lender and Borrower shall deliver to Lender such
originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower shall
at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, and Borrower's cost therefor; (b) Borrower
shall conduct a physical count of the Inventory either through periodic cycle
counts or otherwise at least once each year, but at any time or times as Lender
may request on or after an Event of Default, and promptly following such
physical inventory (whether pursuant to periodic cycle counting or otherwise)
shall supply Lender with a report in the form and with such specificity as may
be reasonably satisfactory to Lender concerning such physical count; (c)
Borrower shall not remove any Inventory from the locations set forth or
permitted herein, without the prior written consent of Lender, except for sales
of Inventory in the ordinary course of Borrower's business and except to move
Inventory directly from one location set forth or permitted herein to another
such location and except for Inventory shipped from the manufacturer thereof to
Borrower which is in transit to the locations set forth or permitted herein; (d)
upon Lender's request, Borrower shall, at its expense, no more than four (4)
times in any twelve (12) month period, but at any time or times as Lender may
request on or after an Event of Default, deliver or cause to be delivered to
Lender written appraisals as to the Inventory in form, scope and methodology
acceptable to Lender and by an appraiser acceptable to Lender, addressed to
Lender and upon which Lender is expressly permitted to rely; (e) Borrower shall
produce, use, store and maintain the Inventory with all reasonable care and
caution and in accordance with the requirements of the insurance maintained by
Borrower with respect thereto, and in conformity with applicable laws (including
the requirements of the Federal Fair Labor Standards Act of 1938, as amended,
the Federal Food, Drug and Cosmetic Act, the Dietary Supplemental Health
Education Act, and all rules, regulations and orders related to any of the
foregoing); (f) Borrower assumes all responsibility and liability arising from
or relating to the production, use, sale or other disposition of the Inventory;
(g) Borrower shall not sell Inventory to any customer on approval, or any other
basis which entitles the customer to return or may obligate Borrower to
repurchase such Inventory except to the extent required by
40
applicable law or in accordance with the current policy of Borrower allowing
returns in the ordinary course of business; (h) Borrower shall keep the
Inventory in good and marketable condition; and (i) Borrower shall not, without
prior written notice to Lender, acquire or accept any Inventory on consignment
or approval.
7.4 Equipment and Real Property Covenants. With respect to the Equipment
and Real Property: (a) upon Lender's request, Borrower shall, at its expense, no
more than once in any twelve (12) month period, but at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written appraisals as to the Equipment and/or the Real
Property in form, scope and methodology acceptable to Lender and by an appraiser
acceptable to Lender, addressed to Lender and upon which Lender is expressly
permitted to rely; (b) Borrower shall keep the Equipment in good order, repair,
running and marketable condition (ordinary wear and tear excepted); (c) Borrower
shall use the Equipment and Real Property with all reasonable care and caution
and in accordance with the requirement of the insurance maintained by Borrower
with the respect thereto and in conformity with all applicable laws; (d) the
Equipment is and shall be used in Borrower's business and not for personal,
family, household or farming use; (e) Borrower shall not remove any Equipment
from the locations set forth or permitted herein, except to the extent necessary
to have any Equipment repaired or maintained in the ordinary course of the
business of Borrower or to move Equipment directly from one location set forth
or permitted herein to another such location and except for the movement of
motor vehicles used by or for the benefit of Borrower in the ordinary course of
business; (f) the Equipment is now and shall remain personal property and
Borrower shall not permit any of the Equipment to be or become a part of or
affixed to real property; and (g) Borrower assumes all responsibility and
liability arising from the use of the Equipment and Real Property.
7.5 Power of Attorney. Borrower hereby irrevocably designates and appoints
Lender (and all persons designated by Lender) as Borrower's true and lawful
attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name, to: (a)
at any time an Event of Default exists or has occurred and is continuing (after
a single notice to Borrower of Lender's intention to exercise its rights under
this Section 7.5(a)), (i) demand payment on Receivables or other Collateral,
(ii) enforce payment of Receivables by legal proceedings or otherwise, (iii)
exercise all of Borrower's rights and remedies to collect any Receivable or
other Collateral, (iv) sell or assign any Receivable upon such terms, for such
amount and at such time or times as the Lender deems advisable, (v) settle,
adjust, compromise, extend or renew an Account, (vi) discharge and release any
Receivable, (vii) prepare, file and sign Borrower's name on any proof of claim
in bankruptcy or other similar document against an account debtor or other
obligor in respect of any Receivables or other Collateral, (viii) notify the
post office authorities to change the address for delivery of remittances from
account debtors or other obligors in respect of Receivables or other proceeds of
Collateral to an address designated by Lender, and open and dispose of all mail
addressed to Borrower and handle and store all mail relating to the Collateral;
and (ix) do all acts and things which are necessary, in Lender's determination,
to fulfill Borrower's obligations under this Agreement and the other Financing
Agreements and (b) at any time to (i) take control in any
41
manner of any item of payment in respect of Receivables or constituting
Collateral or otherwise received in or for deposit in the Blocked Accounts or
otherwise received by Lender, (ii) have access to any lockbox or postal box into
which remittances from account debtors or other obligors in respect of
Receivables or other proceeds of Collateral are sent or received, (iii) endorse
Borrower's name upon any items of payment in respect of Receivables or
constituting Collateral or otherwise received by Lender and deposit the same in
Lender's account for application to the Obligations, (iv) endorse Borrower's
name upon any chattel paper, document, instrument, invoice, or similar document
or agreement relating to any Receivable or any goods pertaining thereto or any
other Collateral, including any warehouse or other receipts, or bills of lading
and other negotiable or non-negotiable documents, (v) clear Inventory the
purchase of which was financed with Letter of Credit Accommodations through U.S.
Customs in Borrower's name, Lender's name or the name of Lender's designee, and
to sign and deliver to customs officials powers of attorney in Borrower's name
for such purpose, and to complete in Borrower's or Lender's name, any order,
sale or transaction, obtain the necessary documents in connection therewith and
collect the proceeds thereof, (vi) sign Borrower's name on any verification of
Receivables and notices thereof to account debtors or other obligors in respect
thereof and (vii) execute in Borrower's name and file any UCC and PPSA financing
statements or amendments thereto. Borrower hereby releases Lender and its
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Lender's own gross negligence or
wilful misconduct as determined pursuant to a final order of a court of
competent jurisdiction which is non-appealable (except if Lender does not appeal
such order).
7.6 Right to Cure. Lender may, at its option, (a) upon notice to Borrower,
cure any default by Borrower under any material agreement with a third party
which affects the Collateral, its value or the ability of Lender to collect,
sell or otherwise dispose of the Collateral or the rights and remedies of Lender
therein or the ability of Borrower to perform its obligations under the other
Financing Agreements, (b) pay or bond on appeal any judgment entered against
Borrower, (c) discharge taxes, liens, security interests or other encumbrances
at any time levied on or existing with respect to the Collateral and (d) pay any
amount, incur any expense or perform any act which, in Lender's judgment, is
necessary or appropriate to preserve, protect, insure or maintain the Collateral
and the rights of Lender with respect thereto. Lender may add any amounts so
expended to the Obligations and charge Borrower's account therefor, such amounts
to be repayable by Borrower within five (5) Business Days after demand. Lender
shall be under no obligation to effect such cure, payment or bonding and shall
not, by doing so, be deemed to have assumed any obligation or liability of
Borrower. Any payment made or other action taken by Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender, at the
reasonable cost and expense of Borrower, (a) Lender or its designee shall have
complete access to all of Borrower's premises during normal business hours and
after not less than three (3) Business Days' prior notice to Borrower, or at any
time and without notice to Borrower if an Event of
42
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request, and (c) Lender or its designee may use during normal business hours
such of Borrower's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default exists or has
occurred and is continuing for the collection of Accounts and realization of
other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is a
corporation duly organized and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on Borrower's financial condition,
results of operation or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions contemplated hereunder and thereunder
are all within Borrower's corporate powers, have been duly authorized and are
not in contravention of law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its property are bound. This Agreement and the other Financing Agreements
constitute legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms. Borrower does not have any Subsidiaries
except as set forth on the Information Certificate. Hidel Partners was a New
Jersey general partnership. Borrower purchased all of the partnership interests
of Hidel Partners pursuant to the Contract for the Sale/Purchase of Partnership
Interests of Hidel Partners, a New Jersey Partnership dated November 28, 1994.
Hidel Partners is not engaged in any business or commercial activity and does
not own or hold any material assets or properties other than an interest in the
real property and related assets used by Borrower located at 000 Xxxxx Xxxx
Xxxx, Xxxxxxxx Xxx Xxxxxx 00000, and including the vacant undeveloped land
(referred to as Xxx 0, Xxxxx 00 xx xxx Xxxxxxxx Xxxxxxxx Xxx Xxx) to be subject
to the Mortgage adjacent thereto. International Vitamin Overseas Corp. is not
engaged in any business or commercial activity (other than to the extent
required to maintain its corporate existence under applicable law) and does not
own or hold any material assets or properties.
43
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered by
Borrower to Lender have been prepared in accordance with GAAP and fairly present
the financial condition and the results of operation of Borrower as at the dates
and for the periods set forth therein. Except as disclosed in any interim
financial statements furnished by Borrower to Lender prior to the date of this
Agreement, there has been no material adverse change in the assets, liabilities,
properties and condition, financial or otherwise, of Borrower, since the date of
the most recent audited financial statements furnished by Borrower to Lender
prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth on the signature page hereto and its only other places
of business and the only other locations of Collateral, if any, are the
addresses set forth in the Information Certificate, subject to the right of
Borrower to establish new locations in accordance with Section 9.2 below. The
Information Certificate correctly identifies any of such locations which are not
owned by Borrower and sets forth the owners and/or operators thereof.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Borrower has good
and marketable title to all of its properties and assets subject to no liens,
mortgages, pledges, security interests, encumbrances or charges of any kind,
except those granted to Lender and such others as are specifically listed on
Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it. All information in such tax returns, reports and declarations is complete
and accurate in all material respects. Borrower has paid or caused to be paid
all taxes due and payable or claimed due and payable in any assessment received
by it, except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of all accrued and unpaid Federal,
State, Provincial, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate, there
is no present investigation by any Governmental Authority pending, or to the
best of Borrower's knowledge threatened, against or affecting Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Borrower
would have a Material Adverse Effect.
44
8.7 Compliance with Other Agreements and Applicable Laws. Borrower is not
in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and Borrower is in compliance in all material respects with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and orders
of any foreign, Federal, State or local Governmental Authority.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 hereto, Borrower and any
Subsidiary have not generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which at any time constitutes a
violation of any applicable Environmental Law or any applicable license, permit,
certificate, approval or similar authorization thereunder and the operations of
Borrower and any Subsidiary complies in all material respects with all
applicable Environmental Laws and all licenses, permits, certificates, approvals
and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.8 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any Governmental Authority or any other person nor is any pending or
to the best of Borrower's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
Borrower and any Subsidiary or the release, spill or discharge, threatened or
actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which affects
Borrower or its business, operations or assets or any properties at which
Borrower has transported, stored or disposed of any Hazardous Materials.
(c) Borrower and its Subsidiaries have no material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(d) Borrower and its Subsidiaries have all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrower under any Environmental Law
and all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect.
8.9 Employee Benefits.
(a) Each Plan is in compliance with the applicable provisions of
ERISA, the Code and other federal or state law. Each Plan which is intended to
qualify under Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service and to the
45
best of Borrower's knowledge, nothing has occurred which would cause the loss of
such qualification. Borrower and its ERISA Affiliates have made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or to the best of Borrower's knowledge,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan. There has been no prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) the current value of each Plan's assets (determined in accordance
with the assumptions used for funding such Plan pursuant to Section 412 of the
Code) exceed such Plan's liabilities under Section 400(a)(16) of ERISA; (iii)
Borrower and its ERISA Affiliates have not incurred and do not reasonably expect
to incur, any liability under Title IV of ERISA with respect to any Plan (other
than premiums due and not delinquent under Section 4007 of ERISA); (iv) Borrower
and its ERISA Affiliates have not incurred and do not reasonably expect to
incur, any liability (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such liability) under Section 4201
or 4243 of ERISA with respect to a Multiemployer Plan; and (v) Borrower and its
ERISA Affiliates have not engaged in a transaction that could be subject to
Section 4069 or 4212(c) of ERISA.
(d) With respect to any Canadian Pension Plan, if and to the extent
that any such Canadian Pension Plan exists or has not been terminated, (i) the
Canadian Pension Plan is duly registered under all applicable Federal and
Provincial pension benefits legislation, (ii) all obligations of Borrower or
Guarantor (including fiduciary, funding, investment and administration
obligations) required to be performed in connection with the Canadian Pension
Plan or the funding agreements therefor have been performed in a timely fashion
and there are no outstanding disputes concerning the assets held pursuant to any
such funding agreement, (iii) all contributions or premiums required to be made
by Borrower or Guarantor to the Canadian Pension Plans have been made in a
timely fashion in accordance with the terms of the Canadian Pension Plans and
applicable laws and regulations, (iv) all employee contributions to the Canadian
Pension Plan required to be made by way of authorized payroll deduction have
been properly withheld by Borrower or Guarantor and fully paid into the Canadian
Pension Plan in a timely fashion, (v) all reports and disclosures relating to
the Canadian Pension Plan required by any applicable laws or regulations have
been filed or distributed in a timely fashion, (vi) there have been no improper
withdrawals, or applications of, the assets of any Canadian Pension Plan, (vii)
no amount is owing by any Canadian Pension Plan under the Income Tax Act
(Canada) or any provincial taxation statute, (viii) the Canadian Pension Plan is
fully funded both on an ongoing basis and on a solvency basis (using actuarial
assumptions and methods which are consistent with the valuations last filed with
the applicable governmental authorities and which are consistent with generally
accepted actuarial principles) and (ix) to the best of the knowledge
46
of Borrower, no Canadian Pension Plan is the subject of an investigation, any
other proceeding, an action or a claim and there exists no state of facts which
after notice or lapse of time or both could reasonably be expected to give rise
to any such proceeding, action or claim.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.10 hereto, subject to
the right of Borrower to establish new accounts in accordance with Section 9.13
below.
8.11 Intellectual Property. Borrower owns or licenses or otherwise has the
right to use all Intellectual Property necessary for the operation of its
business as presently conducted or proposed to be conducted. As of the date
hereof, Borrower does not have any Intellectual Property registered, or subject
to pending applications, in the United States Patent and Trademark Office or any
similar office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, other than those described in
Schedule 8.11 hereto and has not granted any licenses with respect thereto other
than as set forth in Schedule 8.11 hereto. Except to the extent set forth on
Schedule 8.11 hereto, no event has occurred which permits or would permit after
notice or passage of time or both, the revocation, suspension or termination of
such rights. To the best of Borrower's knowledge, no slogan or other advertising
device, product, process, method, substance or other Intellectual Property or
goods bearing or using any Intellectual Property presently contemplated to be
sold by or employed by Borrower infringes any patent, trademark, servicemark,
tradename, copyright, license or other Intellectual Property owned by any other
Person presently and except as set forth on Schedule 8.11 hereto, no claim or
litigation is pending or threatened against or affecting Borrower contesting its
right to sell or use any such Intellectual Property. Schedule 8.11 sets forth
all of the agreements or other arrangements of Borrower pursuant to which
Borrower has a license or other right to use any trademarks, logos, designs,
representations or other Intellectual Property owned by another person as in
effect on the date hereof and the dates of the expiration of such agreements or
other arrangements of Borrower as in effect on the date hereof. No trademark,
servicemark or other Intellectual Property at any time used by Borrower which is
owned by another person, or owned by Borrower subject to any security interest,
lien, collateral assignment, pledge or other encumbrance in favor of any person
other than Lender, is affixed to any Eligible Inventory, except to the extent
permitted under the term of the license agreements listed on Schedule 8.11
hereto.
8.12 Capitalization.
(a) The persons that directly and beneficially own ten (10%) percent
or more of the issued and outstanding shares of Capital Stock of Borrower
consisting of common stock are indicated in the Information Certificate, and in
each case all of such shares have been duly authorized and are fully paid and
non-assessable, free and clear of all claims, liens, pledges and encumbrances of
any kind, except as disclosed in writing to Lender or as otherwise required by
applicable law.
47
(b) Borrower is solvent and will continue to be solvent after the
creation of the Obligations, the security interests of Lender and the other
transaction contemplated hereunder, is able to pay its debts as they mature and
has (and has reason to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business and all businesses in
which it is about to engage. The assets and properties of Borrower at a fair
valuation and at their present salable value are, and will be, greater than the
Indebtedness of Borrower, and including subordinated and contingent liabilities
computed at the amount which, to the best of Borrower's knowledge, represents an
amount which can reasonably be expected to become an actual or mature liability.
8.13 Labor Disputes.
(a) Set forth on Schedule 8.13 hereto is a list (including dates of
termination) of all collective bargaining or similar agreements between or
applicable to Borrower and any union, labor organization or other bargaining
agent in respect of the employees of Borrower on the date hereof.
(b) There is (i) no significant unfair labor practice complaint
pending against Borrower or, to the best of Borrower's knowledge, threatened
against it, before the National Labor Relations Board, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is pending on the date hereof against Borrower
or, to best of Borrower's knowledge, threatened against it, and (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against
Borrower or, to the best of Borrower's knowledge, threatened against Borrower.
8.14 Corporate Name; Prior Transactions. Borrower has not, during the past
five years, been known by or used by any other corporate or fictitious name or
been a party to any merger or consolidation, or acquired all or substantially
all of the assets of any Person, or acquired any of its property or assets out
of the ordinary course of business, except as set forth in the Information
Certificate.
8.15 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of Borrower
permitted hereunder as in effect on the date hereof, there are no contractual or
consensual restrictions on Borrower or any of its Subsidiaries which prohibit or
otherwise restrict (a) the transfer of cash or other assets (i) between Borrower
and any of its Subsidiaries or (ii) between any Subsidiaries of Borrower or (b)
the ability of Borrower or any of its Subsidiaries to incur Indebtedness or
grant security interests to Lender in the Collateral.
8.16 Material Contracts. Schedule 8.16 hereto sets forth all Material
Contracts to which Borrower is a party or is bound as of the date hereof.
Borrower has delivered to Lender true, correct and complete copies of such
Material Contracts as Lender has requested on or before the
48
date hereof. Borrower is not in breach of or in default of or under any Material
Contract and has not received any notice of the intention of any other party
thereto to terminate any Material Contract.
8.17 Payable Practices. Borrower has not made any material change in the
historical accounts payable practices from those in effect immediately prior to
the date hereof.
8.18 Accuracy and Completeness of Information. All information furnished
by or on behalf of Borrower in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate is true and correct in all material respects on the date as of which
such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to have
a Material Adverse Effect, which has not been fully and accurately disclosed to
Lender in writing.
8.19 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other written representations or warranties
which Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Borrower shall at all times preserve, renew
and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted. Borrower shall give Lender thirty (30) days prior written notice of
any proposed change in its corporate name, which notice shall set forth the new
name and Borrower shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name change certified
by the Secretary of State of the jurisdiction of incorporation of Borrower as
soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location within
the continental United States or Canada provided Borrower (a) gives Lender
thirty (30) days prior written notice of the intended opening of any such new
location and (b) executes and delivers, or causes to be executed and delivered,
to Lender such agreements, documents, and instruments as
49
Lender may deem reasonably necessary or desirable to protect its interests in
the Collateral at such location, including UCC financing statements and PPSA
financing statements.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower shall, and shall cause any Subsidiary to, at all times,
comply in all material respects with all applicable laws, rules, regulations,
licenses, permits, approvals and orders applicable to it and duly observe all
applicable requirements of any Federal, State or local Governmental Authority,
including to the extent applicable ERISA, the Code, the Occupational Safety and
Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as
amended, the Food, Drug and Cosmetic Act, the Dietary Supplemental Health
Education Act, and all applicable statutes, rules, regulations, orders, permits
and stipulations relating to employee health and safety and including all
applicable Environmental Laws.
(b) Borrower shall establish and maintain, at its expense, a system
to assure and monitor its continued compliance with all applicable Environmental
Laws in all of its operations, which system shall include annual reviews of such
compliance by employees or agents of Borrower who are familiar with the
requirements of the applicable Environmental Laws. Subject to, and without
waiving any and/or all of Borrower's rights and protections under any and all
applicable privileges recognized by law, including the attorney-client
privilege, the attorney work product privilege and the privilege of self
critical analysis, copies of all environmental surveys, audits, assessments,
feasibility studies and results of remedial investigations shall be promptly
furnished, or caused to be furnished, by Borrower to Lender. Borrower shall take
prompt and appropriate action to respond to any non-compliance with any of the
Environmental Laws and shall regularly report to Lender on such response.
(c) Borrower shall give both oral and written notice to Lender as
soon as possible upon Borrower's receipt of any notice of, or Borrower's
otherwise obtaining knowledge of, (i) the occurrence of any event involving the
release, spill or discharge, of any Hazardous Material which may be in violation
of any applicable Environmental Laws or (ii) any investigation, proceeding,
complaint, order, directive, claims, citation or notice with respect to: (A) any
non-compliance with or violation of any applicable Environmental Law by Borrower
or (B) the release, spill or discharge, of any Hazardous Material or (C) the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or (D) any other
environmental, health or safety matter, which affects Borrower or its business,
operations or assets or any properties at which Borrower transported, stored or
disposed of any Hazardous Materials.
50
(d) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is non-compliance, or any condition
which requires any action by or on behalf of Borrower in order to avoid any
material non-compliance, with any applicable Environmental Law, Borrower shall,
at Lender's request and Borrower's expense: (i) cause an independent
environmental engineer acceptable to Lender to conduct such tests of the site
where Borrower's non-compliance or alleged non-compliance with such applicable
Environmental Laws has occurred as to such non-compliance and prepare and
deliver to Lender a report as to such non-compliance setting forth the results
of such tests, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof and (ii) provide to
Lender such other information from time to time with respect thereto as Lender
may in good faith request.
(e) Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property of
Borrower and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall, and shall cause any
Subsidiary to, duly pay and discharge all taxes, assessments, contributions and
governmental charges upon or against it or its properties or assets, except for
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower or such Subsidiary, as
the case may be, and with respect to which adequate reserves have been set aside
on its books. Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance. Borrower shall, and shall cause any Subsidiary to, at all
times, maintain with financially sound and reputable insurers insurance with
respect to the Collateral against loss or damage and all other insurance of the
kinds and in the amounts customarily insured against or carried by corporations
of established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be satisfactory to Lender
as to form, amount and insurer. Borrower shall furnish certificates, policies or
endorsements to Lender as Lender
51
shall require as proof of such insurance, and, if Borrower fails to do so,
Lender is authorized, but not required, to obtain such insurance at the expense
of Borrower. All policies shall provide for at least thirty (30) days prior
written notice to Lender of any cancellation or reduction of coverage and that
Lender may act as attorney for Borrower in obtaining, and at any time an Event
of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrower shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrower or any of its Affiliates. At
its option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.
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9.6 Financial Statements and Other Information.
(a) Borrower shall, and shall cause any Subsidiary to, keep proper
books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business of
Borrower and its Subsidiaries in accordance with GAAP. Borrower shall promptly
furnish to Lender all such financial and other information as Lender shall
reasonably request relating to the Collateral and the assets, business and
operations of Borrower. Without limiting the foregoing, Borrower shall furnish
or cause to be furnished to Lender, the following: (i) within thirty (30) days
after the end of each fiscal month, monthly unaudited consolidated financial
statements, and unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss, statements of cash flow, and
statements of shareholders' equity), all in reasonable detail, fairly presenting
the financial position and the results of the operations of Borrower and its
Subsidiaries as of the end of and through such fiscal month, certified to be
correct by the chief financial officer of Borrower, subject to normal year-end
adjustments and accompanied by a compliance certificate substantially in the
form of Exhibit B hereto, along with a schedule in form reasonably satisfactory
to Lender of the calculations used in determining, as of the end of such month,
whether Borrower was in compliance with the covenant set forth in Section 9.18
of this Agreement for such month and (ii) within ninety (90) days after the end
of each fiscal year, audited consolidated financial statements and audited
consolidating financial statements of Borrower and its Subsidiaries (including
in each case balance sheets, statements of income and loss, statements of cash
flow and statements of shareholders' equity), and the accompanying notes
thereto, all in reasonable detail, fairly presenting the financial position and
the results of the operations of Borrower and its Subsidiaries as of the end of
and for such fiscal year, together with the unqualified opinion of independent
certified public accountants, which accountants shall be an independent
accounting firm selected by Borrower and reasonably acceptable to Lender, that
such financial statements have been prepared in accordance with GAAP, and
present fairly the results of operations and financial condition of Borrower and
its Subsidiaries as of the end of and for the fiscal year then ended.
(b) Borrower shall promptly notify Lender in writing of the details
of (i) any loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in Borrower's
business, properties, assets, goodwill or condition, financial or otherwise,
(ii) any Material Contract of Borrower being terminated or amended or any new
Material Contract entered into (in which event Borrower shall provide Lender
with a copy of such Material Contract), (iii) any order, judgment or decree in
excess of $250,000 shall have been entered against Borrower or any of its
properties or assets, (iv) any notification of violation of laws or regulations
received by Borrower from any Governmental Authority, (v) any notification of
legal action commenced against Borrower (other than from a Governmental
Authority) alleging violation of any laws or regulations involving an amount in
excess of $250,000, (vi) any ERISA Event, and (vii) the occurrence of any Event
of Default or act, condition or event which,
53
with notice or the passage of time or giving of notice or both, would constitute
an Event of Default.
(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrower
sends to its stockholders generally and copies of all reports and registration
statements which Borrower files with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(d) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrower, as Lender may, from time to time, reasonably
request. The foregoing shall not be construed to require that Borrower provide
to Lender information with respect to the business of Persons that are not
Affiliates if doing so would result in a breach of a written confidentially
agreement between Borrower and such person then in effect, which is valid and
binding upon Borrower, provided, that, if such information may be disclosed to
Lender with the consent of such third party or subject to Lender agreeing to
keep such information confidential or subject to any other conditions, Borrower
shall provide such information to Lender upon obtaining such consent or
fulfilling such condition. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrower to any court or other Governmental Authority or, subject to Section
12.6 hereof, to any participant or assignee or prospective participant or
assignee. Borrower hereby irrevocably authorizes and directs all accountants or
auditors to deliver to Lender, at Borrower's expense, copies of the financial
statements of Borrower and any reports or management letters prepared by such
accountants or auditors on behalf of Borrower and to disclose to Lender such
information as they may have regarding the business of Borrower. Any documents,
schedules, invoices or other papers delivered to Lender may be destroyed or
otherwise disposed of by Lender one (1) year after the same are delivered to
Lender, except as otherwise designated by Borrower to Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, and shall not permit any Subsidiary to, directly or indirectly,
(a) merge into or with or consolidate with or amalgamate with any
other Person or permit any other Person to merge into or with or consolidate
with it; or
(b) sell, assign, lease, transfer, abandon or otherwise dispose of
any Capital Stock or Indebtedness to any other Person or any of its assets to
any other Person, except for
(i) sales of Inventory in the ordinary course of business,
(ii) the disposition of worn-out or obsolete Equipment so long
as (A) any proceeds are paid to Lender and (B) such sales do not involve
Equipment having an aggregate fair market value in excess of $150,000 for all
such Equipment disposed of in any fiscal year of Borrower,
54
(iii) the issuance and sale by Borrower of Capital Stock of
Borrower after the date hereof; provided, that, (A) Lender shall have received
not less than ten (10) Business Days prior written notice of such issuance and
sale by Borrower, which notice shall specify the parties to whom such shares are
to be sold, the terms of such sale, the total amount which it is anticipated
will be realized from the issuance and sale of such stock and the net cash
proceeds which it is anticipated will be received by Borrower from such sale,
(B) Borrower shall not be required to pay any cash dividends or repurchase or
redeem such Capital Stock or make any other payments in respect thereof, (C) the
terms of such Capital Stock, and the terms and conditions of the purchase and
sale thereof, shall not include any terms that include any limitation on the
right of Borrower to request or receive Loans or Letter of Credit Accommodations
or the right of Borrower to amend or modify any of the terms and conditions of
this Agreement or any of the other Financing Agreements or otherwise in any way
relate to or affect the arrangements of Borrower with Lender or are more
restrictive or burdensome to Borrower than the terms of any Capital Stock in
effect on the date hereof, and (D) as of the date of such issuance and sale and
after giving effect thereto, no Event of Default or act, condition or event
which with notice or passage of time or both would constitute an Event of
Default shall exist or have occurred,
(iv) the issuance of Capital Stock of Borrower consisting of
common stock (or options or warrants to purchase such common stock) pursuant to
a stock option plan or 401(k) plan of Borrower for the benefit of its employees,
directors and consultants as compensation or otherwise, provided, that, in no
event shall Borrower be required to issue, or shall Borrower issue, Capital
Stock pursuant to such stock option plan or 401(k) plan which would result in a
Change of Control or other Event of Default and; or
(v) the sale by Borrower of the Real Property consisting of
vacant land currently owned by Borrower to be subject to the Mortgage which land
is adjacent to the facility of Borrower in Freehold, New Jersey (referred to as
Xxx 0, Xxxxx 00 on the Freehold Township Tax Map), provided, that, (A) as to
such sale each of the following conditions is satisfied as determined by Lender:
(1) Lender shall have received not less than ten (10) days' prior written notice
of the proposed sale by Borrower of such land, which notice shall specify the
parties to such sale, the purchase price and manner of payment thereof and such
other information with respect thereto as Lender may request, (2) not less than
eighty (80%) percent of the consideration received from such sale shall be in
the form of cash received by Borrower on the effective date of the transfer of
the title to such Real Property, (3) the total amount of the consideration
payable to Borrower in cash or other immediately available funds in
consideration of such sale at the time of the transfer of title thereof shall be
in an amount not less than the amount equal to eighty (80%) percent of the fair
market value of such Real Property as set forth in the appraisal thereof
currently being conducted on behalf of Lender by Xxxxx-Xxxxxx, Inc. (4) all
proceeds from such sale shall be paid directly by the purchaser to Lender, (5)
if no Event of Default or act, condition or event which with notice or passage
of time or both would constitute an Event of Default shall exist or have
occurred, twenty-five (25%) percent of the net cash proceeds from such sale
shall
55
be applied to the installments of principal in respect of the Term Loan in the
inverse order of maturity as a mandatory prepayment thereof and the remaining
balance shall be applied to the Revolving Loans, and if an Event of Default or
act, condition or event which with notice or passage of time or both would
constitute an Event of Default, shall exist or have occurred, such proceeds
shall be applied to the Obligations in such order and manner as Lender may
determine, (6) such sale shall be on commercially reasonable terms in a bona
fide arms' length transaction with a person that is not an Affiliate, (7) as of
the date of such sale and after giving effect thereto, no Event of Default or
act, condition or event which with notice or passage of time or both would
constitute an Event of Default shall exist or have occurred and (B) so long as
each of the conditions set forth in clause (A) are satisfied as determined by
Lender, Lender shall, upon Borrower's request and at Borrower's expense, execute
and deliver to Borrower a discharge and satisfaction of the Mortgage with
respect to such Real Property, in form and substance satisfactory to Lender,
such discharge and satisfaction to be effective only upon the consummation of
such sale and the satisfaction of each of the conditions set forth in clause (A)
above; or
(c) wind up, liquidate or dissolve; or
(d) agree to do any of the foregoing.
9.8 Encumbrances. Borrower shall not, and shall permit any Subsidiary to,
create, incur, assume or suffer to exist any security interest, mortgage,
pledge, lien, charge or other encumbrance of any nature whatsoever on any of its
assets or properties, including the Collateral, except: (a) the security
interests and liens of Lender; (b) liens securing the payment of taxes, either
not yet overdue or the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower or such
Subsidiary, as the case may be and with respect to which adequate reserves have
been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's or such Subsidiary's business to the extent: (i) such liens secure
Indebtedness which is not overdue or (ii) such liens secure Indebtedness
relating to claims or liabilities which are fully insured and being defended at
the sole cost and expense and at the sole risk of the insurer or being contested
in good faith by appropriate proceedings diligently pursued and available to
Borrower or such Subsidiary, in each case prior to the commencement of
foreclosure or other similar proceedings and with respect to which adequate
reserves have been set aside on its books; (d) zoning restrictions, easements,
licenses, covenants and other restrictions affecting the use of Real Property
which do not interfere in any material respect with the use of such Real
Property or ordinary conduct of the business of Borrower or such Subsidiary as
presently conducted thereon or materially impair the value of the Real Property
which may be subject thereto; (e) purchase money security interests in Equipment
(including Capital Leases) and purchase money mortgages on Real Property to
secure Indebtedness permitted under Section 9.9(b) hereof; (f) the mortgage and
lien upon, and security interest in, the Real Property of Borrower located in
Freehold, New Jersey described on Scheduled 9.8(f) hereof pursuant to the Fixed
Rate NJEDA Bond Agreements as in effect on the date hereof to secure the
contingent reimbursement
56
obligations of Borrower to Banque Nationale de Paris, Houston Agency as the
issuer of Fixed Rate NJEDA Bond Letter of Credit and the NJEDA pursuant to such
agreements to the extent permitted under Section 9.9 and (f) the security
interests and liens set forth on Schedule 8.4 hereto.
9.9 Indebtedness. Borrower shall not, and shall not permit any Subsidiary
to, incur, create, assume, become or be liable in any manner with respect to, or
permit to exist, any Indebtedness, except:
(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases) arising
after the date hereof to the extent secured by purchase money security interests
in Equipment (including Capital Leases) and purchase money mortgages on real
estate not to exceed $250,000 in the aggregate at any time outstanding so long
as such security interests and mortgages do not apply to any property of
Borrower other than the Equipment or real estate so acquired, and the
Indebtedness secured thereby does not exceed the cost of the Equipment or real
estate so acquired, as the case may be;
(c) Indebtedness of Borrower under interest swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
exchange agreements and similar contractual agreements entered into for the
purpose of protecting a Person against fluctuations in interest rates; provided,
that, such arrangements are with banks or other financial institutions that have
combined capital and surplus and undivided profits of not less than $250,000,000
and are not for speculative purposes and such Indebtedness shall be unsecured;
(d) Indebtedness of Borrower evidenced by or arising under the Fixed
Rate NJEDA Bond Agreements as in effect to the date hereof; provided, that:
(i) the aggregate amount required to be paid by Borrower
pursuant to such Fixed Rate NJEDA Bond Agreements shall not exceed $3,425,000,
less the aggregate amount of all repayments, repurchases or redemption, whether
optional or mandatory in respect thereof, plus interest thereon at the rate
provided for in the Fixed Rate NJEDA Bonds as in effect on the date hereof,
(ii) such Indebtedness is not secured by any assets or
properties of any Borrower other than the Real Property and related assets
described on Schedule 9.8(f) hereof pursuant to the Fixed Rate NJEDA Bond
Agreements as in effect on the date hereof,
(iii) Borrower shall not, directly or indirectly, make any
payments in respect of such Indebtedness, except, that, Borrower may make
regularly scheduled payments when due in accordance with the terms of the Fixed
Rate NJEDA Bond Agreements as in effect on the date hereof,
57
(iv) Borrower shall not, directly or indirectly, (A) amend,
modify, alter or change any terms of such Indebtedness or any of the Fixed Rate
NJEDA Bond Agreements, except that Borrower may, after prior written notice to
Lender, amend, modify, alter or change the terms thereof so as to extend the
maturity thereof or defer the timing of any payments in respect thereof, or to
forgive or cancel any portion of such Indebtedness other than pursuant to
payments thereof, or to reduce the interest rate or any fees in connection
therewith, or (B) redeem, entire, defease, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and
(v) Borrower shall furnish to Lender all notices, demands or
other materials concerning such Indebtedness either received by Borrower or on
its behalf, promptly after receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be;
(e) Indebtedness of Borrower evidenced by or arising under the
Floating Rate NJEDA Bond Agreements as in effect on the date thereof; provided,
that:
(i) the aggregate amount required to be paid by Borrower
pursuant to the Floating Rate NJEDA Bond Agreements shall not exceed $2,120,000,
less the aggregate amount of all repayments, repurchases or redemptions, whether
optional or mandatory in respect thereof, plus interest thereon at the rate
provided for in the Floating Rate NJEDA Bonds as in effect on the date hereof;
(ii) such Indebtedness is not secured by any assets or
properties of Borrower,
(iii) Borrower shall not, directly or indirectly, make any
payments in respect of such Indebtedness, except, that, such Indebtedness may be
paid pursuant to draws under the Floating Rate NJEDA Bond Letter of Credit (and
the amount which may be drawn under such letter of credit as of the date hereof
is $2,155,577.13) and no payment shall be made by Borrower to reimburse the
issuer thereof, except after prior written notice and with the prior written
consent of Lender and then only to the extent Lender has not made such payments
to the issuer on behalf of Borrower;
(iv) Borrower shall not, directly or indirectly, (A) amend,
modify, alter or change any terms of such Indebtedness or any of the Floating
Rate NJEDA Bond Agreements except, that Borrower may, after prior written notice
to Lender, amend, modify, alter or change the terms thereof so as to extend the
maturity thereof or defer the timing of any payments in respect thereof, or to
forgive or cancel any portion of such indebtedness other than pursuant to
payments thereof, or to reduce the interest rate or any fees in connection
therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose and,
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(v) Borrower shall furnish to Lender all notices, demands or
other materials concerning such Indebtedness either received by Borrower or on
its behalf, promptly after receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be;
(f) Indebtedness of Guarantor to Borrower arising pursuant to loans
by Borrower to Guarantor permitted under Section 9.10 below;
(g) the Indebtedness of Borrower to Chase Manhattan Bank consisting
of the contingent reimbursements obligations to Chase Manhattan Bank in the
event of draw under the Floating Rate NJEDA Bond Letter of Credit, provided,
that, (i) in no event shall the amount of such contingent reimbursement
obligation exceed $2,155,577.13, as reduced by any principal payments (whether
as sinking fund payments or otherwise) in respect of the Floating Rate NJEDA
Bonds, (ii) the Floating Rate NJEDA Bond Letter of Credit and such reimbursement
obligations shall terminate and be cancelled and Borrower shall have no other or
further obligations to Chase Manhattan Bank in respect thereof on and after
January 15, 2001, (iii) such obligations of Borrower to Chase Manhattan Bank
shall be unsecured, (iv) Borrower shall not make any payments in respect of such
Indebtedness except with the prior written consent of Lender, (v) Borrower shall
not, directly or indirectly, (A) amend, modify, alter or change any terms of
such Indebtedness or any agreement related thereto or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose and (vi) Borrower shall
furnish to Lender all notices, demands or other materials concerning such
Indebtedness either received by Borrower or on its behalf, promptly after
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be;
(h) the contingent obligations of Borrower to certain landlords
arising under leases of retail stores by Vitamin Specialties Corp., for which
Archon Vitamin Corp. is primarily liable pursuant to the purchase by Archon
Vitamin Corp. of the Capital Stock of Vitamin Specialties Corp. from Borrower as
described on Schedule 9.9(h) hereto;
(i) the Indebtedness set forth on Schedule 9.9(i) hereto; provided,
that, (i) Borrower may only make regularly scheduled payments of principal and
interest in respect of such Indebtedness in accordance with the terms of the
agreement or instrument evidencing or giving rise to such Indebtedness as in
effect on the date hereof, (ii) Borrower shall not, directly or indirectly, (A)
amend, modify, alter or change the terms of such Indebtedness or any agreement,
document or instrument related thereto as in effect on the date hereof except,
that, Borrower may, after prior written notice to Lender, amend, modify, alter
or change the terms thereof so as to extend the maturity thereof, or defer the
timing of any payments in respect thereof, or to forgive or cancel any portion
of such Indebtedness (other than pursuant to payments thereof), or to reduce the
interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iii) Borrower shall
furnish to Lender all notices or demands in connection with such Indebtedness
either received by Borrower or on its behalf, promptly after
59
the receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, and shall
not permit any Subsidiary to, directly or indirectly, make any loans or advance
money or property to any person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all
or a substantial part of the assets or property of any person, or guarantee,
assume, endorse, or otherwise become responsible for (directly or indirectly)
the Indebtedness, performance, obligations or dividends of any Person, or form
or acquire any Subsidiaries, or agree to do any of the foregoing, except:
(a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b) investments in cash or Cash Equivalents, provided, that, (i) no
Revolving Loans are then outstanding and (ii) as to any of the foregoing, unless
waived in writing by Lender, Borrower shall take such actions as are deemed
necessary by Lender to perfect the security interest of Lender in such
investments;
(c) the existing equity investments of Borrower as of the date
hereof in its Subsidiaries, provided, that, Borrower shall have no obligation to
make any other investment in, or loans to, or other payments in respect of, any
such Subsidiaries;
(d) guarantees by any Subsidiaries of Borrower of the Obligations in
favor of Lender;
(e) stock or obligations issued to Borrower by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing
to Borrower in connection with the insolvency, bankruptcy, receivership or
reorganization of such Person or a composition or readjustment of the debts of
such Person; provided, that, the original of any such stock or instrument
evidencing such obligations shall be promptly delivered to Lender, upon Lender's
request, together with such stock power, assignment or endorsement by Borrower
as Lender may request;
(f) obligations or account debtors to Borrower arising from Accounts
which are past due evidenced by a promissory note made by such account debtor
payable to Borrower; provided, that, promptly upon the receipt of the original
of any such promissory note by Borrower, such promissory note shall be endorsed
to the order of Lender by Borrower and promptly delivered to Lender as so
endorsed;
(g) loans by Borrower to Guarantor after the date hereof, provided,
that, (i) the aggregate amount of all such loans at any time outstanding shall
not exceed $250,000, (ii) as of the date of any such loan and after giving
effect thereto, Excess Availability shall be not less than
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$1,500,000, and (iii) as of the date of any such loan and after giving effect
thereto, no Event of Default, shall exist or have occurred;
(h) purchases by Borrower of its Capital Stock from time to time
substantially contemporaneously with the giving of such shares to employees to
the extent necessary to match contributions by such employees to the 401(k) plan
maintained by Borrower in accordance with the terms of such plan as in effect on
the date hereof;
(i) the loans, advances and guarantees set forth on Schedule 9.10
hereto; provided, that, as to such loans, advances and guarantees, (i) Borrower
shall not, directly or indirectly, (A) amend, modify, alter or change the terms
of such loans, advances or guarantees or any agreement, document or instrument
related thereto, or (B) as to such guarantees, redeem, retire, defease, purchase
or otherwise acquire the obligations arising pursuant to such guarantees, or set
aside or otherwise deposit or invest any sums for such purpose, and (ii)
Borrower shall furnish to Lender all notices or demands in connection with such
loans, advances or guarantees or other Indebtedness subject to such guarantees
either received by Borrower or on its behalf, promptly after the receipt
thereof, or sent by Borrower or on its behalf, concurrently with the sending
thereof, as the case may be.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
capital stock of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing.
9.12 Transactions with Affiliates. Borrower shall not, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director, agent or other person
affiliated with Borrower, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to the Borrower than Borrower would obtain in a
comparable arm's length transaction with an unaffiliated person or (b) make any
payments of management, consulting or other fees for management or similar
services, or of any Indebtedness owing to any officer, employee, shareholder,
director or other Affiliate of Borrower except (i) reasonable compensation to
officers, employees and directors for services rendered to Borrower in the
ordinary course of business and (ii) as set forth on Schedule 9.12 hereto.
9.13 Additional Bank Accounts. Borrower shall not, directly or indirectly,
open, establish or maintain any deposit account, investment account or any other
account with any bank or other financial institution, other than the Blocked
Accounts and the accounts set forth in Schedule 8.10 hereto, except: (a) as to
any new or additional Blocked Accounts and other such new or additional accounts
which contain any Collateral or proceeds thereof, with the prior
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written consent of Lender and subject to such conditions thereto as Lender may
establish and (b) as to any accounts used by Borrower to make payments of
payroll, taxes or other obligations to third parties, after prior written notice
to Lender.
9.14 Compliance with ERISA. Borrower shall and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other Federal and
State law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; (c) not terminate any of such Plans so as
to incur any liability to the Pension Benefit Guaranty Corporation; (d) not
allow or suffer to exist any prohibited transaction involving any of such Plans
or any trust created thereunder which would subject Borrower or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA; (e) make all required
contributions to any Plan which it is obligated to pay under Section 302 of
ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow or
suffer to exist any accumulated funding deficiency, whether or not waived, with
respect to any such Plan; or (g) allow or suffer to exist any occurrence of a
reportable event or any other event or condition which presents a material risk
of termination by the Pension Benefit Guaranty Corporation of any such Plan that
is a single employer plan, which termination could result in any liability to
the Pension Benefit Guaranty Corporation.
9.15 End of Fiscal Years; Fiscal Quarters. Borrower shall, for financial
reporting purposes, cause its, and each of its Subsidiaries' (a) fiscal years to
end on July 31 of each year and (b) fiscal quarters to end on July 31, October
31, January 31 and April 30 of each year except that Borrower may change its
fiscal year with prior written consent of Lender.
9.16 Change in Business.
(a) Borrower shall not engage in any business other than the
business of Borrower on the date hereof and any business reasonably related,
ancillary or complimentary to the business in which Borrower is engaged on the
date hereof;
(b) Borrower shall not, directly or indirectly, suffer or permit
Hidel Partners or International Vitamin Overseas Corp. to engage in any business
or commercial activity (other than to the extent required to maintain its
corporate existence under applicable law) or to own or hold any material assets
of properties, other than in the case of Hidel Partners to the extent of its
interest in the real property and related assets used by Borrower located at 000
Xxxxx Xxxx Xxxx, Xxxxxxxx, Xxx Xxxxxx 00000 (and including the vacant
undeveloped and adjacent thereto to be subject to the Mortgage) and the sale
thereof to the extent permitted hereunder. Borrower is and at all times shall be
the sole partner of Hidel Partners.
9.17 Limitation of Restrictions Affecting Subsidiaries. Borrower shall
not, directly, or indirectly, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or limits the ability of any
Subsidiary of Borrower to (a) pay dividends or make other
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distributions or pay any Indebtedness owed to Borrower or any Subsidiary of
Borrower; (b) make loans or advances to Borrower or any Subsidiary of Borrower,
(c) transfer any of its properties or assets to Borrower or any Subsidiary of
Borrower; or (d) create, incur, assume or suffer to exist any lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired, other
than encumbrances and restrictions arising under (i) applicable law, (ii) this
Agreement, (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of Borrower or any of its Subsidiaries,
(iv) customary restrictions on dispositions of real property interests found in
reciprocal easement agreements of Borrower or its Subsidiary, (v) any agreement
relating to permitted Indebtedness incurred by a Subsidiary of Borrower prior to
the date on which such Subsidiary was acquired by Borrower and outstanding on
such acquisition date, and (vi) the extension or continuation of contractual
obligations in existence on the date hereof; provided, that, any such
encumbrances or restrictions contained in such extension or continuation are no
less favorable to Lender than those encumbrances and restrictions under or
pursuant to the contractual obligations so extended or continued.
9.18 Adjusted Tangible Net Worth. Borrower shall, at all times, maintain
Adjusted Tangible Net Worth of not less than $10,000,000.
9.19 Real Property Collateral. In addition to any other agreements,
documents or instruments at any time to be delivered by Borrower to Lender, as
soon as possible, but in any event prior to January 31, 2001, Borrower shall
deliver or cause to be delivered to the following, each in form and substance
satisfactory to Lender:
(a) the Mortgage, duly authorized, executed and delivered by Hidel
Partners and Borrower;
(b) environmental audits of the Real Property to be subject to the
Mortgage conducted by an independent environmental engineering firm acceptable
to Lender, and in form, scope and methodology satisfactory to Lender, confirming
(i) Borrower is in compliance with all material applicable Environmental Laws
and (ii) the absence of any material environmental problems;
(c) a valid and effective title insurance policy with respect to the
Real Property to be subject to the Mortgage issued by a company and agent
acceptable to Lender (i) insuring the priority, amount and sufficiency of the
Mortgage, (ii) insuring against matters that would be disclosed by surveys and
(iii) containing any legally available endorsements, assurances or affirmative
coverage requested by Lender for protection of its interests;
(d) evidence that Lender has a first priority mortgage and lien
upon, and security interest in, the Real Property and related assets of Hidel
Partners and Borrower to be subject to the Mortgage;
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(e) a written appraisal as to the Real Property of Hidel Partners
and Borrower to be subject to the Mortgage, at the expense of Borrower, by an
appraiser acceptable to Lender, addressed to Lender and on which Lender is
expressly permitted to rely, in form, scope and methodology satisfactory to
Lender;
(f) an executed original of the release and discharge of the
existing Mortgage and Security Agreement by Hidel Partners in favor of NJEDA and
the issuer of the Fixed Rate NJEDA Bond Letter of Credit in form acceptable for
recording with the applicable recording office, with respect to the Real
Property and related assets to be subject to the Mortgage, duly authorized,
executed and delivered by the NJEDA and such issuer; and
(g) a current ALTA certified survey with respect to the Real
Property of Hidel Partners and Borrower to be subject to the Mortgage by
acceptable registered land surveyors certified by such surveyor to Lender and
the title insurance company indicating length and bearing of exterior boundary
lines, measurements of the distance between buildings and boundary lines,
locations of fences, drives, utility and other easements, encroachments, any
existing building, ingress and egress, and such other items as Lender requires
and with a legal description.
9.20 Costs and Expenses. Borrower shall pay to Lender on demand all costs,
expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including UCC financing statements, PPSA
financing statements, filing taxes and fees, documentary taxes, intangibles
taxes and mortgage recording taxes and fees, if applicable); (b) costs and
expenses and fees for insurance premiums, environmental audits, surveys,
assessments, engineering reports and inspections, appraisal fees and search
fees, costs and expenses of remitting loan proceeds, collecting checks and other
items of payment, and establishing and maintaining the Blocked Accounts,
together with Lender's customary charges and fees with respect thereto; (c)
charges, fees or expenses charged by any bank or issuer in connection with the
Letter of Credit Accommodations; (d) costs and expenses of preserving and
protecting the Collateral; (e) costs and expenses paid or incurred in connection
with obtaining payment of the Obligations, enforcing the security interests and
liens of Lender, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Lender arising out
of the transactions contemplated hereby and thereby (including preparations for
and consultations concerning any such matters); (f) any goods and services taxes
or other value added taxes incurred by Lender; (g) all out-of-pocket expenses
and costs heretofore and from time to time hereafter incurred by Lender during
the course of periodic field examinations of the Collateral and Borrower's
operations, plus a per diem charge at the rate of $750 per person per day for
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Lender's examiners in the field and office; and (h) the fees and disbursements
of counsel (including legal assistants) to Lender in connection with any of the
foregoing.
9.21 Further Assurances. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Lender, Lender may, at its option, cease to make any
further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, Borrower hereby
authorizes Lender to execute and file one or more UCC financing statements and
PPSA financing statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Borrower fails to pay any of the Obligations when due or
(ii) Borrower fails to perform any of the covenants contained in Sections 9.3,
9.4, 9.6, 9.13, 9.14, 9.15, 9.16, 9.17, 9.19, 9.20 or 9.21 of this Agreement and
such failure shall continue for ten (10) Business Days, provided, that, in each
case, such ten (10) Business Day period shall not apply in the case of any
failure to observe any such covenant which is not capable of being cured at all
or within such ten (10) Business Day period or which has been the subject of a
prior failure within a six (6) month period or (iii) Borrower fails to perform,
or otherwise breaches or violates, any of the terms, covenants, conditions or
provisions contained in this Agreement or any of the other Financing Agreements,
other than those described in Sections 10.1(a)(i) and 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by
Borrower or any Obligor to Lender in this Agreement, the other Financing
Agreements or any other agreement, schedule, confirmatory assignment or
otherwise shall when made or deemed made be false or misleading in any material
respect;
(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
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(d) any judgment for the payment of money is rendered against
Borrower or any Obligor in excess of $100,000 in any one case or in excess of
$250,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of forty-five (45) days (except if Borrower or such Obligor has
promptly appealed such judgment and execution is at all times effectively stayed
during such appeal) or execution shall at any time not be effectively stayed, or
any judgment other than for the payment of money, or injunction, attachment,
garnishment or execution is rendered against Borrower or any Obligor or any of
their assets (except as to a garnishment as to assets in Canada, any garnishment
order entered merely upon the commencement of a legal action against Borrower or
Guarantor in Canada where all amounts subject to such garnishment are paid to
the court and not the garnishee, only if an appropriate motion or other action
required by the applicable court to dismiss such garnishment is not brought
within ten (10) Business Days after the date of the effectiveness of the
garnishment and only if such garnishment is not dismissed within twenty (20)
Business Days);
(e) Borrower or any Obligor dissolves or suspends or discontinues
doing business;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors in connection with a moratorium or adjustment of the obligations of
Borrower to such creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect, or a petition, case, application
or proceeding under any bankruptcy or insolvency laws of Canada (including the
Bankruptcy and Insolvency Act (Canada) and the Companies' Creditors Arrangement
Act (Canada)) or any similar law now or hereafter in effect in any jurisdiction
or under any insolvency, arrangements, reorganization, moratorium, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at law or in equity) is filed
against Borrower or any Obligor or all or any part of its properties and such
petition or application is not dismissed within thirty (30) days after the date
of its filing or Borrower or any Obligor shall file any answer admitting or not
contesting such petition or application or indicates its consent to,
acquiescence in or approval of, any such action or proceeding or the relief
requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect, or a petition, case, application
or proceeding under any bankruptcy or insolvency laws of Canada (including the
Bankruptcy and Insolvency Act (Canada)) and the Companies' Creditors Arrangement
Act (Canada) or any similar law now or hereafter in effect in any jurisdiction
or under any insolvency, arrangement, reorganization, moratorium, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at a law or equity) is filed,
taken or commenced after the date hereof by Borrower or any Obligor or for all
or any part of its property, including, without limitation, if Borrower or any
Obligor shall: (i) apply for, request or consent to the appointment of a
receiver, administrative receiver, receiver and manager, examiner, judicial
custodian, trustee, liquidator official manager, administrator or other
controller or any other similar official of it or of all or a
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substantial part of its property and assets, (ii) be unable, or admit in writing
its inability, to pay its debts as they become due, or commit any other act of
bankruptcy, (iii) make a general assignment for the benefit of creditors, (iv)
file a voluntary petition or assignment in bankruptcy or a proposal seeking a
reorganization, compromise, moratorium or arrangement with its creditors, (v)
take advantage of any insolvency or other similar law pertaining to
arrangements, moratoriums, compromises or reorganizations, or admit the material
allegations of a petition or application filed in respect of it in any
bankruptcy, reorganization or insolvency proceeding, or (vi) take any corporate
action for the purpose of effecting any of the foregoing;
(i) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any Indebtedness for borrowed money owing to
any person other than Lender, (and including any of the Fixed Rate NJEDA Bond
Agreements or any of the Floating Rate NJEDA Bond Agreements), or any Capital
Lease, contingent Indebtedness in connection with any guarantee, letter of
credit, indemnity or similar type of instrument in favor of any person other
than Lender in any case in an amount in excess of $200,000, which default
continues for more than the applicable cure period, if any, with respect
thereto, or any default by Borrower or any Obligor under any material contract,
lease, license or other obligation to any person other than Lender, which
default continues for more than the applicable cure period, if any, with respect
thereto;
(j) an ERISA Event shall occur which results in or could reasonably
be expected to result in liability of Borrower or any Obligor in an aggregate
amount in excess of $200,000;
(k) any Change of Control;
(l) the indictment by any Governmental Authority, or as Lender may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of Borrower or any Obligor of which Borrower or any
Obligor or Lender receives notice, in either case, as to which there is a
reasonable possibility of an adverse determination, in the good faith
determination of Lender, under any criminal statute, or commencement or
threatened commencement of criminal or civil proceedings against Borrower or any
Obligor, pursuant to which statute or proceedings the penalties or remedies
sought or available include forfeiture of (i) any of the Collateral or (ii) any
other property of Borrower which is necessary or material to the conduct of its
business;
(m) there shall be a material adverse change in the business or
assets of Borrower or any Obligor after the date hereof; or
(n) there shall be an event of default under any of the other
Financing Agreements.
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10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the PPSA, the UCC and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, PPSA, the UCC or other applicable law, are cumulative, not
exclusive and enforceable, in Lender's discretion, alternatively, successively,
or concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by Borrower or any Obligor of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Lender to Borrower designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any bond
which might otherwise be required.
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(c) For the purpose of enabling Lender to exercise the rights and
remedies hereunder, Borrower hereby grants to Lender, to the extent assignable,
an irrevocable, non-exclusive license (exercisable without payment of royalty or
other compensation to Borrower) to use, assign, license or sublicense any of the
trademarks, service-marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by Borrower, wherever
the same maybe located, including in such license reasonable access to all media
in which any of the licensed items may be recorded or stored and to all computer
programs used for the compilation or printout thereof.
(d) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrower shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
(e) Lender may appoint, remove and reappoint any person or persons,
including an employee or agent of Lender, to be a receiver (the "Receiver")
which term shall include a receiver and manager of, or agent for, all or part of
the Collateral. Any such Receiver shall, as far as concerns responsibility for
his acts, be deemed to be the agent of Borrower and Guarantor and not of Lender,
and Lender shall not in any way be responsible for any misconduct, negligence or
non-feasance of such Receiver, its employees or agents. Except as otherwise
directed by Lender, all money shall be received in trust for and paid to Lender.
Such Receiver shall have all of the powers and rights of Lender described in
this Agreement. Lender may, either directly or through its agents or nominees,
exercise any or all powers and rights of a Receiver.
(f) On and after an Event of Default and for so long as the same is
continuing, Borrowers shall pay all costs, charges and expenses incurred by
Lender or any Receiver or any nominee or agent of Lender, whether directly or
for services rendered (including, without limitation, solicitor's costs on a
solicitor and his own client basis, auditor's costs, other legal expenses and
Receiver remuneration) in enforcing this Agreement or any of the other Financing
Agreement and in enforcing or collecting Obligations and all such expenses
together with any money owing as a result of any borrowing permitted hereby
shall be a charge on the proceeds of realization and shall be secured hereby.
(g) Without limiting the foregoing, upon the occurrence of an Event
of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrower and/or (ii) terminate any provision of this
Agreement providing for any future Loans or Letter of Credit Accommodations to
be made by Lender to Borrower.
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SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements (except to the extent otherwise provided in
the Mortgage) and any dispute arising out of the relationship between the
parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the laws of the State of New York (without giving effect to
principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Supreme Court of the State of New York in New
York County and the United States District Court for the Southern District of
New York and waive any objection based on venue or forum non conveniens with
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against Borrower
or its property in the courts of any other jurisdiction which Lender deems
necessary or appropriate in order to realize on the Collateral or to otherwise
enforce its rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth on the
signature pages hereof and service so made shall be deemed to be completed five
(5) Business Days after the same shall have been so deposited in the U.S. mails
as evidenced by the official postage date affixed thereto, or, at Lender's
option, by service upon Borrower in compliance with any other manner of service
provided for under the rules of the court of the jurisdiction in which the
action is commenced. Within thirty (30) days after such service, Borrower shall
appear in answer to such process, failing which Borrower shall be deemed in
default and judgment may be entered by Lender against Borrower for the amount of
the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW
70
EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE. BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY AND THAT BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF
THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final
non-appealable order of a court of competent jurisdiction binding on Lender
(provided that such order need not be non-appealable if Lender elects not to
exercise its right to appeal such order), that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Lender shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and chattel paper, included in or evidencing any of
the Obligations or the Collateral, and any and all other demands and notices of
any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
71
11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in this Section may be unenforceable because it violates any law or
public policy, Borrower shall pay the maximum portion which it is permitted to
pay under applicable law to Lender in satisfaction of indemnified matters under
this Section. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
11.6 Currency Indemnity. If, for the purposes of obtaining judgment in any
court in any jurisdiction with respect to this Agreement or any of the other
Financing Agreements, it becomes necessary to convert into the currency of such
jurisdiction (the "Judgment Currency") any amount due under this Agreement or
under any of the other Financing Agreements in any currency other than the
Judgment Currency (the "Currency Due"), then conversion shall be made pursuant
to the Currency Exchange Convention at which Lender is able, on the relevant
date, to purchase the Currency Due with the Judgment Currency prevailing on the
Business Day before the day on which judgment is given. In the event that there
is a change in the rate pursuant to the Currency Exchange Convention prevailing
between the Business Day before the day on which the judgment is given and the
date of receipt by Lender of the amount due, Borrower will, on the date of
receipt by Lender, pay such additional amounts, if any, or be entitled to
receive reimbursement of such amount, if any, as may be necessary to ensure that
the amount received by Lender on such date is the amount in the Judgment
Currency which when converted at the rate of exchange prevailing on the date of
receipt by Lender is the amount then due under this Agreement or such other of
the Financing Agreements in the Currency Due. If the amount of the Currency Due
which Lender is able to purchase is less than the amount of the Currency Due
originally due to it, Borrower shall indemnify and save Lender harmless from and
against loss or damage arising as a result of such deficiency. The indemnity
contained herein shall constitute an obligation separate and independent from
the other obligations contained in this Agreement and the other Financing
Agreements, shall give rise to a separate and independent cause of action, shall
apply irrespective of any indulgence granted by Lender from time to time and
shall continue in full force and effect notwithstanding any judgment or order
for a liquidated sum in respect of an amount due under this Agreement or any of
the other Financing Agreements or under any judgment or order.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
72
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof. Lender or Borrower may terminate
this Agreement and the other Financing Agreements effective on the Renewal Date
or on the anniversary of the Renewal Date in any year by giving to the other
party at least ninety (90) days prior written notice; provided, that, this
Agreement and all other Financing Agreements must be terminated simultaneously.
Upon the effective date of termination or non-renewal of the Financing
Agreements, Borrower shall pay to Lender, in full, all outstanding and unpaid
Obligations and shall furnish cash collateral to Lender in such amounts as
Lender determines are reasonably necessary to secure Lender from loss, cost,
damage or expense, including attorneys' fees and legal expenses, in connection
with any contingent Obligations, including issued and outstanding Letter of
Credit Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrower to the bank account designated
by Lender are received in such bank account later than 12:00 noon, New York City
time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the end
of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
Amount Period
------ ------
(i) three (3%) percent of the From the date hereof to and
Maximum Credit including the first anniversary of
the date hereof
(ii) two (2%) percent of the From the first anniversary of the
Maximum Credit date hereof to and including the
second anniversary of the date
hereof
(iii) one (1%) of the Maximum From the second anniversary of the
Credit date
73
hereof to and including the date
immediately prior to the third
anniversary of the date hereof, or if
the term of this Agreement is
extended, at any time prior to the
end of the then current term.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing.
(d) Notwithstanding anything to the contrary contained in Section 12.1(c),
in the event of the termination of this Agreement by Borrower prior to the end
of the then current term or renewal term of this Agreement and the full and
final repayment of all of the Obligations and the receipt by Lender of cash
collateral all as provided in Section 12.1(a) above prior to the end of such
term, Borrower shall not be required to pay to Lender an early termination fee
if such payments are made to Lender with the initial proceeds of a revolving
credit facility provided by First Union National Bank to Borrower.
12.2 Interpretative Provisions.
(a) All terms used herein which are defined in Article 1 or Article 9 of
the Uniform Commercial Code shall have the meanings given therein unless
otherwise defined in this Agreement.
(b) All references to the plural herein shall also mean the singular and
to the singular shall also mean the plural unless the context otherwise
requires.
(c) All references to Borrower and Lender pursuant to the definitions set
forth in the recitals hereto, or to any other person herein, shall include their
respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not any particular provision of this Agreement and as this Agreement
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall mean
"including, without limitation".
(f) An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender.
74
(g) Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Borrower most recently
received by Lender prior to the date hereof.
(h) In the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including", the words "to" and
"until" each mean "to but excluding" and the word "through" means "to and
including".
(i) Unless otherwise expressly provided herein, (i) references herein to
any agreement, document or instrument shall be deemed to include all subsequent
amendments, modifications, supplements, extensions, renewals, restatements or
replacements with respect thereto, but only to the extent the same are not
prohibited by the terms hereof or of any other Financing Agreement, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
recodifying or supplementing the statute or regulation.
(j) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(k) This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(l) This Agreement and the other Financing Agreements are the result of
negotiations among and have been reviewed by counsel to Lender and the other
parties, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Lender merely
because of Lender's involvement in their preparation.
12.3 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief executive office set forth below, or to such other address as either
party may designate by written notice to the other in accordance with this
provision, and (b) deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) Business Days after mailing.
12.4 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to
75
be invalid or unenforceable and the rights and obligations of the parties shall
be construed and enforced only to such extent as shall be permitted by
applicable law.
12.5 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.6 Confidentiality.
(a) Lender shall use all reasonable efforts to keep confidential, in
accordance with its customary procedures for handling confidential information
and safe and sound lending practices, any non-public information supplied to it
by Borrower pursuant to this Agreement, provided, that, nothing contained herein
shall limit the disclosure of any such information: (i) to the extent required
by statute, rule, regulation, subpoena or court order (after reasonable notice
to Borrower to the extent permitted under applicable law or regulation as
determined by Lender in good faith), (ii) to bank examiners and other
regulators, auditors and/or accountants, (iii) in connection with any litigation
to which Lender is a party, (iv) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant (or prospective
assignee or participant) shall have first agreed to treat such information as
confidential in accordance with this Section 12.6, or (v) to counsel for Lender
or any participant or assignee (or prospective participant or assignee).
(b) In no event shall this Section 12.6 or any other provision of
this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by Borrower or becomes
generally available to the public other than as a result of a disclosure in
violation hereof, (ii) to apply to or restrict disclosure of information that
was or becomes available to Lender on a non-confidential basis from a person
other than Borrower, (iii) require Lender to return any materials furnished by
Borrower to Lender or (iv) prevent Lender from responding to routine
informational requests in accordance with the Code of Ethics for the Exchange of
Credit Information promulgated by The Xxxxxx Xxxxxx Associates or other
applicable industry standards relating to the exchange of credit information.
The obligations of Lender under this Section 12.6 shall supersede and replace
the obligations of Lender under any confidentiality letter signed prior to the
date hereof.
76
12.7 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
77
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
LENDER BORROWER
CONGRESS FINANCIAL CORPORATION IVC INDUSTRIES, INC.
By: /s/ Xxxxx Xxxxxxxxx By: /s/ E. Xxxxxx Xxxxx
------------------- -------------------
Title: Senior Vice President Title: Chief Executive Officer
--------------------- -----------------------
Address: Chief Executive Office:
-------- ----------------------
1133 Avenue of the Americas 000 Xxxxx Xxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxxxxxxx, Xxx Xxxxxx 00000
78
SCHEDULE 1.34
TO LOAN AND SECURITY AGREEMENT
EXISTING LETTERS OF CREDIT
1. Banque Nationale De Paris, Houston Agency, Irrevocable Letter of Credit No.
10183 dated December 27, 1991 issued in favor of First Fidelity Bank National
Association (now know as First Union National Bank), as Trustee under the Trust
Indenture dated as of December 1, 1991 between New Jersey Economic Development
Authority ("NJEDA") and Trustee.
2. The Chase Manhattan Bank Irrevocable Letter of Credit No. PC801162 dated
April 30, 1996 issued in favor of First Union National Bank (formerly known as
First Fidelity Bank National Association), as Trustee for the benefit of
bondholders under the Indenture of Trust dated as of October 1, 1995 between New
Jersey Economic Development Authority ("NJEDA") and Trustee.
SCHEDULE 8.4
TO LOAN AND SECURITY AGREEMENT
EXISTING LIENS
Lienholder
--------------------------------------------------------------------------------
1. Sanwa Business Credit Lien on specific equipment consisting
Corporation of 1997 Kometsu Forklift, 1998 Kometsu
One South Xxxxxx Forklift and related parts evidenced by
37th Floor financing statements bearing filing
Xxxxxxx, XX 00000 nos. 416881, 416882 and 429506 filed
with the Oregon Secretary of State
--------------------------------------------------------------------------------
2. Dime Commercial Corp. Lien on specific equipment as described
1180 Avenue of the Americas on Exhibit 1 to this Schedule 8.4
Xxx Xxxx, XX 00000
--------------------------------------------------------------------------------
3. General Electric Capital Co. Lien with respect to specific equipment
0000 Xxxxx Xxxxx evidenced by financing statement
Xxxxxxx, XX 00000 bearing filing no. 1886354
--------------------------------------------------------------------------------
4. Trinity Capital Corporation Lien on specific equipment as described
000 Xxxxxxx Xxxxxx - 19th Floor on Exhibit 2 to this Schedule 8.4
Xxx Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
5. Leasing Partners, Inc. Lien on specific equipment as described
20,000 Horizon Way on Exhibit 3 to this Schedule 8.4
Xxxxx 000
Xx. Xxxxxx, XX 00000
--------------------------------------------------------------------------------
6. AOE Ricoh, Inc. Lien on specific equipment described on
00 Xxxxxxx Xxxx Exhibit 4 to this Schedule 8.4
Xxxxxxxxx, XX 00000
--------------------------------------------------------------------------------
SCHEDULE 8.8
TO LOAN AND SECURITY AGREEMENT
ENVIRONMENTAL MATTERS
Property Location: Halls Mill Road
Freehold, New Jersey
Designated on the Municipal Tax Map of Xxxxxx Township as
Xxxxx 000, Xxx 0 and on the Municipal Tax Map of Freehold
Township as Block 78, Lots 8 and 8.01.
(Hereinafter in this Schedule 8.8 referred to as "the
Property")
Current Property Owner: Hidel Partners/IVC Industries, Inc.
ISRA Case Nos. 86614, 87380 and 00000
XXXX Triggering Events:
(1) October 1986 - Sale and transfer of Property from Xxxxxx Development
Company to Xxxxxx Technicon, Inc. (subsequently transferred to a related
party known as Technicon Instruments Corporation).
(2) May 1987 - Sale and transfer of Property from Technicon Instruments
Corporation to Hidel Partners.
As set forth above, since 1986 and continuing to the present, the Property has
been and is currently the subject of an on-going remedial environmental action
and investigation ("Remedial Action") conducted under the oversight of the New
Jersey Department of Environmental Production ("NJDEP") and in accordance with
the requirements, rules and regulations of the Industrial Site Recovery Act
("ISRA")(previously known as "ECRA"), N.J.S.A. 13:1K-6 et seq. The Remedial
Action resulted from those transactions set forth above, which operated as a
"triggering event" under ISRA. Xxxxxx Development Company ("Xxxxxx"), a prior
owner and operator of the Property, is the party fully responsible for the
Remedial Action, as well as any and all liabilities under ISRA relating thereto,
including without limitation any and all costs, expenses and liabilities
relating to the implementation of the Remedial Action. Xxxxxx is a New Jersey
corporation with its principal place of business located at 0000 Xxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxxx 00000. The Remedial Action, as well as the liabilities
and obligations of Xxxxxx with respect thereto, is governed by the terms and
conditions of NJDEP Administrative Consent Orders ("ACOs") under the above
referenced ISRA case numbers, copies of which have been provided to Lender. In
addition to Xxxxxx'x liability under the ACOs, Technicon Instrument Corporation
and Xxxxxx Technicon, Inc. further guarantee performance of and under the ACOs.
Moreover, as further security for the performance of its obligations under the
ACOs, Xxxxxx
has provided NJDEP with financial assurances in the form of a surety bond or
letter of credit in the amount of $1,000,000, as required by the express terms
and conditions of the ACOs.
The Remedial Action is currently being implemented on behalf of Xxxxxx by
O'Brien & Xxxx Engineers, Inc. The Remedial Action focuses mainly on groundwater
contamination. IVC's involvement in the Remedial Action has been limited solely
to providing Xxxxxx with access to the Property for performance of the Remedial
Action pursuant to the terms and conditions of a Site Access Agreement between
IVC and Xxxxxx dated as of December 19, 1996, and amended by a Supplemental
Agreement between IVC and Xxxxxx dated December 1, 1999 ("Site Access
Agreements"). Lender has been provided with copies of the Site Access
Agreements.
Based solely upon the representations of Xxxxxx by and through it
consultants O'Brien & Xxxx Engineers, Inc., the Remedial Action is presently
limited to groundwater monitoring, and Xxxxxx anticipates obtaining a "No
Further Action Letter" from NJDEP within the next year. We neither render nor
make any representation, warranty and/or opinion as to the accuracy of such
representations by Xxxxxx and/or O'Brien & Xxxx Engineers, Inc.
O'Brien & Xxxx Engineers, Inc. is located at Xxxxxxx Xxxxx X, Xxxxxx, Xxx
Xxxxxx 00000 and can be reached by telephone and fax at (000) 000-0000 and (732)
255-7931, respectively. Xxxxx Xxxxxx is the Project Manager for this matter at
O'Brien & Xxxx Engineers, Inc.
SCHEDULE 8.13
TO LOAN AND SECURITY AGREEMENT
LABOR MATTERS
None
SCHEDULE 8.16
TO LOAN AND SECURITY AGREEMENT
MATERIAL CONTRACTS
1. Manufacturing and Supply Agreement between IVC Industries, Inc. and Eckerd
Corporation, effective February 1, 1999.
2. Agreement between IVC Industries, Inc. and Xxxxxx'x, Inc., effective
January 1, 1999.
3. Supply Agreement between IVC Industries, Inc. and Pathmark Stores, Inc.
dated August 24, 1998, as Amended August 7, 2000.
4. Supply, Marketing and Sales Agreement between IVC Industries, Inc. and
PlanetRx, Inc., effective July 22, 1999.
5. Agreement between IVC Industries, Inc. and Xxxx Drug, Inc. dated November
24, 1999.
6. Agreement between IVC Industries, Inc. and Xxxxxx Drugs, Inc., effective
September 1, 1999, as Amended April 4, 2000.
7. Sales Purchase Agreement between Xxxx Xxxxxx and IVC Industries, Inc.,
effective July 20, 2000.
8. Private Label License Agreement between IVC Industries, Inc. and Bruno's,
Inc., dated February 2, 2000.
9. Wholesale Private Label Agreement between IVC Industries, Inc. and Costco
Whole Corporation and the Price Company, dated March 1, 2000.
10. Direct Purchase Vitamin Agreement between Xxxx Merchandising Corporation
and IVC Industries, Inc., effective January 1, 1999.
11. Lease Agreement dated 9/28/98 between IVC Industries, Inc. and Xxxxx
Business Center for leased premises located at 0000 X.X. Xxxxxxxx,
Xxxxxxxx, Xxxxxx.
12. Renewal Lease dated June 18, 1999 between Diversified Management Inc. and
Hall Laboratories Ltd. for Canadian facility.
13. IVC Industries, Inc. 1995 Stock Option Plan (as amended 11/11/99).
14. IVC Industries, Inc. Non-Employee Director's Stock Option Plan (as amended
5/15/00).
15. Mutual Non-Disclosure Agreement dated October 1, 1999 by and between NaPro
BioTherapeutics, Inc. and Intergel, a Division of IVC Industries, Inc.
16. Bilateral Confidentiality Disclosure Agreement dated July 26, 1999 by and
between Xxxxxx Laboratories and Intergel, a Division of IVC Industries,
Inc.
17. Confidentiality Agreement dated May 11, 2000 by and between Kali
Laboratories, Inc. and Intergel, a Division of IVC Industries, Inc.
18. Confidential Information Agreement dated February 3, 2000 by and between
Biogenics, Inc. d/b/a E'Ola International and Intergel, a Division of IVC
Industries, Inc.
19. Employment Agreement dated as of August 1, 2000 by and between IVC
Industries, Inc. and Xxxxxx X. Xxxxxxxx, Chief Financial Officer.
20. Employment Agreement dated April 12, 2000 by and between IVC Industries,
Inc. and Xxxxxxx Xxxxxxxx, Chief Operating Officer.
21. Employment Agreement dated April 12, 2000 by and between IVC Industries,
Inc. and Xxxxxxx Xxxxx, Senior Vice President, Sales and Marketing.
22. Lease Agreement dated July 29, 1998 by and between 000 Xxxxx Xxxx Xxxx,
L.L.C. and IVC Industries Inc. for the premises located at 000 Xxxxx Xxxx
Xxxx, Xxxxxxxx, Xxx Xxxxxx.
23. Lease Amendment dated October 26, 1996 by and between 000 Xxxxx Xxxx Xxxx,
L.L.C. and IVC Industries, Inc. for the premises located at 000 Xxxxx Xxxx
Xxxx, Xxxxxxxx, Xxx Xxxxxx.
24. Severance, Consulting and Non-Competition Agreement dated March 1, 1999 by
and between I. Xxxx Xxxxxxxxxx and IVC Industries, Inc.
25. Development Agreement dated August 3, 1998 by and between Block Drug
Company, Inc. and Intergel, a Division of IVC Industries, Inc.
26. Agreement for the Purchase and Sale of the Stock of Vitamin Specialties
Corp. dated July 13, 1999 by and between IVC Industries, Inc. and Archon
Vitamin Corporation.
27. IVC Industries, Inc. Employee 401(k) Profit Sharing Plan effective April
1, 1997 (as amended).
28. Employment Agreement between Xxxxxx X. Xxxxxxxxx and IVC Industries, Inc.
dated April 30, 1996 and Amendment to Employment Agreement dated February
1, 1998.
29. Equipment Lease dated as of October 6, 1999 by and between IVC Industries,
Inc. and Trinity Capital Corporation.
30. Brokerage Agreement dated January 3, 1995 by and between Xxxxxxxx
Xxxxxxxxxxx, Inc. and Hall Laboratories, Inc. (now known as f IVC
Industries, Inc.).
31. Sub-Vendor Import and Supply Agreement dated October 21, 1998 by and
between IVC Industries, Inc. and Costco Companies, Inc.
32. Equipment Lease Agreement dated August 24, 1998 by and between IVC
Industries, Inc. and Dime Commercial Corp.
33. Equipment Lease Agreement by and between IVC Industries and General
Electric Capital Corp.
34. 1998 Equipment Lease Agreement by and between Sanwa Business Credit Corp.
and IVC Industries, Inc.
35. Equipment Lease Agreement (no. 6781317-001) dated December 4, 1998 by and
between IVC Industries, Inc. and AOE Ricoh, Inc.
36. Equipment Lease Agreement (no. 0026857-001) dated October 6, 1999 by and
between IVC Industries, Inc. and Trinity Capital Corporation.
37. Equipment Lease Agreement dated October 4, 1999 by and between IVC
Industries, Inc. and Leasing Partner, Inc.
38. Sublease Agreement dated February 22, 1994 by and between Pioneer
Pharmaceuticals, Inc. (now known as Essex Chemical Corp.) and
International Vitamin Corporation (now known as IVC Industries, Inc.) for
the premises located at 000 00xx Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx.
39. Lease Agreement dated December 1, 1986 by and between Pioneer
Pharmaceuticals, Inc. and Xxxxxxx and Xxxxx Xxxxxx for the premises
located at 000 00xx Xxxxxx, Xxxxxxxxx, Xxx Xxxxxx.
40. Sublease Agreement dated June 29, 1993 (as amended by Addendum dated June
30, 1993) by and between Pioneer Pharmaceuticals, Inc. (now known as Essex
Chemical Corp.) and International Vitamin Corporation (now known as IVC
Industries, Inc.) for the premises located at 000 00xx Xxxxxx, Xxxxxxxxx,
Xxx Xxxxxx.
SCHEDULE 9.9(i)
TO LOAN AND SECURITY AGREEMENT
EXISTING INDEBTEDNESS AS OF 10/13/00
Creditor Amount
-------- ------
1. Dime Savings-Equipment Leases $670,734
Final Payment Due 8/05
2. Capital Lease Payable $3,099,501
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxxxx
Payable to 000 Xxxxx Xxxx Xxxx LLC
Final Payment Due 7/1/08
3. Citicorp $18,356
000 Xxxxxxxxxx Xxx.
Xxxxxxxx XX 00000
Final Payment Due 3/8/03
4. General Electric Capital Co. $140,579
0000 Xxxxxx Xxxxxx Xxxx. XX
Xxxxx Xxxxxx, Xxxx 00000
Final Payment Due 6/1/04
5. Trinity Capital Corporation $62,328
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Final Payment Due 11/15/04
6. GE Capital-Colonial Pacific Leasing $65,270
00000 XX 00xx Xxxxxxx
Xxxxxxxx, XX. 00000
Final Payment Due 4/15/05
7. Trade Payables
Ninety (90) Days Past Due $1,049,266.02
(See Attached Exhibit 1) ($1,934,548.36)
Under Vendor Payment Plans
8. Non-Trade Payable
Ninety (90) Days Past Due $243,375.53
(See Attached Exhibit 2)
SCHEDULE 9.10
TO LOAN AND SECURITY AGREEMENT
EXISTING LOANS, ADVANCES AND GUARANTEES
Name of Employee Amount Interest Rate Maturity Date
---------------- ------ ------------- -------------
1. E. Xxxxxx Xxxxx $393,242 5.93% as of 10/1/00 7/31/05
CEO as of 9/30/001 compounded monthly
2. I. Xxxx Xxxxxxxxxx $148,784 5.0% as of 2/1/99 3/1/03 (1st installment)
(Prior CFO resigned as of 7/31/99 compounded monthly 3/1/04 (2nd installment)
as of 3/1/99) 3/1/05 (3rd installment)
(**Note - Loan terms for I. Xxxx Xxxxxxxxxx are pursuant to the Severance,
Consulting and Non-Competition Agreement dated March 1, 1999, between I.
Xxxx Xxxxxxxxxx and IVC Industries, Inc., a copy of which has been
provided to the Lender.)
--------
1 Please be advised that this figure represents the outstanding loan balance due
IVC from E. Xxxxxx Xxxxx reduced by the outstanding loan balance due Xxxxxxxx
Xxxxx from IVC. (XX Xxxxx loan balance $780,808 less XXxxxx loan balance
$307,566 equals $393,242)
