CREDIT AGREEMENT
dated as of August 20, 1997
among
PDK LABS INC. and FUTUREBIOTICS, INC., as Co-Borrowers,
and
EUROPEAN AMERICAN BANK, as Agent,
and
THE "BANKS" PARTY HERETO
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS......................................1
Section 1.1. Definitions...................................................1
Section 1.2. Accounting Terms.............................................12
ARTICLE 2....................................................................13
REVOLVING CREDIT FACILITY....................................................13
Section 2.1. Revolving Credit Loans.......................................13
Section 2.2. The Notes....................................................13
Section 2.3. Use of Proceeds..............................................14
Section 2.4. Borrowing Procedures for Revolving Credit Loans..............14
Section 2.5. Minimum Amounts..............................................15
Section 2.6. Interest Periods, Continuations and Conversions..............15
Section 2.7. Letters of Credit............................................16
Section 2.8. Acceptances..................................................20
Section 2.9. Voluntary Prepayment of Revolving Credit Loans...............25
Section 2.10. Inability to Determine Rate.................................26
Section 2.11. Illegality..................................................26
Section 2.12. Requirement of Law..........................................26
Section 2.13. Indemnification.............................................27
ARTICLE 3. THE TERM LOAN FACILITY............................................28
Section 3.1. Generally....................................................28
Section 3.2. The Term Notes...............................................28
Section 3.3. Amortization of Term Loans...................................28
Section 3.4. Interest on Term Loans.......................................28
Section 3.5. Use of Proceeds of Term Loans................................29
Section 3.6. Borrowing Procedure for Term Loans...........................29
ARTICLE 4. GENERAL CREDIT PROVISIONS; FEES AND PAYMENTS......................29
Section 4.1. Certain Notices; etc.........................................29
Section 4.2. Prepayments..................................................30
Section 4.3. Fees.........................................................30
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Section 4.4. Reimbursement Obligations....................................31
Section 4.5. Requirements of Law..........................................31
Section 4.6. Payments Generally...........................................32
ARTICLE 5. CONDITIONS PRECEDENT..............................................32
Section 5.1. Documentary Conditions Precedent.............................32
Section 5.2. Additional Conditions Precedent..............................36
Section 5.3. No Default Certification and Deemed Representations..........36
Section 5.4. Special Conditions for Term Loans............................36
ARTICLE 6. REPRESENTATIONS AND WARRANTIES....................................37
Section 6.1. Corporate Existence..........................................37
Section 6.2. Corporate Power and Authorization............................37
Section 6.3. No Legal Bar to Loans........................................38
Section 6.4. No Material Litigation.......................................38
Section 6.5. No Default...................................................38
Section 6.6. Ownership of Properties; Liens...............................38
Section 6.7. Taxes........................................................38
Section 6.8. Financial Condition..........................................39
Section 6.9. Filing of Statements and Reports.............................39
Section 6.10. ERISA.......................................................39
Section 6.11. Environmental Matters.......................................39
Section 6.12. Licenses, Permits, etc......................................40
Section 6.13. Material Agreements.........................................40
Section 6.14. Margin Credit...............................................40
Section 6.15. Use of Proceeds.............................................40
Section 6.16. Properties Affected.........................................40
Section 6.17. Guarantors..................................................41
Section 6.18. Subsidiaries................................................41
Section 6.19. Solvency....................................................41
ARTICLE 7. AFFIRMATIVE COVENANTS.............................................41
Section 7.1. Financial Statements.........................................41
Section 7.2. Payment and Performance of Obligations.......................43
Section 7.3. Maintenance of Properties; Insurance.........................44
ii
Section 7.4. Notices......................................................44
Section 7.5. Conduct of Business and Maintenance of Existence.............44
Section 7.6. Inspection of Property, Books and Records....................44
Section 7.7. Hazardous Material...........................................45
Section 7.8. Subsidiary Guaranties........................................45
Section 7.9. Pension Funding..............................................45
Section 7.10. Dissolution of PDI Labs Inc.................................46
ARTICLE 8. NEGATIVE COVENANTS................................................46
Section 8.1. Limitation on Indebtedness...................................46
Section 8.2. Limitation on Liens..........................................47
Section 8.3. Limitation on Contingent Obligations.........................47
Section 8.4. Prohibition of Fundamental Changes...........................48
Section 8.5. Limitation on Investments, Loans and Advances................48
Section 8.6. Prohibition of Certain Prepayments...........................49
Section 8.7. Limitation on Leases.........................................49
Section 8.8. Sale and Leaseback...........................................49
Section 8.9. Prohibitions Regarding Subordinated Debt.....................49
Section 8.10. Transactions with Affiliates................................49
Section 8.11. Management..................................................50
Section 8.12. Change in Control...........................................50
Section 8.13. Limitation on Capital Expenditures..........................50
Section 8.14. Limitation on Dividends and Stock Acquisitions..............50
ARTICLE 9. FINANCIAL COVENANTS...............................................51
Section 9.1. Leverage.....................................................51
Section 9.2. Minimum Coverage Ratio.......................................51
Section 9.3. Minimum Liquidity Ratio......................................51
Section 9.4. Minimum Consolidated Net Income..............................51
ARTICLE 10. EVENTS OF DEFAULT................................................51
Section 10.1. Events of Default...........................................51
Section 10.2. Remedies....................................................53
ARTICLE 11. THE AGENT; RELATIONS AMONG BANKS.................................54
Section 11.1. Appointment, Powers and Immunities of Agent.................54
iii
Section 11.2. Reliance by Agent...........................................54
Section 11.3. Defaults....................................................55
Section 11.4. Rights of Agent as a Bank...................................55
Section 11.5. Indemnification of Agent....................................56
Section 11.6. Documents...................................................56
Section 11.7. Non-Reliance on Agent and Other Banks.......................56
Section 11.8. Failure of Agent to Act.....................................57
Section 11.9. Resignation or Removal of Agent.............................57
Section 11.10. Amendments Concerning Agency Function......................57
Section 11.11. Liability of Agent.........................................57
Section 11.12. Transfer of Agency Function................................58
Section 11.13. Non-Receipt of Funds by the Agent..........................58
Section 11.14. Several Obligations and Rights of Banks....................58
Section 11.15. Pro Rata Treatment of Loans, Etc...........................58
Section 11.16. Sharing of Payments Among Banks............................59
ARTICLE 12. MISCELLANEOUS....................................................59
Section 12.1. Amendments and Waivers......................................59
Section 12.2. Usury.......................................................50
Section 12.3. Expenses....................................................60
Section 12.4. Survival....................................................60
Section 12.5. Assignment; Participation...................................61
Section 12.6. Notices.....................................................61
Section 12.7. Setoff......................................................62
Section 12.8. Jurisdiction; Immunities....................................62
Section 12.9. Table of Contents; Headings.................................63
Section 12.10. Severability...............................................63
Section 12.11. Counterparts...............................................63
Section 12.12. Integration................................................63
Section 12.13. Joint and Several Obligations..............................63
Section 12.14. Governing Law..............................................63
iv
CREDIT AGREEMENT dated as of August 20, 1997 among PDK LABS
INC., a corporation organized under the laws of New York ("PDK"), FUTUREBIOTICS,
INC., a corporation organized under the laws of Delaware ("Futurebiotics";
collectively with PDK, the "Co-Borrowers"), each of the Banks which is party
hereto and EUROPEAN AMERICAN BANK, a New York banking corporation having an
xxxxxx xx XXX Xxxxx, Xxxxxxxxx, Xxx Xxxx 00000 ("EAB"), as agent for the Banks
(in such capacity, together with its successors in such capacity, the "Agent").
The Co-Borrowers desire that the Banks extend credit as
provided herein, and the Banks are prepared to extend such credit. Accordingly,
the Co-Borrowers, the Banks and the Agent agree as follows:
ARTICLE 1.
DEFINITIONS; ACCOUNTING TERMS
Section 1.1. Definitions.
As used in this Agreement the following terms have the
following meanings (terms defined in the singular to have a correlative meaning
when used in the plural and vice versa):
"Acceptance Obligations" means, at any time, an amount equal
to the sum of (a) the aggregate face amount of unmatured Acceptances and (b) the
aggregate amount of all unpaid Acceptance Reimbursement Obligations.
"Acceptance Rate" means the rate for any Acceptance financing,
as determined from time to time by the Agent in its sole and absolute
discretion.
"Acceptance Reimbursement Obligations" means the obligation of
the Co-Borrowers to reimburse the Agent pursuant to Section 4.4 hereof for the
face amount of Acceptances.
"Acceptance Request" means an Acceptance Request with
appropriate insertions, in such form as the Agent shall reasonably request.
"Acceptances" shall have the meaning assigned to that term in
Section 2.8 hereof.
"Accumulated Funding Deficiency" shall have the meaning set
forth in Section 302 of ERISA.
"Affiliate" means any Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with, the
Co-Borrowers, or either of them; (b) which directly or indirectly beneficially
owns or holds 5% or more of any class of voting stock of the Co-Borrowers, or
either of them; (c) 5% or more of the voting stock of which is directly or
1
indirectly beneficially owned or held by the Co-Borrowers, or either of them; or
(d) which is a partnership in which the Co-Borrowers, or either of them, are a
general partner. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
"Aggregate Outstandings" means an amount equal to the sum of
(a) the aggregate principal amount of all Loans then outstanding, (b) L/C
Obligations then outstanding, and (c) Acceptance Obligations then outstanding.
"Agreement" means this Credit Agreement, as amended or
supplemented from time to time. References to Articles, Sections, Exhibits,
Schedules and the like refer to the Articles, Sections, Exhibits, Schedules and
the like of this Agreement unless otherwise indicated.
"Amortization" means amortization as determined and calculated
in accordance with GAAP.
"Application" means an application, in such form as the Agent
may specify from time to time, requesting the Agent to open a Letter of Credit.
"Banking Day" means any day on which commercial banks are not
authorized or required to close in New York City.
"Banks" means each of EAB and the other Banks, if any,
signatory hereto and each Bank which hereinafter becomes a "Bank" pursuant to
the terms hereof.
"Capital Base" means, on a consolidated basis, the
shareholders equity of the Co-Borrowers and their Subsidiaries plus Subordinated
Debt, less all intangible assets, including without limitation, organizational
expenses, intellectual property, goodwill, security deposits, loans or mortgages
due from shareholders and/or employees and/or Affiliates, treasury stock and
deferred charges.
"Capital Expenditures" means expenditures for any fixed assets
or improvements, replacements, substitutions, or additions thereto which have a
useful life of more than one (1) year.
"Capital Lease" means any lease which has been capitalized on
the balance sheet of the lessee in accordance with GAAP.
"Closing Date" means the date this Agreement has been executed
by the Co-Borrowers, the Banks and the Agent.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
2
"Collateral" means all of the now-owned or hereafter acquired
personal property of the Co-Borrowers and of the Guarantors, together with all
products and proceeds thereof all as more fully described in the Security
Agreements and the Guarantor Security Agreements.
"Commitments" shall mean the Revolving Credit Commitments and
the Term Loan Commitments.
"Commitment Fee" shall have the meaning assigned to such term
in Section 4.3.
"Commitment Proportion" means, with respect to each Bank at
the time of determination, that proportion its Commitment bears to the Total
Commitments.
"Commonly Controlled Entity" shall mean an entity, whether or
not incorporated, which is under common control with the Co-Borrowers within the
meaning of Section 4001 of ERISA.
"Consolidated Coverage Ratio" shall mean, with respect to PDK
and its Subsidiaries, for any twelve month period, on a consolidated basis, the
ratio of (i) the sum of Consolidated Net Income, tax expense, depreciation
expense, amortization of intangibles, other noncash charges and interest
expense, minus any unfunded Capital Expenditures, minus any cash dividends paid
(common or preferred) as permitted by this Agreement, minus cash taxes paid, to
(ii) the sum of interest expense during the preceding four fiscal quarters plus
the current portion of long term Consolidated Indebtedness (i.e., principal
installments scheduled to be paid during the subsequent four fiscal quarters.)
For purposes hereof, long term Consolidated Indebtedness shall exclude all
Revolving Credit Outstandings.
"Consolidated Current Liabilities" shall mean, at a particular
date, all amounts which would, in conformity with GAAP, be included under
current liabilities on a consolidated balance sheet of PDK and its Subsidiaries
as at such date, including, without limitation, (a) all obligations payable on
demand or within one year after the date on which the determination is made and
(b) all Revolving Credit Oustandings.
"Consolidated Indebtedness" shall mean, at a particular date,
the aggregate amount for PDK and its Subsidiaries of (i) indebtedness or
liability for borrowed money; (ii) indebtedness for the deferred purchase price
of property or services (including trade obligations or trade letters of credit)
; (iii) obligations of a lessee under Capital Leases; (iv) current liabilities
in respect of unfunded vested benefits under any Plan; (v) obligations under
stand-by letters of credit issued for the account of the Co-Borrowers, or either
of them, or any Subsidiary for purposes other than to support trade indebtedness
that would be included in clause (ii) above; (vi) obligations arising under
acceptance facilities; (vii) all guaranties, endorsements (other than for
collection or deposit in the ordinary course of business) and other contingent
obligations to purchase, to provide funds for payment, to supply funds to invest
in any Person, or otherwise to assure a creditor against loss; (viii)
obligations secured by any Lien on property owned by the Co-Borrowers, or any of
them, or any Subsidiary whether or not the obligations have been
3
assumed; and (ix) all other liabilities recorded as such, or which should be
recorded as such, on the consolidated financial statements of PDK and its
Subsidiaries in accordance with GAAP.
"Consolidated Intangibles" shall mean at a particular date,
the aggregate amount of all assets of PDK and its Subsidiaries, determined on a
consolidated basis at such date, that would be classified as intangible assets
in accordance with GAAP, but in any event including, without limitation,
customer lists, unamortized debt discount expense, unamortized organization and
reorganization expense, costs in excess of the net asset value of acquired
companies, patents, trade or service marks, franchises, trade names, goodwill
and the amount of any write-up in the book value of any assets resulting from
the revaluation (other than reevaluations arising out of foreign currency
valuations in accordance with GAAP) thereof.
"Consolidated Liquid Assets" shall mean, at a particular date,
all amounts which would, in conformity with GAAP, be included under cash and
cash equivalents, marketable securities and net accounts receivable on a
consolidated balance sheet of PDK and its Subsidiaries at such date.
"Consolidated Net Income" shall mean, at a particular date,
the aggregate amount which would, in accordance with GAAP, be classified as
consolidated net income, after taxes, in a consolidated income statement of PDK
and its Subsidiaries as at such date.
"Consolidated Quick Ratio" shall mean the ratio of (i)
Consolidated Liquid Assets to (ii) Consolidated Current Liabilities.
"Consolidated Total Assets" shall mean, at a particular date,
all amounts which would, in conformity with GAAP, be included under total assets
on a consolidated balance sheet of a Co-Borrower and its Subsidiaries at such
date.
"Consolidated Total Liabilities" shall mean, at a particular
date, all amounts which would, in conformity with GAAP, be included under total
liabilities on a consolidated balance sheet of a Co-Borrower and its
Subsidiaries at such date.
"Debt" means, with respect to any Person: (a) indebtedness of
such Person for borrowed money; (b) indebtedness for the deferred purchase price
of property or services; (c) Unfunded Vested Liabilities of such Person; (d) the
face amount of any outstanding letters of credit issued for the account of such
Person; (e) obligations arising under acceptance facilities; (f) guaranties,
endorsements (other than for collection in the ordinary course of business) and
other contingent obligations to purchase, to provide funds for payment, to
supply funds to invest in any person, or otherwise to assure a creditor against
loss; (g) obligations secured by any Lien on property of such Person; (h)
obligations of such Person as lessee under Capital Leases; (i) indebtedness of
such Person evidenced by a note, bond, indenture or similar instrument; and (j)
deferred taxes.
"Default" means any event which with the giving of notice or
lapse of time, or both, would become an Event of Default.
4
"Default Rate" means, with respect to the principal of any
Loan and, to the extent permitted by law, any other amount payable by the
Co-Borrowers under this Agreement or any Note, a rate per annum equal to 2%
above the rate of interest otherwise applicable to such Loan.
"Depreciation" means depreciation, in accordance with GAAP.
"Dividends" means, for any period, dividends paid by either
the Co-Borrower or the Guarantor.
"Dollars" and the sign "$" mean lawful money of the United
States of America.
"Draft" means a draft in such form as the Agent shall
reasonably request.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, including any rules and regulations
promulgated thereunder.
"ERISA Affiliate" means any corporation or trade or business
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as the Co-Borrowers or any Affiliate of
the Co-Borrowers or is under common control (within the meaning of Section
414(c) of the Code) with the Co-Borrowers or any Affiliate of the Co-Borrowers.
"Eurodollar Loan" shall mean a Revolving Credit Loan at such
time as it is made or maintained at a rate of interest based on the Eurodollar
Rate.
"Eurodollar Rate" shall mean for each Interest Period the rate
per annum, adjusted as provided in the following sentence, determined by the
Agent to be the rate at which U.S. dollar deposits are offered to leading banks
in the interbank eurodollar market, two (2) Banking Days prior to the first day
of such Interest Period for delivery on the first day of such Interest Period,
for the number of days in such Interest Period in an amount equal to, for each
Eurodollar Loan, the amount of such Eurodollar Loan which will be outstanding
during such Interest Period. The interest rate determined under this paragraph
shall be adjusted by dividing such interest rate by the number equal to 1.00
minus the Reserve Requirement.
"Event of Default" has the meaning given such term in Section
10.1.
5
"Facility Documents" means this Agreement, the Notes, the
Security Agreement, the Guarantees, the Guarantor Security Agreement, the
Subordination Agreement and all other documents or instruments executed in
connection herewith or therewith.
"Federal Funds Rate" means, for any day, the rate per annum
(expressed on a 360 day basis of calculation), equal to the weighted average of
the rates on overnight federal funds transactions with member banks of the
Federal Reserve System arranged by federal funds brokers, as published by the
Federal Reserve Bank of New York for such day (or for any day that is not a
Banking Day, for the immediately preceding Banking Day).
"Final Maturity Date" means the date in which all Term Loans
hereunder have reached their respective maturity dates in accordance with their
terms, which date shall be no later than the fifth anniversary of the Revolving
Credit Termination Date.
"Fixed Rate" means, with respect to any Term Loan, the rate
per annum determined by the Agent to be equal to the then current yield on U.S.
Treasury Securities having maturities approximately corresponding to the Term
Loan Maturity Date for such Term Loan plus a margin of 2% per annum.
"Forfeiture Proceeding" means the commencement of any action
or proceeding affecting the Co-Borrowers, or either of them, or any Guarantors
before any court, governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign which may result in the seizure or
forfeiture of any of their property which would cause a Material Adverse Change
with respect to the Co-Borrowers, or either of them, or either Guarantor.
"Futurebiotics Sublimit" shall mean $4,000,000, or such lesser
amount as may be in effect from time to time.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time, applied on a basis
consistent with those used in the preparation of the financial statements
referred to in Section 5.1.
"Guarantees" means the guarantees to be executed by each of
the Guarantors, each substantially in the form of Exhibit D.
"Guarantor Collateral" means all of the now owned or hereafter
acquired personal property of the Guarantors, together with all products and
proceeds thereof all as more fully described in the Guarantor Security
Agreements.
"Guarantors" means, collectively, any now existing or
hereafter created subsidiary of either Co-Borrower other than PDI Labs Inc.
"Guarantor Security Agreement" means the security agreement to
be executed, by each Guarantor, substantially in the form of Exhibit E hereto.
6
"Hazardous Substance" means any material, whether animate or
inanimate, raw, processed or waste by-product, which in itself or as found or
used, is potentially toxic, noxious or harmful to the health or safety of human
or animal life or vegetation, regardless of whether such material be found on or
below the surface of the ground, in any surface or underground water, or
airborne in ambient air or in the air inside of any structure built or located
upon or below the surface of the ground, or in any machinery, equipment or
inventory located or used in any such structure, including, but in no event
limited to all hazardous materials, hazardous wastes, toxic substances,
infectious wastes, pollutants and contaminants from time to time defined or
classified as such under any Environmental Law regardless of the quantity found,
used, manufactured or removed from a given location.
"Interest Period" shall mean with respect to any Eurodollar
Loan, initially, the period commencing on the date of borrowing with respect to
such Eurodollar Loan and ending one, two or three months thereafter as selected
by the Co-Borrowers in their notice of borrowing as provided in Section 4.1 and
thereafter, each period commencing on the last day of the next preceding
Interest Period applicable to such Eurodollar Loan and ending one, two or three
months thereafter, as selected by the Company by irrevocable notice to the Agent
not less than three (3) Working Days prior to the last day of the then current
Interest Period with respect to such Eurodollar Loan; provided that:
(A) no Interest Period shall end later than the Revolving
Termination Date;
(B) if any Interest Period would end on a day which is not a
Banking Day, that Interest Period shall be extended to the next succeeding
Banking Day unless the result of such extension would be to carry such Interest
Period into another calendar month in which event such Interest Period shall end
on the immediately preceding Banking Day; and
(C) any Interest Period that begins on the last Banking Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on the
last Banking Day of a calendar month.
"Investment" shall mean any stock, evidence of debt or other
security of any Person, any loan, advance, contribution of capital, extension of
credit or commitment therefor, including without limitation the guaranty of
loans made to others (except for current trade and customer accounts receivable
for services rendered in the ordinary course of business and payable in
accordance with customary trade terms in the ordinary course of business), to
another Person, and any purchase of (i) any security of another Person or (ii)
any business or undertaking of any Person or any commitment or option to make
any such purchase, or any other investment.
"Letter of Credit" means any letter of credit issued by the
Agent for the account of the Co-Borrowers pursuant to the terms of Section 2.7
of this Agreement.
7
"L/C Obligations" means, at any time, an amount equal to the
sum of (a) the aggregate then undrawn and unexpired amount of then outstanding
Letters of Credit and (b) the aggregate amount of unpaid L/C Reimbursement
Obligations.
"L/C Reimbursement Obligations" means the obligation of the
Co-Borrowers to reimburse the Agent pursuant to Section 4.4 for amounts drawn
under Letters of Credit.
"Lien" means any lien (statutory or otherwise), security
interest, mortgage, deed of trust, priority, pledge, charge, conditional sale,
title retention agreement, Capital Lease or other encumbrance or similar right
of others, or any agreement to give any of the foregoing.
"Loan" means any Revolving Credit Loan or any Term Loan.
"Material Adverse Change" shall mean, with respect to any
Person, (i) a material adverse change in the financial condition, business,
operations, properties, prospects or assets of such Person or (ii) the
occurrence of any event with respect to such Person which could have a material
adverse effect on the ability of such Person to perform its obligations under
the Facility Documents.
"Multiemployer Plan" means a Plan defined as such in Section
4001(a)(3) of ERISA to which contributions have been made by the Co-Borrowers,
or either of them, or any ERISA Affiliate and which is covered by Title IV of
ERISA.
"Notes" means, collectively, the Revolving Credit Notes and
the Term Notes.
"Participating Bank" means any Bank (other than the Agent)
with respect to its Participating Interest in each Letter of Credit or
Acceptance.
"Participating Interest" means, with respect to each Letter of
Credit or Acceptance, (i) in the case of the Agent, its interest (a) in such
Letter of Credit and any Application relating thereto, or (b) in such Acceptance
and any Acceptance Request relating thereto, as the case may be, in each case
after giving effect to the granting of any participating interests therein
pursuant hereto and (ii) in the case of each Participating Bank, its undivided
participating interest (a) in such Letter of Credit and any Application relating
thereto, or (b) in such Acceptance and any Acceptance Request relating thereto,
as the case may be.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Permitted Acquisition" means the acquisition by the
Co-Borrowers, or either of them, of the stock or assets of any Person engaged in
a similar type of business as the Co-Borrowers (an "Eligible Business") provided
that: (i) after giving effect thereto, the nature and scope of the business of
the Co-Borrowers shall not have been materially changed; (ii) the Permitted
Acquisition Purchase Price of all such purchases shall not exceed $6,000,000 in
the aggregate during any fiscal year of the Co-Borrowers, and that the Permitted
Acquisition
8
Purchase Price of any such acquisition does not exceed $5,000,000 and that not
more than $5,000,000 of the Permitted Acquisition Purchase Price of all such
acquisitions in the aggregate during any fiscal year of the Borrower shall be
paid in cash; (iii) prior to giving effect to such acquisition, the Agent shall
be provided with satisfactory evidence that such acquisition shall not be a
"hostile" acquisition or other "hostile" transaction (i.e., such transactions
shall have been approved by the Board of Directors of the Eligible Business); or
(iv) such Eligible Business, in the case of a purchase of stock, shall be
incorporated in or organized under the laws of a State of the United States or,
if such acquisition is of assets, such assets shall be located in the United
States.
"Permitted Acquisition Purchase Price" shall mean, with
respect to any Permitted Acquisition, collectively, without duplication, (i) all
cash paid by the Co-Borrowers or any of their Subsidiaries in connection with
such Permitted Acquisition, including in respect of transaction costs, fees and
other expenses incurred by the Co-Borrowers or any of their Subsidiaries in
connection with such Permitted Acquisition, (ii) all indebtedness created, and
all indebtedness assumed, by the Co-Borrowers or any of their Subsidiaries in
connection with such Permitted Acquisition, (iii) the value of all capital stock
issued by the Co-Borrowers or any of their Subsidiaries in connection with such
Permitted Acquisition and (iv) any deferred portion of the purchase price or any
other costs paid by the Co-Borrowers or any of their Subsidiaries in connection
with such Permitted Acquisition, including but not limited to consulting
agreements and non-compete agreements.
"Permitted Liens" means those certain Liens defined in Section
8.2 hereof.
"Person" means an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by the Co-Borrowers, or
either of them, or any ERISA Affiliate and which is covered by Title IV of ERISA
or to which Section 412 of the Code applies provided that such term shall not
include plans terminated prior to the date hereof.
"Prime Rate" means that rate of interest from time to time
announced by the Agent at its principal office as its prime commercial lending
rate.
"Prime Rate Loan" means any Loan to the extent that it is
bearing interest at a rate based upon the Prime Rate.
"Principal Office" means the principal office of the Agent,
presently located at XXX Xxxxx, Xxxxxxxxx, Xxx Xxxx 00000 or at such other
address as may be designated by the Agent as its principal office.
"Prohibited Transaction" shall mean any transaction set forth
in Section 406 of ERISA or Section 4975 of the Code.
9
"Reimbursement Obligations" means, collectively, the L/C
Reimbursement Obligations and the Acceptance Reimbursement Obligations.
"Reportable Event" means any of the events set forth in
Section 4043(b) of ERISA as to which events the PBGC by regulation has not
waived the requirement of Section 4043(a) of ERISA that it be notified within 30
days of the occurrence of such event, provided that a failure to meet the
minimum funding standard of Section 412 of the Code or Section 302 of ERISA
shall be a Reportable Event regardless of any waivers given under Section 412(d)
of the Code.
"Required Banks" shall mean, at any time, Banks having sixty
percent (60%) of the Total Commitments.
"Reserve Requirement" means, with respect to each Interest
Period for each Eurodollar Loan, the aggregate of the maximum rates (expressed
as a percentage and rounded upwards if necessary to the nearest 1/100th of 1%)
of reserve requirements current on the date two Banking Days prior to the
beginning of such Interest Period (including, without limitation, basic,
supplemental, marginal and emergency reserves under any regulations of the Board
of Governors of the Federal Reserve System or other governmental authority
having jurisdiction with respect thereto), as now and/or from time to time
hereafter in effect, relating to reserve requirements prescribed for
eurocurrency funding maintained by a member bank of such system. Such reserve
percentages shall include, without limitation, those imposed under Regulation D.
Eurodollar Loans shall be deemed to constitute "eurocurrency liabilities" (as
defined in Regulation D) and, as such, shall be deemed to be subject to such
reserve requirements without benefit of or credit for proration, exemptions or
offsets which may be available to any bank under Regulation D. The Reserve
Requirement shall be adjusted automatically on and as of the effective date of
any change in any such reserve percentage.
"Revolving Credit Commitment" means, with respect to each
Bank, the obligation of such Bank to extend credit to the Co-Borrowers pursuant
to Article 2 hereof and subject to the terms hereof in the aggregate principal
amounts following, as such amount may be reduced or otherwise modified from time
to time:
Bank Commitment
---- ----------
EAB $15,000,000
"Revolving Credit Facility" means the Revolving Credit
Facility provided for in Article 2 hereof.
"Revolving Credit Loans" means any revolving credit loan made
by the Banks to the Co-Borrowers pursuant to Section 2.1 hereto.
10
"Revolving Credit Note" means a promissory note of the
Co-Borrowers, substantially in the form of Exhibit A hereto, evidencing
Revolving Credit Loans made by any Bank hereunder.
"Revolving Credit Oustandings" means an amount equal to the
sum of (a) the aggregate principal amount of Revolving Credit Loans then
outstanding, (b) L/C Obligations then outstanding and (c) Acceptance Obligations
then outstanding.
"Revolving Credit Termination Date" means the date three years
from the date of this Agreement.
"Security Agreement" means each Security Agreement in
substantially the form of Exhibit B, to be delivered by the Co-Borrowers under
the terms of this Agreement.
"Solvent" means when used with respect to any Person on a
particular date, that on such date: (a) the fair saleable value of its assets is
in excess of the total amount of its liabilities, including, without limitation,
the reasonably expected amount of such Person's obligations with respect to
contingent liabilities, (b) the present fair saleable value of the assets of
such Person is not less than the amount that will be required to pay the
probable liability of such Person on its Debts as they become absolute and
matured, (c) such Person does not intend to, and does not believe that it will,
incur Debts or liabilities beyond such Person's ability to pay as such Debts and
liabilities mature and (d) such Person is not engaged in business or a
transaction, for which such Person's property would constitute an unreasonably
small capital.
"Subordinated Debt" means that certain indebtedness listed on
Schedule 1.1 (c) and unsecured Debt of the Co-Borrowers, or either of them, that
is subordinated on terms satisfactory to the Banks to the obligations of the
Co-Borrowers, or either of them, to the Banks under this Agreement.
"Subsidiary" means, as to any Person, any corporation or other
entity of which at least a majority of the securities or other ownership
interests having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by such Person.
"Term Loan" means each Term Loan made by the Banks to the
Co-Borrowers pursuant to Article 3 hereto.
"Term Loan Commitment" means with respect to each Bank, the
obligation of the Bank to extend credit to the Co-Borrowers pursuant to Article
3 hereof and subject to the terms and conditions hereof in the aggregate
principal amounts following, as such amounts may be reduced or otherwise
modified from time to time:
Bank Commitment
---- ----------
EAB $8,500,000
11
"Term Loan Maturity Date" means, with respect to each Term
Loan, the date on which such Term Loan matures in accordance with its terms
provided that no such date shall extend beyond the fifth anniversary of the
Revolving Credit Termination Date.
"Term Note" means each promissory note of the Co-Borrowers,
substantially in the form of Exhibit A-1 hereto, evidencing a Term Loan made by
any Bank hereunder.
"Total Commitments" means the sum of the Commitments.
"Total Unsubordinated Liabilities" means all Debt of the
Co-Borrowers and the Corporate Guarantor, on a consolidated basis, that is not
Subordinated Debt excluding all Debt which is contingent indebtedness..
"Unfunded Vested Liabilities" means, with respect to any Plan,
the amount (if any) by which the present value of all vested benefits under the
Plan exceeds the fair market value of all Plan assets allocable to such
benefits, as determined on the most recent valuation date of the Plan and in
accordance with the provisions of ERISA for calculating the potential liability
of the Borrower or any ERISA Affiliate to the PBGC or the Plan under Title IV of
ERISA.
"UCC" means the Uniform Commercial Code as in effect from time
to time in New York.
"Uniform Customs" means the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended from time to time.
Section 1.2. Accounting Terms.
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP, and all financial data required to be
delivered hereunder shall be prepared in accordance with GAAP.
12
ARTICLE 2.
REVOLVING CREDIT FACILITY
Section 2.1. Revolving Credit Loans.
Subject to the terms and conditions of this Agreement, each of
the Banks severally agrees to make revolving credit loans in Dollars (the
"Revolving Credit Loans") to the Co-Borrowers from time to time from and
including the date hereof to but excluding the Revolving Credit Termination Date
up to but not exceeding at any one time outstanding, when aggregated with such
Bank's Commitment Proportion of the then outstanding L/C Obligations and
Acceptance Obligations, the amount of its Revolving Credit Commitment; provided,
that no Revolving Credit Loan shall be made if after giving effect to such Loan
the Revolving Credit Outstandings at the time of such Loan would exceed the
aggregate Revolving Credit Commitments in effect on such date. Revolving Credit
Loans may be outstanding as Prime Rate Loans or as Eurodollar Loans; provided,
however, that during the occurrence and continuance of a Default or Event of
Default, the Banks shall have no obligation to make Eurodollar Loans. Subject to
the foregoing limits, the Co-Borrowers may borrow, repay and reborrow, on or
after the date hereof and prior to the Revolving Credit Termination Date, all or
a portion of the aggregate Revolving Credit Commitments hereunder.
Section 2.2. The Notes.
The Revolving Credit Loans of each Bank shall be evidenced by
a single promissory note in favor of such Bank substantially in the form of
Exhibit A with appropriate insertions, duly executed and completed by the
Co-Borrowers. Each Bank is hereby authorized to record the date and amount of
each Revolving Credit Loan, the date and amount of each payment of principal
thereof, and the principal amount subject thereto in such Bank's records and/or
on the schedules annexed to and constituting a part of the Revolving Credit
Notes, and, absent manifest error, any such recordation shall constitute
conclusive evidence of the information so recorded; provided that the failure to
make any such recordation shall not in any way affect the obligation of the
Co-Borrowers to repay the Revolving Credit Loans. Each Revolving Credit Note (a)
shall be dated the date hereof, (b) be stated to mature on the Revolving Credit
Termination Date and (c) shall bear interest from and including the date hereof
on the unpaid principal amount thereof as follows:
(i) Each Prime Rate Loan shall bear interest on the
unpaid principal amount thereof at a rate per
annum equal to the Prime Rate. Interest on Prime
Rate Loans shall be payable monthly on the first
Banking Day of each month commencing on the first
such date after a Prime Rate Loan is made and upon
payment or prepayment in full of the unpaid
principal amount thereof.
13
(ii) Each Eurodollar Loan shall bear interest on the
unpaid principal amount thereof at a rate per
annum equal to the Eurodollar Rate plus a margin
of 1-3/4% per annum. Interest on each Eurodollar
Loan shall be payable on the last day of each
Interest Period applicable thereto, and upon
payment or prepayment in full of the unpaid
principal amount thereof. If applicable,
interest on each Eurodollar Loan with an Interest
Period greater than one month shall also be
payable on the first Business Day of each month
from the date of such Eurodollar Loan, and on the
first Business Day of each month thereafter.
(iii) The unpaid principal amount of all Prime Rate
Loans and Eurodollar Loans shall be payable on the
Revolving Termination Date. If all or a portion of
any principal amount of any loan shall not be paid
when due (whether as stated, by acceleration or
otherwise), such loan, if a Eurodollar Loan, shall
be converted to a Prime Rate Loan at the end of
the relevant Interest Period applicable thereto,
and any such overdue principal amount shall bear
interest at a rate per annum which is 2% above the
rate which would otherwise be applicable pursuant
to the terms of this Section 2.2.
Section 2.3. Use of Proceeds.
(a) The Co-Borrowers shall use the proceeds of the Revolving
Credit Loans (i) to refinance all obligations of the Co-Borrowers to The Chase
Manhattan Bank and (ii) subject to the Futurebiotics Sublimit, to finance the
ongoing working capital needs of the Co-Borrowers for general corporate purposes
and general working capital purposes. No part of the proceeds of any of the
Loans will be used for any purpose which violates the provisions of Regulation
G, T, U or X of the Board of Governors of the Federal Reserve System as in
effect on the date of making such Loans.
(b) The Co-Borrowers agree to indemnify each Bank and hold
each Bank harmless from and against any and all liabilities, losses, damages,
costs and expenses of any kind (including, without limitation, the reasonable
fees and disbursements of counsel for any Bank in connection with any
investigative, administrative or judicial proceeding, whether or not such Bank
shall be designated a party thereto) which may be incurred by any Bank (or by
the Agent in connection with its actions as Agent hereunder), relating to or
arising out of this Agreement or any actual or proposed use of proceeds of Loans
hereunder, except those caused by such Bank's gross negligence or willful
misconduct or the breach of its obligations hereunder.
Section 2.4. Borrowing Procedures for Revolving Credit Loans.
The Co-Borrowers may request a borrowing under the Revolving
Credit Commitments hereunder as provided in Section 4.1. Not later than 1:00
p.m. New York City time on the date of such borrowing, each Bank shall, subject
to the conditions of this Agreement, make the amount of the Revolving Credit
Loan to be made by it on such day available to the Agent, at the Principal
Office and in immediately available funds for the account of the Co-
14
Borrowers. The amount received by the Agent shall, subject to the conditions of
this Agreement, be made available to the Co-Borrowers on the date of such
borrowing, in immediately available funds, by the Agent crediting an account of
the Co-Borrowers designated by the Co-Borrowers and maintained with the Agent at
the Principal Office.
Section 2.5. Minimum Amounts.
Except for borrowings which exhaust the full remaining amount
of the Revolving Credit Commitments and payments which result in the prepayment
of all Revolving Credit Loans, each borrowing and payment of principal of Prime
Rate Loans shall be in an amount at least equal to $200,000 and, if greater,
integral multiples of $100,000, and each borrowing and payment of Eurodollar
Loans shall be in an amount at least equal to $500,000 and, if greater, integral
multiples of $500,000.
Section 2.6. Interest Periods, Continuations and Conversions.
(a) In the case of each Eurodollar Loan, the Co-Borrowers
shall select an Interest Period of any of the durations set forth in the
definition of Interest Period in Section 1.1. and shall notify the Agent of such
selection as provided in Section 4.1 hereof.
(b) Upon the expiration of an Interest Period for any
Eurodollar Loan or any portion thereof, such Loan or portion thereof shall be
automatically converted to a Prime Rate Loan, except to the extent that such
Loan shall be repaid hereunder or shall be required to be repaid hereunder or
unless the Co-Borrowers shall have notified the Agent, as provided in Section
4.1 hereof, of their intention to continue such Loan as a Eurodollar Loan and
shall have selected an Interest Period with respect thereto. Subject to the
following conditions and to the terms and conditions of this Agreement, the
Co-Borrowers shall have the right to convert or continue (as the case may be)
any Loan or portion thereof as aforesaid, provided that:
(i) if less than all Revolving Credit Loans at the
time outstanding shall be converted or continued,
the notice given by the Co-Borrowers to the Agent
shall specify the aggregate amount of Revolving
Credit Loans in each case to be converted or
continued and such conversion or continuation
shall be made ratably among the Banks in
accordance with their respective Commitment
Proportions;
(ii) in the case of a conversion or continuation of
less than all outstanding Revolving Credit Loans,
the aggregate principal amount of Revolving Credit
Loans to be converted or continued shall not be
less than (1) $1,000,000 (and if greater in
integral multiples of $500,000 in excess thereof)
in the case of conversions to or continuations of
Eurodollar Loans or (2) $200,000 (or if greater in
integral multiples of $100,000 in excess thereof)
in the case of conversions to Prime Rate Loans;
15
(iii) no Revolving Credit Loan may be converted to or
continued as a Eurodollar Loan less than one month
before the Revolving Credit Termination Date;
(iv) a Eurodollar Loan may be converted to a Prime Rate
Loan only on the last day of an Interest Period;
(v) no Revolving Credit Loan or portion thereof may be
converted to or continued as a Eurodollar Loan
after the occurrence and during the continuance of
a Default or an Event of Default;
(vi) the initial Interest Period for any Eurodollar
Loan shall commence on the date of the making of
such Loan (including the date of any conversion
from a Prime Rate Loan) and each Interest Period
occurring thereafter in respect of such Loan shall
commence on the date on which the next preceding
Interest Period expires; and
(vii) no Interest Period in respect of any Eurodollar
Loan shall extend beyond the Revolving Credit
Termination Date.
Section 2.7. Letters of Credit.
(a) Generally. Subject to the terms and conditions hereof, the
Agent, in reliance on the agreements of the other Banks set forth in subsection
2.7(d)(i), agrees to issue letters of credit (the "Letters of Credit") for the
account of the Co-Borrowers on any Banking Day prior to the Revolving Credit
Termination Date in such form as may be approved from time to time by the Agent;
provided that the Agent shall have no obligation to issue any Letter of Credit
if, after giving effect to such issuance, (i) the Revolving Credit Outstandings
would exceed the aggregate Revolving Credit Commitments as then in effect or
(ii) the L/C Obligations plus the Acceptance Obligations would exceed $2,000,000
in the aggregate. Each Letter of Credit shall be denominated in Dollars and
shall expire no later than one year after the date of issuance and in any event
no later than the Revolving Credit Termination Date.
(i) Each Letter of Credit shall be subject to the
Uniform Customs and, to the extent not
inconsistent therewith, the laws of the State of
New York.
(ii) The Agent shall not at any time be obligated to
issue any Letter of Credit hereunder if such
issuance would conflict with, or cause the Agent
or any Participating Banks to exceed any limits
imposed by, any applicable law.
(iii) In no event shall the aggregate face amount of the
Letters of Credit outstanding plus the aggregate
Acceptance Obligations hereunder exceed
$2,000,000.
16
(b) Procedure for Issuance of Letters of Credit. The
Co-Borrowers may from time to time request that the Agent issue a Letter of
Credit by delivering to the Agent at its address for notices specified herein an
Application therefor, including by electronic transmission, completed to the
satisfaction of the Agent, and such other certificates, documents and other
papers and information as the Agent may require. Upon receiving a completed
Application and such other certificates, documents and other papers and
information, the Agent will process such Application and the certificates,
documents and other papers and information delivered to it in connection
therewith in accordance with its customary procedures and shall promptly issue
the Letter of Credit requested thereby (but in no event shall the Agent be
required to issue any Letter of Credit earlier than three Banking Days after its
receipt of the Application therefor and all such other certificates, documents
and other papers and information relating thereto) by issuing the original of
such Letter of Credit to the beneficiary thereof or as otherwise may be agreed
by the Agent and the Co-Borrowers. The Agent shall furnish a copy of such Letter
of Credit to the Co-Borrowers promptly following the issuance thereof.
(c) Fees, Commissions and Other Charges.
(i) Subject to the Agent's minimum commissions
established from time to time, the Co-Borrowers
shall pay to the Agent, for the account of the
Agent and the Participating Banks, a letter of
credit commission with respect to each Letter of
Credit that is a standby letter of credit, in an
amount equal to 1% per annum of the face amount of
each such Letter of Credit at the time such Letter
of Credit is established, to be shared ratably
among the Agent and the Participating Banks in
accordance with their respective Commitment
Proportions. Subject to the Agent's minimum
commissions established from time to time, the
Co-Borrowers shall pay to the Agent, for the
account of the Agent and the Participating Banks,
a letter of credit commission with respect to each
Letter of Credit other than a standby letter of
credit in an amount equal to 1/4 of 1% of the face
amount of each such Letter of Credit at the time
such Letter of Credit is established and 1/4 of 1%
of the amount paid on each such Letter of Credit
when there is a drawing thereon.
(ii) In addition to the foregoing commissions, the
Co-Borrowers shall pay or reimburse the Agent for
such normal and customary costs and expenses as
are incurred or charged by the Agent in issuing,
effecting payment under, amending or otherwise
administering any Letter of Credit.
(iii) The Agent shall, at the end of each month,
distribute to itself and the Participating Banks
all commissions received by the Agent for their
respective accounts pursuant to this subsection.
17
(d) Participating Banks.
(i) The Agent irrevocably agrees to grant and hereby
grants to each Participating Bank , and, to induce
the Agent to issue Letters of Credit hereunder,
each Participating Bank irrevocably agrees to
accept and purchase and hereby accepts and
purchases from the Agent, on the terms and
conditions hereinafter stated, for such
Participating Bank's own account and risk, an
undivided interest equal to such Participating
Bank's Commitment Proportion in the Agent's
obligations and rights under each Letter of Credit
issued hereunder and the amount of each draft paid
by the Agent thereunder. Each Participating Bank
unconditionally and irrevocably agrees with the
Agent that, if a draft is paid under any Letter of
Credit for which the Agent is not reimbursed in
full by the Co-Borrower in accordance with the
terms of this Agreement or the Application, as the
case may be, such Participating Bank shall pay to
the Agent upon demand at the Agent's address for
notices specified herein an amount equal to such
Participating Bank's Commitment Proportion of the
amount of such draft, or any part thereof, which
is not so reimbursed.
(ii) If any amount required to be paid by any
Participating Bank to the Agent pursuant to
subsection 2.7(d)(i) in respect of any
unreimbursed portion of any payment made by the
Agent under any Letter of Credit is paid to the
Agent within three Banking Days after the date
such payment is due, such Participating Bank shall
pay to the Agent on demand an amount equal to the
product of (i) such amount, times (ii) the daily
average Federal Funds Rate, as quoted by the
Agent, during the period from and including the
date such payment is required to the date on which
such payment is immediately available to the
Agent, times (iii) a fraction, the numerator of
which is the number of days that elapse during
such period and the denominator of which is 360.
If any such amount required to be paid by any
Participating Bank pursuant to subsection
2.7(d)(i) is not in fact made available to the
Agent by such Participating Bank within three
Banking Days after the date such payment is due,
the Agent shall be entitled to recover from such
Participating Bank, on demand, such amount with
interest thereon calculated from such date at the
rate per annum applicable to Prime Rate Loans
which are not overdue hereunder. A certificate of
the Agent submitted to any Participating Banks
with respect to any amounts owing under this
subsection shall be conclusive in the absence of
manifest error.
(iii) Whenever, at any time after the Agent has made
payment under any Letter of Credit and has
received from any Participating Bank its pro rata
share of such payment in accordance with
subsection 2.7(d)(i),
18
the Agent receives any payment related to such
Letter of Credit (whether directly from the
Co-Borrowers or otherwise, including proceeds of
collateral applied thereto by the Agent), or any
payment of interest on account thereof, the Agent
will, within three Banking Days after receipt
thereof, distribute to such Participating Bank its
pro rata share thereof; provided, however, that in
the event that any such payment received by the
Agent shall be required to be returned by the
Agent, such Participating Bank shall, within three
Banking Days, return to the Agent the portion
thereof previously distributed by the Agent to it.
If any amount payable under this paragraph is paid
within three Banking Days after such payment is
due, the Bank which owes such amount shall pay to
the Bank to which such amount is owed on demand an
amount equal to the product of (i) such amount,
times (ii) the daily average Federal Funds Rate,
as quoted by such Bank, during the period from and
including the date such payment is required to the
date on which such payment is made available to
such Bank, times (iii) a fraction, the numerator
of which is the number of days that elapse during
such period and the denominator of which is 360.
If any amount required to be paid under this
paragraph is not in fact made available to the
Bank to which such amount is owed within three
Banking Days after the date such payment is due,
such Bank shall be entitled to recover from the
Bank which owes such amount, on demand, such
amount with interest thereon calculated from such
due date at the rate per annum applicable to Prime
Rate Loans which are not overdue hereunder.
(e) Obligations Absolute. The Co-Borrowers' obligations under
this Section 2.7 and Section 4.4 shall be absolute and unconditional under any
and all circumstances and irrespective of any set-off, counterclaim or defense
to payment which the Co-Borrowers may have or have had against the Agent or any
beneficiary of a Letter of Credit. The Co-Borrowers also agree with the Agent
that the Agent shall not be responsible for, and the Co-Borrowers' L/C
Reimbursement Obligations under Section 4.4 shall not be affected by, among
other things, the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or any dispute between or among the Co-Borrowers and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or any claims whatsoever of the Co-Borrowers against
any beneficiary of such Letter of Credit or any such transferee. The Agent shall
not be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit, except for errors or omissions caused by
the Agent's gross negligence or willful misconduct. The Co-Borrowers agree that
any action taken or omitted by the Agent under or in connection with any Letter
of Credit (including any Existing Letter of Credit) or the related drafts or
documents, if done in the absence of gross negligence or willful misconduct and
in accordance with the standards of care specified in the UCC, shall be binding
on the Co-Borrowers and shall not result in any liability of the Agent to the
Co-Borrowers.
19
(f) Letter of Credit Payments. If any draft shall be presented
for payment under any Letter of Credit, the Agent shall promptly notify the
Co-Borrowers of the date and amount thereof. The responsibility of the Agent to
the Co-Borrowers in connection with any draft presented for payment under any
Letter of Credit shall, in addition to any payment obligation expressly provided
for in such Letter of Credit, be limited to determining that the documents
(including each draft) delivered under such Letter of Credit in connection with
such presentment are in conformity with such Letter of Credit.
(g) Application. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 2.7, the provisions of this Section 2.7 shall apply. The
Co-Borrowers acknowledge and agree that all rights of the Agent under any
Application shall inure to the benefit of each Participating Bank to the extent
of its Commitment Proportion as fully as if such Participating Banks were a
party to such Application.
Section 2.8. Acceptances.
(a) Generally.
(i) Subject to the terms and conditions hereof, the
Agent, in reliance of the agreements of the other
Banks set forth in subsection 2.8(c)(i), agrees to
create acceptances (the "Acceptances") in respect
of Drafts drawn on the Agent by the Co-Borrowers
and discounted by the Agent for the account of the
Co-Borrowers on any Banking Day prior to the
Termination Date; provided that the Agent shall
have no obligation to create any Acceptance, if
after giving effect to such creation, (i) the
Revolving Credit Outstandings would exceed the
aggregate Revolving Credit Commitments as then in
effect or (ii) the Acceptance Obligations plus the
L/C Obligations would exceed $2,000,000 in the
aggregate. Upon the creation of any Acceptance
hereunder, the Co-Borrowers shall be deemed to
have requested that the Agent discount such Draft
pursuant to, subsection 2.8(d) hereof
(ii) The Agent shall not at any time be obligated to
create an Acceptance hereunder if such creation
would conflict with, or cause the Agent or any
Participating Bank to exceed any limits imposed by
any applicable law or if, for reasons beyond the
control of the Agent, such Acceptance does not
comply with applicable requirements of Section 13
of the Federal Reserve Act or the regulations of
the Board of Governors of the Federal Reserve
System of the United States of America governing
the creation and discounting of, and the
maintenance of reserves with respect to, bankers'
acceptances.
20
(b) Procedure for Creation of Acceptances.
(i) The Co-Borrowers may from time to time request the
creation of Acceptances hereunder by delivering to
the Agent at its address for notices specified
herein, (A) an Acceptance Request, completed to
the satisfaction of the Agent and specifying,
among other things, the date (which must be a
Banking Day), maturity and amount of the Draft to
be accepted, (B) to the extent not theretofore
supplied to the Agent in accordance with
subsection 2.8(g), a Draft to be drawn on the
Agent, appropriately completed in accordance with
this subsection 2.8(b) and (C) such other
certificates, documents and other papers and
information as the Agent may reasonably request.
(ii) Each Draft submitted by the Co-Borrowers for
acceptance hereunder shall be denominated in
Dollars, shall be dated the date specified in the
Acceptance Request with respect thereto and shall
be stated to mature on a Banking Day which is 30,
60, 90, 120, 150 or 180 days after the date
thereof provided that no Draft submitted for
acceptance hereunder shall be stated to mature on
a date after the Revolving Credit Termination
Date. Acceptances created hereunder shall be in
minimum face amounts of $500,000 and, if greater,
in integral multiples of $100,000 in excess
thereof.
(iii) Subject to subsection 2.8(b)(iv), not later than
the close of business at its address for notices
specified herein on the Banking Day specified in
an Acceptance Request, and upon fulfillment of the
applicable conditions set forth in Section 5.1,
the Agent shall, in accordance with such
Acceptance Request, (A) complete the date, amount
and maturity of each Draft presented for
acceptance (to the extent not completed by the
Co-Borrowers), (B) accept such Drafts and (C) upon
such acceptance, discount such Acceptances in
accordance with subsection 2.8(d).
(iv) The acceptance and discounting of Drafts by the
Agent hereunder shall at all times be in the sole
and absolute discretion of the Agent.
(c) Acceptance Participation.
(i) The Agent irrevocably agrees to grant and hereby
grants to each Participating Bank, and, to induce
the Agent to create Acceptances hereunder, each
Participating Bank irrevocably agrees to accept
and purchase and hereby accepts and purchases from
the Agent, on the terms and conditions hereinafter
stated, for such Participating Bank's own account
and risk, an undivided interest equal to such
21
Participating Bank's Commitment Proportion in the
Agent's obligations and rights under each
Acceptance created hereunder and the face amount
of each Acceptance created by the Agent. Each
Participating Bank unconditionally and irrevocably
agrees with the Agent that, if the Agent is not
reimbursed in full by the Co-Borrowers for the
face amount of any Acceptance in accordance with
the terms of this Agreement, such Participating
Bank shall pay to the Agent upon demand at the
Agent's address for notices specified herein an
amount equal to such Participating Bank's
Commitment Proportion of the face amount of such
Acceptance, or any part thereof, which is not so
reimbursed.
(ii) If any amount required to be paid by any
Participating Bank to the Agent pursuant to
subsection 2.8(c)(i) in respect of any
unreimbursed portion of any payment made by the
Agent under any Acceptance is paid to the Agent
within three Banking Days after the date such
payment is due, such Participating Bank shall pay
to the Agent on demand an amount equal to the
product of (A) such amount, times (B) the daily
average Federal Funds Rate, as quoted by the
Agent, during the period from and including the
date such payment is required to the date on which
such payment is immediately available to the
Agent, times (C) a fraction, the numerator of
which is the number of days that elapse during
such period and the denominator of which is 360.
If any such amount required to be paid by any
Participating Bank pursuant to subsection
2.8(c)(i) is not in fact made available to the
Agent by such Participating Bank within three
Banking Days after the date such payment is due,
the Agent shall be entitled to recover from such
Participating Bank, on demand, such amount with
interest thereon calculated from such due date at
the rate per annum applicable to Prime Rate Loans
which are not overdue hereunder. A certificate of
the Agent submitted to any Participating Bank with
respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest
error.
(iii) Whenever, at any time after the Agent has made
payment under any Acceptance and has received from
any Participating Bank its pro rata share of such
payment in accordance with subsection 2.8(c)(i),
the Agent receives any payment related to such
Acceptance (whether directly from the Co-Borrowers
or otherwise, including proceeds of collateral
applied thereto by the Agent), or any payment of
interest on account thereof, the Agent will,
within three Banking Days after receipt thereof,
distribute to such Participating Bank its pro rata
share thereof; provided, however, that in the
event that any such payment received by the Agent
shall be required to be returned by the Agent,
such Participating Bank shall, within three
Banking Days, return to
22
the Agent the portion thereof previously
distributed by the Agent to it. If any amount
payable under this paragraph is paid within three
Banking Days after such payment is due, the Bank
which owes such amount shall pay to the Bank to
which such amount is owed on demand an amount
equal to the product of (A) such amount, times (B)
the daily average Federal Funds Rate, as quoted by
such Bank, during the period from and including
the date such payment is required to the date on
which such payment is made available to such Bank,
times (C) a fraction, the numerator of which is
the number of days that elapse during such period
and the denominator of which is 360. If any amount
required to be paid under this paragraph is not in
fact made available to the Bank to which such
amount is owed within three Banking Days after the
date such payment is due, such Bank shall be
entitled to recover from the Bank which owes such
amount, on demand, such amount with interest
thereon calculated from such due date at the rate
per annum applicable to Prime Rate Loans which are
not overdue hereunder.
(d) Discount of Acceptances, etc.
(i) The Agent agrees, on the terms and conditions of
this Agreement, that on any date on which it
creates an Acceptance hereunder, the Agent will
discount such Acceptance at the Acceptance Rate
plus 1-3/4%, by making available to the
Co-Borrowers an amount in immediately available
funds equal to the face amount of each Acceptance
created by the Agent on such date less such
discount and notify the Agent that such Draft has
been accepted and discounted by the Agent. The
Agent will then pay to the Agent for the account
of the Co-Borrowers an amount equal to the
proceeds of such discount.
(ii) On the date that any Acceptance is discounted
pursuant to subsection 2.8(d)(i), the Agent shall
pay to each Participating Bank an amount equal to
1-3/4% of such Participating Bank's Commitment
Proportion of the face amount of such Acceptance.
(iii) In addition, the Co-Borrowers shall pay or
reimburse the Agent for such normal and customary
costs and expenses as are incurred or charged by
the Agent in connection with the creation,
discount or administration of Acceptances.
(e) Mandatory Prepayment.
(i) In the event that (A) there is a change in, or
change in interpretation of, any applicable law,
rule or regulation (such determination or such
change, a "Reserve Determination"), in either case
to the effect that
23
any bankers' acceptance created hereunder or in
connection with a substantially similar facility
(whether or not either the Co-Borrowers or any
Bank is directly involved as a party) will be
ineligible for reserve-free treatment (or, if
already discounted, should have been ineligible
for reserve-free treatment) under Section 13 of
the Federal Reserve Act or any other regulation or
rule of the Board of Governors of the Federal
Reserve System of the United States of America,
and as a result any Bank is required to maintain,
or determines as a matter of prudent banking
practice that it is appropriate for it to
maintain, additional reserves, or (B) any
restriction is imposed on any Bank (including,
without limitation, any change in acceptance
limits imposed on any Bank) which would prevent
such Bank from creating or participating in
bankers' acceptances or otherwise performing its
obligations in respect of the Acceptances, then
the Agent may, or upon the direction of the Banks,
the Agent shall, by notice to the Co-Borrowers,
demand prepayment of all outstanding Acceptances
(if such prepayment is required), and the Agent
shall have no further obligation to accept or
discount Drafts hereunder. The Co-Borrowers agree
that they shall, within two Banking Days of its
receipt of a notice of mandatory prepayment of the
Acceptances, prepay all Acceptance Obligations in
accordance with the provisions of subsection
2.8(e)(ii) hereof.
(ii) Any prepayment of any Acceptance Obligation made
pursuant hereto shall be made to the Agent and
shall be in an amount equal to the face amount of
such Acceptance minus a prepayment discount
calculated by the Agent in accordance with its
customary practice for similar Acceptances and
communicated to the Co-Borrowers; provided that,
in the event that the Co-Borrowers fail to make
such prepayment as provided in this subsection
2.8(e)(ii), such Acceptance Obligation shall be
automatically converted into Loans in the amount
of such prepayment. The Borrowing Date with
respect to such borrowing shall be the date of
such prepayment.
(iii) Except as otherwise provided herein, Acceptances
may not be prepaid prior to maturity.
(f) Obligations Absolute. The Co-Borrowers' obligations under
this Section 2.8 and Section 4.4 shall be absolute and unconditional under any
and all circumstances and irrespective of any set-off, counterclaim or defense
to payment which the Co-Borrowers may have or have had against the Agent. The
Co-Borrowers also agree with the Agent that the Agent shall not be responsible
for, and the Co-Borrowers' Acceptance Reimbursement Obligations under Section
4.4 shall not be affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even though such documents shall in
fact prove to be invalid, fraudulent or forged, or any dispute between or among
the Co-Borrowers or any other
24
party to which such Acceptance may be transferred or any claims whatsoever of
the Co-Borrowers or any such transferee. The Co-Borrowers agree that any action
taken or omitted by the Agent under or in connection with any Acceptance or the
related drafts or documents, if done in the absence of gross negligence or
willful misconduct and in accordance with the standards of care specified in the
UCC, shall be binding on the Co-Borrowers and shall not result in any liability
of the Agent to the Co-Borrowers.
(g) Supply of Drafts. To enable the Agent to create
Acceptances in the manner specified in this Section 2.8, the Co-Borrowers may
provide to the Agent, on the Closing Date and thereafter from time to time upon
request of the Agent or the Agent, such number of blank Drafts conforming to the
requirements hereof as the Agent or the Agent may reasonably request, each duly
executed on behalf of the Co-Borrowers, and the Agent shall hold any such
documents in safekeeping. The Co-Borrowers and the Agent hereby agree that in
the event that any authorized signatory of the Co-Borrowers whose signature
shall appear on any Draft shall cease to have such authority at the time that an
Acceptance is to be created with respect thereto, such signature shall
nevertheless be valid and sufficient for all purposes as if such authority had
remained in full force and effect at the time of such creation.
(h) Delivery of Certain Documentation. Upon request by the
Agent, the Co-Borrowers shall furnish to the Agent (a) a copy of the contract of
sale or any xxxx of lading, warehouse receipt, policy or certificate of
insurance or other document covering or otherwise relating to each shipment of
goods, if any, specified in the Acceptance Request relating to such Acceptance
and (b) such other documents or information as the Agent shall reasonably
request with respect to the creation of such Acceptance.
(i) Notice. The Agent shall notify the Federal Reserve Bank of
New York of the terms under which Acceptances may be made if requested or
required to do so by such institution.
(j) Use of Proceeds. The proceeds of the Acceptances shall be
used in transactions which fulfill the requirements of Section 13 of the Federal
Reserve Act or the regulations of the Board of Governors of the Federal Reserve
System of the United States of America governing the creation and discounting
of, and the maintenance of reserves with respect to, bankers' acceptances or for
general working capital purposes.
Section 2.9. Voluntary Prepayment of Revolving Credit Loans.
The Co-Borrowers may prepay any Prime Rate Loan without
premium or penalty in whole at any time or in part from time to time, and any
Eurodollar Loan without premium or penalty in whole or in part on the last day
of any Interest Period applicable thereto. Eurodollar Loans may not be prepaid
during an Interest Period unless together with such payment, the Co-Borrowers
pay any amounts required to be paid in accordance with Section 2.13(iv) hereof.
Partial prepayments of the Revolving Credit Loans shall be in minimum principal
amount of $200,000 (or integral multiples of $100,000 in excess thereof) if
repayment is of a Prime Rate Loan, and $1,000,000 (or integral multiples of
$500,000 in excess thereof) if repayment is of a
25
Eurodollar Loan, together with payment of accrued interest thereon to the date
of the prepayment (and, if applicable, the payment required by Section 2.13
(iv)). The Co-Borrowers shall give to the Agent and each Bank at least three (3)
Business Days prior written, telegraphic or tested telex notice of any repayment
or prepayment of any Eurodollar Loan, specifying the date and the amount
thereof.
Section 2.10. Inability to Determine Rate.
If with respect to any Interest Period pertaining to a
Eurodollar Loan, the Agent determines that extraordinary circumstances affecting
the relevant market make it impracticable to ascertain the interest rate
applicable for such Interest Period, the Agent shall promptly notify the
Co-Borrowers and each Bank of such determination and no additional Eurodollar
Loans shall be made nor shall there be any conversions thereto until such notice
is withdrawn. If any Eurodollar Loan is outstanding on the date of such notice
and such notice has not been withdrawn on the last day of the then current
Interest Period applicable thereto, the Co-Borrowers may on the last day of such
Interest Period either convert such Eurodollar Loan to a Prime Rate Loan or
prepay the outstanding principal balance thereof and accrued interest thereon in
full.
Section 2.11. Illegality.
Notwithstanding any other provisions of this Agreement, if any
law, regulation, treaty or directive or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Bank to
make or maintain Eurodollar Loans as contemplated by this Agreement, then (a)
such Bank shall promptly notify the Agent thereof (with a copy to the
Co-Borrowers) and such Bank's obligation to make or maintain Eurodollar Loans or
convert Prime Rate Loans to Eurodollar Loans shall forthwith be suspended until
such time as such Bank may again make and maintain such Loans and (b) Loans then
outstanding as Eurodollar Loans, if any, shall be converted to Loans bearing
interest at the Prime Rate on the last day of the Interest Period applicable
thereto or within such earlier period as required by law. The Co-Borrowers
hereby agree to promptly pay to the Agent for the benefit of the affected Bank,
upon the demand of such Bank through the Agent, any amounts required by Section
2.13(iv) resulting from a prepayment of a Eurodollar Loan.
Section 2.12. Requirement of Law.
In the event that any law, regulation, treaty or directive or
any change therein or in the interpretation or application thereof or compliance
by any Bank with any request or directive (whether or not having the force of
law) from any central bank or other governmental authority, agency or
instrumentality:
(i) does or shall subject such Bank to any tax of any
kind whatsoever with respect to this Agreement,
its Commitment, the Notes or any Loans made
hereunder, or change the basis of taxation of
payments to such Bank of principal, commitment
fee, interest or any other amount payable
hereunder (except for changes in the rate of any
tax presently imposed on such Bank);
26
(ii) does or shall impose, modify or hold applicable
any reserve, special deposit, compulsory loan or
similar requirement against assets held by, or
deposits or other liabilities in or for the
account of, advances or loans by, or other credit
extended by, or any other acquisition of funds by,
any office of such Bank which are not otherwise
included in the determination of the Eurodollar
Rate hereunder;
(iii) does or shall impose on such Bank any other
condition;
and the result of any of the foregoing is to increase the cost to such Bank of
making, renewing or maintaining commitments, advances or extensions of credit to
the Co-Borrowers or to reduce any amount receivable from the Co-Borrowers
thereunder then, in any such case, the Co-Borrowers shall promptly pay to the
Agent for the account of each Bank, upon the demand of such Bank through the
Agent, any additional amounts necessary to compensate such Bank for such
additional cost or reduced amount receivable which such Bank deems to be
material as determined by such Bank with respect to this Agreement, its
Commitment, the Notes or the Loans made hereunder. If any Bank becomes entitled
to claim any additional amounts pursuant to this Section 2.12, it shall promptly
notify the Co-Borrowers and the Agent of the event by reason of which it has
become so entitled. A certificate setting forth calculations as to any
additional amounts payable pursuant to the foregoing sentence submitted by such
Bank to the Agent and the Co-Borrowers shall be conclusive in the absence of
manifest error.
Section 2.13. Indemnification.
The Co-Borrowers agree to indemnify each Bank (including,
without limitation, the Agent) and to hold each Bank harmless from any loss or
expense which such Bank may sustain or incur as a consequence of (i) default by
the Co-Borrowers in payment when due of the principal amount of or interest on
any Eurodollar Loan, (ii) default by the Co-Borrowers in making a borrowing of,
conversion into or continuation of Eurodollar Loans after the Co-Borrowers have
given a notice requesting the same in accordance with the provisions of this
Agreement, (iii) default by the Co-Borrowers in making any prepayment after the
Co-Borrowers have given a notice thereof in accordance with the provisions of
this Agreement, or (iv) the making of a prepayment of Eurodollar Loans on a day
which is not the last day of an Interest Period with respect thereto, including,
without limitation, in each case, any such loss (including lost profits) or
expense arising from the reemployment of funds obtained by it or from fees
payable to terminate the deposits from which such funds were obtained. This
covenant shall survive the termination of this Agreement and the payment of the
Notes and all other amounts payable hereunder.
27
ARTICLE 3.
THE TERM LOAN FACILITY.
Section 3.1. Generally
Subject to the terms and conditions hereof, the Banks agree to
make Term Loans to the Co-Borrowers on or before the Revolving Credit
Termination Date in an aggregate principal amount not to exceed $8,500,000 at
any one time. The Term Loans may initially bear interest at a floating rate
equal to the Prime Rate or at a Fixed Rate, as determined by the Co-Borrowers
and notified to the Agent in accordance with Section 3.1, provided, however,
that the minimum principal amount of any Term Loan shall be $250,000.
Section 3.2. The Term Notes.
Each Term Loan made by any Bank hereunder shall be evidenced
by a single promissory note substantially in the form of Exhibit A-1 hereto,
with appropriate insertions, payable to the order of such Bank and representing
the obligation of the Co-Borrowers to pay the unpaid principal balance of such
Term Loan, with interest thereon as provided herein. Each Bank is hereby
authorized to record the type of its Term Loan, the date or amount of each
payment or prepayment of principal thereof and the date and amount of each
payment of interest thereon in the Bank's records and/or on a schedule annexed
to its Term Note and, absent manifest error, any such recordation shall
constitute conclusive evidence of the accuracy of the information so recorded;
provided, however, that the failure to record such information shall not affect
the Co-Borrowers' obligations to repay the Term Loans. Each Term Note (a) shall
be dated the date such Term Loan is made (b) shall be stated to mature not less
than two (2) years or more than five (5) years after the date such Loan is made
and (c) shall bear interest for a period from the date such Loan is made until
it is paid in full on the unpaid principal amount thereof at the applicable
rates per annum specified herein.
Section 3.3. Amortization of Term Loans.
Term Loans made hereunder shall, at the Co-Borrowers'
election, have terms of not less than two (2) years and not more than five (5)
years. The principal balance of each Term Loan shall be paid in equal
consecutive monthly installments commencing on the first day of the month
following the date on which such Term Loan is made and ending on the relevant
Term Loan Maturity Date.
Section 3.4. Interest on Term Loans.
The Co-Borrowers shall pay interest on the outstanding and
unpaid principal amount of each Term Loan made hereunder at the Co-Borrowers
option, at a floating rate equal to the Prime Rate or at a Fixed Rate. If the
Co-Borrowers elect the floating rate, (i) each change in the interest rate shall
take effect simultaneously with the corresponding change in the Prime Rate and
(ii) at any time prior to the date six months before the Term Loan Maturity the
Co-Borrowers may convert such Term Loan to a Loan bearing interest at a Fixed
Rate by giving the Agent five (5) Banking Days prior written notice. Interest
shall be calculated on the basis of a
28
year of 360 days and shall be paid to the Banks in arrears on the first day of
each month as provided in Section 4.6 and on the relevant Term Loan Maturity
Date. Any principal amount not paid when due (at maturity in acceleration or
otherwise) shall bear interest thereafter until paid at a rate which shall be
two percent (2%) above the rate which would otherwise be applicable hereunder.
Section 3.5. Use of Proceeds of Term Loans.
The Co-Borrowers shall use the proceeds of Term Loans made
hereunder to finance the Capital Expenditures of the Co-Borrowers and to
refinance existing Debt of the Co-Borrowers. No part of the proceeds of any of
the Term Loans will be used for any purpose which violates the provisions of
Regulations G, T, U or X of the Board of Governors of the Federal Reserve System
in effect on the date of making such Loans.
Section 3.6. Borrowing Procedure for Term Loans.
The Co-Borrowers may request a borrowing under the Term Loan
Commitments hereunder as provided in Section 4.1. Not later than 1:00 p.m. New
York City time on the date of such borrowing, each Bank shall, subject to the
conditions of this Agreement, make the amount of the Term Loan to be made by it
on such day available to the Agent, at the Principal Office and in immediately
available funds for the account of the Co-Borrowers. The amount received by the
Agent shall, subject to the conditions of this Agreement, be made available to
the Co-Borrowers on the date of such borrowing in immediately available funds,
by the Agent crediting an account of the Co-Borrowers designated by the
Co-Borrowers and maintained with the Agent at the Principal Office.
ARTICLE 4.
GENERAL CREDIT PROVISIONS; FEES AND PAYMENTS.
Section 4.1. Certain Notices; etc.
(a) Notices by the Co-Borrowers to the Agent of each borrowing
pursuant to Section 2.4 and 3.6, each continuation or conversion of a Loan
pursuant to Section 2.6 and of each prepayment of Term Loans pursuant to Section
4.2(d) shall be irrevocable and shall be effective on the date of receipt only
if received by the Agent not later than 11:00 a.m., New York City time, and (i)
in the case of borrowings of Revolving Credit Loans bearing interest at the
Prime Rate or conversion of Eurodollar Loans to Prime Rate Loans, given on the
day of the requested borrowing or conversion; (ii) in the case of borrowings of
Eurodollar Loans or conversions of Prime Rate Loans to Eurodollar Loans or
continuation of Eurodollar Loans, given three (3) Banking Days prior to the date
of the proposed borrowing, continuation or conversion; (iii) in the case of
borrowings of Term Loans, given ten (10) Banking Days to the date of the
proposed borrowing and (iv) in the case of prepayment of Term Loans, given ten
(10) days prior thereto. Each such notice of borrowing of Eurodollar Loans or
conversions to or continuations of Eurodollar Loans shall specify an Interest
Period to be applicable to each such Loan. Each such notice of prepayment of
Term Loans shall specify the Term Loans to be prepaid. The Agent shall notify
the Banks of the contents of each such notice with reasonable promptness.
29
(b) Each Bank will make its share of each borrowing available
to the Agent by 1:00 p.m. on the date of such borrowing in immediately available
funds. Unless any applicable condition specified in Article 5 has not been
satisfied, the amounts so received by the Agent will be made available to the
Co-Borrowers on the date of such borrowing by credit to an account of the
Co-Borrowers maintained at the Agent.
Section 4.2. Prepayments.
(a) Mandatory Prepayment. In the event that the Revolving
Credit Outstandings exceed the aggregate Revolving Credit Commitments at any
time prior to the Revolving Credit Termination Date, the Co-Borrowers shall
promptly pay or prepay so much of the Revolving Credit Loans outstanding as
shall be necessary in order to eliminate such excess.
(b) Accrued Interest. All prepayments made pursuant to this
Section 4.2 shall be accompanied by the payment of all accrued interest on the
amount so prepaid.
(c) Outstanding L/C Obligations and/or Acceptance Obligations.
To the extent that at any time after giving effect to any prepayment required by
this Section 4.2, the sum of then outstanding L/C Obligations and Acceptance
Obligations exceeds the Revolving Credit Commitments then in effect, the
Co-Borrower shall, without notice or demand, immediately deposit in a cash
collateral account with the Agent, as collateral security for the liability of
the Agent (whether direct or contingent) under any Letters of Credit then
outstanding or under any Acceptances then outstanding, an amount equal to the
amount by which the sum of the then outstanding L/C Obligations and Acceptance
Obligations exceeds the Revolving Credit Commitments then in effect.
(d) Prepayment of Term Loans. Any Term Loan may be prepaid in
whole or in minimum amounts of $100,000 or integral multiples thereof, at any
time, upon at least ten (10) days' notice. If such Term Loan is bearing interest
as a rate based on the Prime Rate, prepayment shall not be subject to premiums
or penalty. However, if such Term Loan is bearing interest at a Fixed Rate, such
prepayment shall be accompanied by interest accrued on the amount prepaid
through the date of prepayment together with a prepayment charge equal to the
present value of (a) (i) the difference between the Fixed Rate then in effect,
and the then current yield on U.S. Treasury Securities with maturities
approximately equal to the remaining time between the date of prepayment and the
Maturity Date (expressed as a percentage), multiplied by (ii) the total amount
of principal prepaid, divided by (iii) 360 multiplied by the actual number of
days remaining until the Maturity Date. Each prepayment shall be made together
with interest accrued thereon to and including the date of prepayment and shall
be applied to the last maturing monthly installments of principal in inverse
order of their respective maturities.
Section 4.3. Fees.
(a) Origination Fee. The Co-Borrowers agree to pay to the
Agent for its own account an origination fee equal in accordance with the terms
of a fee letter dated the date hereof and executed by and between the
Co-Borrowers and the Agent.
30
(b) Commitment Fees. The Co-Borrowers agree to pay to the
Agent for the account of the Banks a commitment fee for the period commencing on
the Closing Date to and including the Revolving Credit Termination Date or such
earlier date as the Total Commitments shall terminate in accordance with the
terms and provisions hereof, computed at the rate of 1/4% of 1% per annum on the
average daily unused portion of the Total Commitments. Each Bank shall be
entitled to its Commitment Proportion of such commitment fees. All commitment
fees payable under this subsection (b) shall be payable quarterly, in arrears,
on the first Banking Day of January, April, July and October of each year and on
the Revolving Credit Termination Date.
Section 4.4. Reimbursement Obligations
(a) The Co-Borrowers agree to reimburse the Agent on demand on
each date on which the Agent notifies the Co-Borrowers of the date and amount of
a draft presented under any Letter of Credit and paid by the Agent for the
amount of (i) such draft so paid and (ii) any taxes, fees, charges or other
costs or expenses incurred by the Agent in connection with such payment. Each
such payment shall be made to the Agent at XXX Xxxxx, Xxxxxxxxx, Xxx Xxxx 00000
in lawful money of the United States of America and in immediately available
funds. Each drawing under any Letter of Credit, to the extent not reimbursed by
the Co-Borrowers on the date of such drawing, shall constitute a request by the
Co-Borrowers to the Agent for a borrowing pursuant to Section 2.1 of a Revolving
Credit Loan in the amount of such drawing the proceeds of which shall be applied
by the Agent to such reimbursement obligation. The Borrowing Date with respect
to such borrowing shall be the date of such drawing. Interest shall be payable
on any and all amounts remaining unpaid by the Borrower under this subsection
from the date such amounts become payable until payment in full at a rate which
would be payable on any outstanding Revolving Credit Loans which were then
overdue.
(b) The Co-Borrowers shall be obligated, and hereby
unconditionally agree to reimburse the Agent on demand on the maturity date
thereof or on such earlier date as the Acceptance Obligations shall become or
shall have been declared due and payable in an amount equal to the face amount
of each Acceptance created by the Agent hereunder. Each such payment shall be
made to the Agent at XXX Xxxxx, Xxxxxxxxx, Xxx Xxxx 00000 in lawful money of the
United States of America and in immediately available funds. Each payment under
any Acceptance, to the extent not paid by the Co-Borrowers to the Agent on the
date of such payment, shall constitute a request by the Co-Borrowers to the
Agent for a borrowing pursuant to Section 2.1 of a Revolving Credit Loan in the
amount of such payment the proceeds of which shall be applied by the Agent to
such payment obligation. The Borrowing Date with respect to such borrowing shall
be the date of such payment. Interest shall be payable on any and all amounts
remaining unpaid by the Co-Borrowers under this subsection from the date such
amounts became payable until payment in full at the rate which would be payable
on any outstanding Revolving Credit Loans which were then overdue.
Section 4.5. Requirements of Law.
31
In the event that any Bank shall have reasonably determined
that any change in any law regarding capital adequacy or in the interpretation
or application thereof or compliance by such Bank or any corporation controlling
such Bank with any request or directive regarding capital adequacy (whether or
not having the force of law) from any governmental authority made subsequent to
the date hereof does or shall have the effect of reducing the rate of return on
such Bank's or such corporation's capital as a consequence of its obligations
hereunder or under any Letter of Credit or Acceptance to a level below that
which such Bank or such corporation could have achieved but for such change or
compliance (taking into consideration such Bank's or such corporation's policies
with respect to capital adequacy) by an amount deemed by such Bank to be
material, then from time to time, after submission by such Bank to the
Co-Borrowers, as the case may be (with a copy to the Agent) of a written request
therefor, the Co-Borrowers shall pay to such Bank such additional amount or
amounts as will compensate such Bank for such reduction.
Section 4.6. Payments Generally.
(a) All payments under this Agreement or the Notes, shall be
made in Dollars in immediately available funds not later than 1:00 p.m. New York
City time on the relevant dates specified above (each such payment made after
such time on such due date to be deemed to have been made on the next succeeding
Banking Day) at XXX Xxxxx, Xxxxxxxxx, Xxx Xxxx 00000 for the account of each
Bank. The Agent may (but shall not be obligated to) debit the amount of any such
payment which is not made by such time to any ordinary deposit account of the
Co-Borrowers, or of either of them, with the Agent. The Co-Borrowers shall, at
the time of making each payment under this Agreement or the Notes, specify to
the Agent the principal or other amount payable by the Co-Borrowers under this
Agreement or the Notes to which such payment is to be applied (and in the event
that it fails to so specify, or if a Default or Event of Default has occurred
and is continuing, the Agent may apply such payment as it may elect in its sole
discretion (subject to Article 10). If the due date of any payment under this
Agreement or the Notes would otherwise fall on a day which is not a Banking Day,
such date shall be extended to the next succeeding Banking Day and interest
shall be payable for any principal so extended for the period of such extension.
Each payment received by the Agent hereunder or under any Note for the account
of a Bank shall be paid promptly to such Bank, in immediately available funds,
for the account of such Bank.
ARTICLE 5.
CONDITIONS PRECEDENT.
Section 5.1. Documentary Conditions Precedent.
The obligations of the Banks to make the Loans constituting
the initial borrowing are subject to the conditions precedent that:
(a) the Agent shall have received on or before the date of
such Loans each of the following, in form and substance satisfactory to the
Agent and its counsel:
(i) this Agreement and the Notes duly executed by the
Co-Borrowers;
32
(ii) a certificate of the Secretary of each of the
Co-Borrowers, dated the Closing Date, attesting to
all corporate action taken by such entity,
including resolutions of its Board of Directors
authorizing the execution, delivery and
performance of the Facility Documents and each
other document to be delivered pursuant to this
Agreement, together with certified copies of the
certificate or articles of incorporation and the
by-laws of each of the Co-Borrowers; and, such
certificate shall state that the resolutions and
corporate documents thereby certified have not
been amended, modified, revoked or rescinded as of
the date of such certificate;
(iii) a certificate of the Secretary of each of the
Co-Borrowers, dated the Closing Date, certifying
the names and true signatures of the officers of
such entity authorized to sign the Facility
Documents and the other documents to be delivered
by such entity under this Agreement;
(iv) a certificate of a duly authorized officer of each
of the Co-Borrowers, dated the Closing Date,
stating that the representations and warranties in
Article 6 are true and correct on such date as
though made on and as of such date and that no
event has occurred and is continuing which
constitutes a Default or Event of Default;
(v) Security Agreements duly executed by each of the
Co-Borrowers, together with (A) fully completed
and executed financing statements on Form UCC-1,
in proper form for filing duly filed under the
Uniform Commercial Code in all jurisdictions
necessary or, in the reasonable discretion of the
Agent, desirable to perfect the security interests
to be granted hereunder and under the Security
Agreements and (B) UCC search results identifying
all of the financing statements on file with
respect to each Co-Borrower in all jurisdictions
referred to under clause (A) hereof, indicating
that no party claims an interest in any of the
Collateral;
(vi) a favorable opinion of counsel for the
Co-Borrowers and Guarantors, dated the Closing
Date, in form and substance satisfactory to the
Agent and its counsel;
(vii) satisfactory evidence that the Co-Borrowers are
duly organized, validly existing and in good
standing under the laws of their respective
jurisdictions of incorporation and each other
jurisdiction where qualification is necessary;
(viii) audited consolidated balance sheet of PDK and its
Subsidiaries as of November 30, 1996, and
consolidated income statement and statement of
cash flows of PDK and its Subsidiaries for the
fiscal year
33
then ended, all prepared in accordance with GAAP,
together with the unqualified opinion thereon of
Xxxxx Xxxxxxxxxx & Co., LLP, independent certified
public accountants, together with corresponding
management prepared consolidating financial
statements of PDK and its Subsidiaries, all
prepared in accordance with GAAP under the
supervision of the chief financial officer of PDK,
and unaudited consolidated and consolidating
balance sheets of PDK and its Subsidiaries as at
May 31, 1997, together with consolidated and
consolidating income statements and statements of
cash flows of PDK and its Subsidiaries, for the
fiscal quarter ended May 31, 1997, and for the
period commencing at the end of the previous
fiscal year and ending with the end of such
quarter, each prepared by or under the supervision
of the chief financial officer of PDK in
accordance with GAAP;
(ix) an audited balance sheet of Futurebiotics as of
November 30, 1996 and income statement and
statement of cash flows of Futurebiotics for the
fiscal year then ended, all prepared in accordance
with GAAP, together with an unqualified opinion
thereon of Xxxxx Xxxxxxxxxx & Co., LLP,
independent certified public accountants and an
unaudited balance sheet of Futurebiotics as at May
31, 1997, together with an income statement and
statement of cash flows of Futurebiotics for the
fiscal quarter ended May 31, 1997 and for the
period ending at the end of the previous fiscal
year and ending with the end of such quarter, each
prepared by or under the supervision of the chief
financial officer of Futurebiotics in accordance
with GAAP;
(x) original certificates of insurance covering the
Collateral and the other assets and the business
of the Co-Borrowers, which certificates shall
designate the Agent as the "loss payee" and as an
"additional insured", in form and substance and in
amounts and with carriers satisfactory to the
Agent in all respects together with copies of each
policy described in such certificates;
(xi) evidence satisfactory to the Agent that the
products liability insurance referred to in
Section 7.3 hereof is in full force and effect on
the date hereof;
(xii) a complete copy of the supply agreement executed
by and between PDK and Futurebiotics, together
with all amendments, supplements or modifications
thereof;
(xiii) for each of PDK and Futurebiotics, summary
accounts receivable and accounts payable agings
and detailed accounts receivable and accounts
payable agings for its 10 largest customers or
vendors, as the case may be, and for its 10
largest customers or vendors, as the
34
case may be, with account balances that remain
unpaid for ninety days or more, for the most
recent month then ended, in form and substance
satisfactory to the Agent;
(xiv) landlord's waivers, in form and substance
satisfactory to the Agent, for each location
leased by the Co-Borrowers or the Guarantors, or
any of them, where assets of the Co-Borrowers or
the Guarantors, or any of them, are located;
(xv) a certified copy of the certificate of dissolution
of C&C Enterprises, Inc.; and
(xvi) such other documents, instruments, agreements,
approvals, opinions and evidence as the Agent may
reasonably require.
(b) the Co-Borrowers shall have paid or caused to be paid in
full all fees and expenses required to be paid hereunder or in connection
herewith, and including all fees and expenses of the Agent incurred in
connection with the preparation, execution and delivery of this Agreement and
the other Facility Documents and the consummation of the transactions
contemplated thereby;
(c) the Co-Borrowers shall have obtained all consents, permits
and approvals required in connection with the execution, delivery and
performance by the Co-Borrowers of their obligations hereunder and such
consents, permits and approvals shall continue in full force and effect;
(d) the Agent shall be satisfied that all obligations of the
Co-Borrowers and The Chase Manhattan Bank shall have been paid in full;
(e) the Agent shall be satisfied with the form and content of
all Schedules delivered by the Co-Borrowers pursuant to this Agreement or any
document delivered in connection herewith;
(f) the Co-Borrowers shall provide reasonably satisfactory
evidence that none of them is in default with respect to any contractual
obligations to which it is a party, the effect of which may be material and
adverse to any Co-Borrower, or to the ability of any Co-Borrower or any
Guarantor to perform its obligations hereunder or under the other Facility
Documents;
(g) results satisfactory to the Agent of all due diligence
with respect to the Co-Borrowers including, without limitation, trade checkings,
customer checkings and litigation checkings and all due diligence with respect
to management of the Co-Borrowers;
(h) receipt and satisfactory review by the Agent of (i) all
material loan documents or credit agreements entered into by any Co-Borrower;
(ii) all shareholder, and management
35
agreements entered into by any Co-Borrower; (iii) any employment agreement
entered into by any Co-Borrower and any officer of any such entity; and (iv) all
lease agreements entered into by any Co-Borrower;
(i) since November 30, 1996, nothing shall have occurred which
in the Agent's sole judgment could, individually or in the aggregate, result in
a Material Adverse Change with respect to the Co-Borrowers, or either of them;
(j) the Agent and its counsel shall be satisfied in all
respects with their review of any litigation pending against the Co-Borrowers
and shall have been provided with a letter from the Co-Borrower's counsel
describing the status of a litigation captioned PDK Labs Inc. x. Xxxxx X. Xxxxx,
which is pending in New York State Court in Suffolk County; and
(k) all legal matters in connection with this financing shall
be reasonably satisfactory to the Agent and its counsel.
Section 5.2. Additional Conditions Precedent.
The obligations of the Banks to make any Loan (including the
initial Loans) or to issue any Letter of Credit or create any Acceptance (each
such event being hereafter referred to as a "Borrowing Event") shall be subject
to the further conditions precedent that on the date of such Borrowing Event the
following statements shall be true:
(i) the representations and warranties contained in
Article 6 are true and correct on and as of the
date of such Borrowing Event as though made on and
as of such date;
(ii) no Default or Event of Default has occurred and is
continuing, or would result from such Borrowing
Event; and
(iii) no Material Adverse Change shall have occurred
with respect to either Co-Borrower or of any
Guarantor since the date of the most recent
financial statements of the Co-Borrowers delivered
to the Agent hereunder or in connection herewith.
Section 5.3. No Default Certification and Deemed Representations.
Each Borrowing Event shall be deemed a certification by the
Co-Borrowers that the statements contained in Section 5.2 are true and correct
on the date of such notice or submission and, unless the Co-Borrowers otherwise
notifies the Agent prior to such Borrowing Event, each Borrowing Event shall
constitute a representation and warranty that such statements are true and
correct as of the date of such Borrowing Event.
Section 5.4. Special Conditions for Term Loans.
36
In addition to the conditions specified above, the obligation
of the Banks to make any Term Loan shall be subject to the further conditions
precedent that on or before the date of such Term Loan the Agent shall have
received each of the following, each in form and substance satisfactory to the
Agent and its counsel:
(i) a list of equipment having a value at least equal
to the requested principal amount of such Term
Loan, together with a certification from the
Co-Borrowers that such equipment is owned by the
Co-Borrowers free and clear of all liens and
encumbrances other than liens in favor of the
Banks; and
(ii) UCC-1 financing statements relating to such
specific items of equipment, in proper form for
filing in all jurisdictions necessary or, in the
reasonable discretion of the Agent, desirable to
perfect its security interest in such specific
equipment.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES.
In order to induce the Agent and the Banks to enter into this
Agreement and to make the Loans herein provided for, the Co-Borrowers and the
Guarantors hereby represent and warrant that:
Section 6.1. Corporate Existence.
Each of the Co-Borrowers and the Guarantors is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and each has the corporate power to own its assets and to transact
the business in which it is presently engaged, and is duly qualified as a
foreign corporation and in good standing under the laws of each jurisdiction in
which failure to so qualify or be in good standing could result in a Material
Adverse Change in such Co-Borrower or Guarantor.
Section 6.2. Corporate Power and Authorization.
Each of the Co-Borrowers and the Guarantors has the corporate
power, authority and legal right to make, deliver and perform the Facility
Documents to which it is a party and, with respect to the Co-Borrowers, to
borrow hereunder and has taken all necessary corporate action to authorize the
borrowings hereunder and the Guarantees on the terms and conditions of this
Agreement, the Notes, and the Guarantees. No consent of any other party
(including stockholders of the Co-Borrowers or the Guarantors), and no consent,
license, approval or authorization of, or registration or declaration with, any
governmental authority, bureau or agency is required in connection with the
execution, delivery, performance, validity or enforceability of the Facility
Documents. The Facility Documents when delivered hereunder will have been duly
executed and delivered on behalf of the Co-Borrowers and the Guarantors, as the
case may be, and will be legal, valid and binding obligations of the
Co-Borrowers and the
37
Guarantors, as the case may be, enforceable against the Co-Borrowers or the
Guarantors in accordance with their respective terms.
Section 6.3. No Legal Bar to Loans.
The execution, delivery and performance of the Facility
Documents will not violate any provision of any existing law or regulation or of
any order or decree of any court or governmental instrumentality, or of the
certificates of incorporation or by-laws of the Co-Borrowers, or either of them
or any of the Guarantors, or of any mortgage, indenture, contract or other
agreement to which the Co-Borrowers, or either of them, or any of the Guarantors
is a party or by which the Co-Borrowers, or either of them, or any of the
Guarantors or any of their property or assets may be bound, and will not result
in the creation or imposition of any Lien on any of its properties pursuant to
the provisions of such mortgage, indenture, contract or other agreement.
Section 6.4. No Material Litigation.
Except as set forth on Schedule 6.4 hereto, no litigation or
administrative proceedings of or before any court, tribunal or governmental body
is presently pending, or, to the knowledge of the Co-Borrowers, threatened
against the Co-Borrowers, or either of them, or any of the Guarantors or any of
its or their properties or with respect to the Facility Documents which, if
adversely determined, could result in, in the opinion of the Co-Borrowers, a
Material Adverse Change in the Co-Borrowers, or either of them, or any of the
Guarantors.
Section 6.5. No Default.
Neither the Co-Borrowers, nor either of them, nor any of the
Guarantors is in default in any material manner in the payment or performance of
any of their obligations or in the performance of any contract, agreement or
other instrument to which any of them is a party or by which any of them or any
of their assets may be bound, and no Default hereunder has occurred and is
continuing.
Section 6.6. Ownership of Properties; Liens.
Each of the Co-Borrowers and each of the Guarantors has good
and marketable title to all of their properties and assets, real and personal,
and none of such properties and assets are subject to any Lien except as
permitted in Section 8.2 hereof and except as set forth on Schedule 6.6 hereto.
Section 6.7. Taxes.
Each Co-Borrower and each of the Guarantors has filed or
caused to be filed all tax returns which to the knowledge of the Co-Borrowers
are required to be filed, and has paid all taxes shown to be due and payable on
said returns or on any assessments made against them (other than those being
contested in good faith by appropriate proceedings for which adequate reserves
have been provided on the books of such Co-Borrower or such Guarantor, as the
case
38
may be), and no tax liens have been filed and, to the best of the knowledge of
the Co-Borrowers and the Guarantors, no claims are being asserted with respect
to any taxes.
Section 6.8. Financial Condition.
The financial statements referred to in Section 5.1(ix) and
(x) hereof heretofore furnished to each Bank, each present fairly the financial
condition of PDK and its Subsidiaries and Futurebiotics as at the dates of said
statements and the results of their operations for the periods covered by such
statements. All such financial statements have been prepared in accordance with
GAAP and since the date of the annual financial statement mentioned above, there
has been no Material Adverse Change in the Co-Borrowers, or either of them, or
any of the Guarantors from that shown by said statements as of said date and
since the date of the quarterly financial statements mentioned above, there has
been no material increase in liabilities of PDK and its Subsidiaries or of
Futurebiotics. Neither of the Co-Borrowers nor any of the Guarantors has any
material obligation, liability or commitment, direct or contingent, which is not
reflected in the foregoing financial statements (and the related notes thereto)
as of said dates.
Section 6.9. Filing of Statements and Reports.
Each of the Co-Borrowers and each of the Guarantors have filed
copies of all material statements and reports which, to the knowledge of the
Co-Borrowers or the Guarantors, are required to be filed with any governmental
authority, agency, commission, board or bureau.
Section 6.10. ERISA.
Each Co-Borrower and each of the Guarantors, and each ERISA
Affiliate are in compliance in all material respects with all applicable
provisions of ERISA. Neither a Reportable Event nor a Prohibited Transaction has
occurred and is continuing with respect to any Plan; no notice of intent to
terminate a Plan has been filed nor has any Plan been terminated; no
circumstances exist which constitute grounds under to terminate, or appoint a
trustee to administrate, a Plan, nor has the PBGC instituted any such
proceedings; none of the Co-Borrowers or the Guarantors, nor any ERISA Affiliate
has completely or partially withdrawn under Sections 4201 or 4204 of ERISA from
a Multiemployer Plan; each Co-Borrower and each of the Guarantors and each ERISA
Affiliate have met their minimum funding requirements under ERISA with respect
to all of their Plans and the present fair market value of all Plan assets
exceeds the present value of all vested benefits under each Plan, as determined
on the most recent valuation date of the Plan in accordance with the provisions
of ERISA for calculating the potential liability of each Co-Borrower and each of
the Guarantors or any ERISA Affiliate to PBGC or the Plan under Title IV of
ERISA; and none of the Co-Borrowers, nor any of the Guarantors nor any ERISA
Affiliate, or any of them, has incurred any liability to the PBGC under ERISA.
Section 6.11. Environmental Matters.
Each Co-Borrower and each of the Guarantors are in compliance
with all federal, state or local laws, ordinances, rules, regulations or
policies governing Hazardous Materials and
39
none of the Co-Borrowers nor any of the Guarantors have used Hazardous Materials
on, from, or affecting any property now owned or occupied or hereafter owned or
occupied by such Co-Borrower or Guarantor in any manner which violates federal,
state or local laws, ordinances, rules, regulations or policies governing the
use, storage, treatment, transportation, manufacture, refinement, handling,
production or disposal of Hazardous Materials, and that to the best knowledge of
the Co-Borrowers and the Guarantors, no prior owner of any such property or any
tenant, subtenant, prior tenant or prior subtenant have used Hazardous Materials
on, from or affecting such property in any manner which violates federal, state
or local laws, ordinances, rules, regulations, or policies governing the use,
storage, treatment, transportation, manufacture, refinement, handling,
production or disposal of Hazardous Materials.
Section 6.12. Licenses, Permits, etc.
Each Co-Borrower and each of the Guarantors possess all
licenses, permits, franchises, patents, copyrights, trademarks and trade names,
or rights thereto, to conduct their respective businesses substantially as now
conducted and as presently proposed to be conducted, and none of the
Co-Borrowers nor the Guarantors is in violation of any similar rights of others.
Schedule 6.12 is a true and complete list of all of such items.
Section 6.13. Material Agreements.
None of the Co-Borrowers or the Guarantors is a party to any
indenture, loan or credit agreement or any other agreement, lease or instrument
or subject to any charter or corporate restriction the violation of which could
result in a Material Adverse Change in the Co-Borrowers, or either of them, or
any Guarantor.
Section 6.14. Margin Credit.
The Co-Borrowers are not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U), and no proceeds of any Loan will be used to purchase
or carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock or in any other way which will violate
the provisions of Regulation G, T, U or X.
Section 6.15. Use of Proceeds.
The proceeds of each Loan shall be used for the purposes set
forth in Sections 2.3 and 3.5 hereof.
Section 6.16. Properties Affected.
Neither the business nor the properties of any Co-Borrower or
any Guarantor are affected by any fire, explosion, accident, strike, hail,
earthquake, embargo, act of God or of the public enemy, or other casualty
(whether or not covered by insurance), which could result in a Material Adverse
Change in the Co-Borrowers, or either of them, or any Guarantor.
40
Section 6.17. Guarantors.
The liability of each Guarantor as a result of the execution
of its Guaranty and the execution of this Agreement shall not cause the
liabilities (including contingent liabilities) of such Guarantor to exceed the
fair saleable value of its assets. Each Guarantor acknowledges it has derived or
expects to derive a financial or other advantage from the Loans obtained by the
Company from the Banks.
Section 6.18. Subsidiaries.
As of the date hereof, PDI Labs Inc. is the only existing
Subsidiary of the Co-Borrowers and PDI Labs Inc. has assets having a value of
not more than [$1,000].
Section 6.19. Solvency.
Without giving effect to any Guaranty executed in connection
with this Agreement, each of the Co-Borrowers, on both a stand-alone and
consolidated basis, and each of the Guarantors, is Solvent. After giving effect
to any such Guaranty, the Co-Borrowers and the Guarantors, taken as a whole, are
Solvent.
ARTICLE 7.
AFFIRMATIVE COVENANTS.
Each of the Co-Borrowers and each of the Guarantors hereby
covenant that so long as the Notes remain outstanding and unpaid or so long as
the Commitments have not been terminated, each Co-Borrower and each of the
Guarantors will, and shall cause any Subsidiary to:
Section 7.1. Financial Statements.
Furnish to each Bank:
(a) as soon as available, but in any event not later than 90
days after the close of each fiscal year of PDK, a copy of the annual audit
report for such fiscal year of PDK and its Subsidiaries, including therein the
consolidated and consolidating balance sheets of PDK and its Subsidiaries as at
the end of such fiscal year, and related consolidated and consolidating
statements of income and retained earnings of PDK and its Subsidiaries for such
fiscal year, setting forth in each case in comparative form the corresponding
figures for the preceding fiscal period, all in reasonable detail, prepared in
accordance with GAAP, such consolidated financial statements being certified by
independent certified public accountants of recognized standing selected by PDK
and acceptable to the Agent and each of the Banks and such consolidating
financial statements being prepared by the Chief Financial Officer of PDK;
(b) as soon as available, but in any event not later than 90
days after the close of each fiscal year of Futurebiotics, a copy of the annual
audit report for such fiscal year of Futurebiotics and its Subsidiaries,
including therein the consolidated and consolidating balance
41
sheets of Futurebiotics and its Subsidiaries as at the end of such fiscal year,
and related consolidated and consolidating statements of income and retained
earnings of Futurebiotics and its Subsidiaries for such fiscal year, setting
forth in each case in comparative form the corresponding figures for the
preceding fiscal period, all in reasonable detail, prepared in accordance with
GAAP, such consolidated financial statements being certified by independent
certified public accountants of recognized standing selected by Futurebiotics
and acceptable to the Agent and each of the Banks and such consolidating
financial statements being prepared by the Chief Financial Officer of
Futurebiotics;
(c) as soon as available, but in any event not later than 60
days after the end of each of the first three quarterly periods of each fiscal
year of PDK and of Futurebiotics, each such entity's 10Q reports for such fiscal
quarter, together with the consolidating financial statements of the
Co-Borrowers that relate to the consolidated financial statements included
therein, such consolidating statements to be prepared by the Chief Financial
Officer of PDK;
(d) concurrently with the delivery of the financial statements
referred to in clauses (a), (b) and (c) above, a certificate of the President or
the Chief Financial Officer of each of the Co-Borrowers stating that, to the
best of such officer's knowledge, the Co-Borrowers during such period have kept,
observed, performed and fulfilled each and every covenant and condition
contained in this Agreement and in the Notes and that such officer has obtained
no knowledge of any Events of Default or Defaults hereunder except as
specifically indicated, with computations evidencing compliance with the
covenants set forth in Article 9 hereof;
(e) promptly after the same are sent, copies of all financial
statements and reports which the Co-Borrowers, or either of them, send to their
stockholders, and promptly after the same are filed, copies of all financial
statements and reports which the Co-Borrowers, or either of them, may make to,
or file with, the Securities and Exchange Commission or any other governmental
authority, agency, commission, board or bureau;
(f) as soon as possible and in any event within 30 days after
either Co-Borrower knows or has reason to know of the following events: (i) the
occurrence or expected occurrence of any Reportable Event with respect to any
Plan or any withdrawal from, or the termination, Reorganization or Insolvency
of, any Multiemployer Plan or (ii) the institution of proceedings or the taking
of any other action by the PBGC, the Co-Borrowers, or either of them, or any
Commonly Controlled Entity, or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan
the Co-Borrowers shall deliver to the Agent and each of the Banks a certificate
of the Chief Financial Officer of each of the Co-Borrowers setting forth the
details thereof and the action the Co-Borrowers or the Commonly Controlled
Entity proposes to take with respect thereto;
(g) within 30 days of the expiration date of each policy,
updated originals of all insurance coverage binders and, if the Co-Borrowers
intend to purchase new policies of insurance, certified copies of such policies
together with original certificates of insurance with respect to such policies;
and
42
(h) promptly upon receipt thereof, copies of any reports
submitted to any Co-Borrower or any Guarantor by independent certified public
accountants in connection with examination of the financial statements of either
Co-Borrower and their Subsidiaries made by such accountants;
(i) promptly after the furnishing thereof, copies of any
statement or report furnished to any other party pursuant to the terms of any
indenture, loan, or credit or similar agreement and not otherwise required to be
furnished to the Agent and the Banks pursuant to any other clause of this
Section 7.1;
(j) no later than 30 days after the end of each fiscal quarter
of each Co-Borrower, an accounts receivable aging schedule for each Co-Borrower
and an accounts payable aging schedule of each Co-Borrower, each of which shall
include a "break-out" of the ten largest customers or vendors, as the case may
be, of each Co-Borrower and of the ten customers or vendors, as the case may be,
having the largest balances that remain unpaid for 90 days or more, each in form
and substance reasonably satisfactory to the Agent;
(k) no later than 30 days after the end of each fiscal quarter
of each Co-Borrower, a consolidated inventory breakdown in form and substance
reasonably satisfactory to the Agent;
(l) promptly, copies of all financial, legal or other
information and/or documentation as the Agent may require pertaining to any
Permitted Acquisitions;
(m) concurrently with the delivery of the financial statements
referred to in clauses (a), (b) and (c) above, a written status report, in form
and substance satisfactory to the Agent, on the litigation captioned PDK Labs
Inc. x. Xxxxx X. Xxxxx, which is pending in New York State Supreme Court in
Suffolk County; and
(n) promptly, such additional financial and other information
as the Agent may from time to time reasonably request including, without
limitation, copies of all material shareholders agreements, consulting
agreements, management agreements, employment agreements, noncompete agreements,
employee benefit plans, stock option plans or voting trust agreements relating
to the Co-Borrowers, or either of them.
Notwithstanding the provisions of clauses (a) and (b) above,
if the Co-Borrowers receive an extension from the Securities and Exhange
Commission and are permitted to file such statements more than 90 days after
fiscal year end, such statements shall be due hereunder simultaneously with
their filing with the Securities and Exchange Commission; provided, however,
that in no event shall such statements be delivered to the Banks more than 105
days after the fiscal year-end of the Co-Borrowers.
Section 7.2. Payment and Performance of Obligations.
Perform and comply with each of the provisions of each and
every agreement of which the failure to perform or comply could result in a
Material Adverse Change in the Co-
43
Borrowers, or either of them, or any of the Guarantors. Pay and discharge, and
cause the Guarantors to pay and discharge, at or before maturity all of their
respective obligations and liabilities, including without limitation tax
liabilities, except where the same may be contested in good faith, and maintain,
in accordance with GAAP, appropriate reserves for the accrual of any of the
same.
Section 7.3. Maintenance of Properties; Insurance.
Keep, and cause the Guarantors to keep, all properties useful
and necessary in the business of the Co-Borrowers and the Guarantors in good
working order and condition; maintain, and cause the Guarantors to maintain,
with financially sound and reputable insurance companies, insurance on all their
properties in such amounts as are proper in accordance with sound business
practices against such risks as are usually insured against in the same general
area and by companies engaged in the same or a similar business, including but
without limitation, product liability insurance in an aggregate amount not less
than $8,000,000 for the Co-Borrowers at any time, such insurance to be in form
and substance satisfactory to the Agent and each of the Banks; pay, and cause
the Guarantors to pay, all insurance premiums, and, upon written request, any
other information as to the insurance carried.
Section 7.4. Notices.
Promptly give notice in writing to the Agent of (a) the
occurrence of any Default or Event of Default under this Agreement or of any
default under any material instrument or other agreement of any Co-Borrower or
any Guarantor, (b) any litigation, proceeding, investigation or dispute which
may exist at any time between any Co-Borrower or any Guarantor and any
governmental regulatory body which could result in a Material Adverse Change in
the Co-Borrowers, or either of them, or any of the Guarantors including, without
limitation, any such proceeding relating to an alleged violation of any
Environmental Law, (c) all litigation actions, suits and proceedings affecting
the Co-Borrowers, or either of them, or any of the Guarantors in which the
amount claimed is $100,000 or more or in which injunctive or similar relief is
sought, (d) any of the Co-Borrowers or Guarantors establishing or contributing
to any Plan and (e) any change in the management of the Co-Borrowers, the
Guarantors or any of them.
Section 7.5. Conduct of Business and Maintenance of Existence.
Continue, and cause the Guarantors to continue, to engage in
business of the same general type as now conducted by the Co-Borrowers and the
Guarantors, and preserve, renew and keep in full force and effect their
corporate existence and take all reasonable action to maintain their rights,
privileges and franchises necessary or desirable in the normal conduct of
business; provided that nothing herein contained shall prevent any of the
Co-Borrowers or any Guarantor from discontinuing a part of its business which is
not a substantial part of the business of such entity if such discontinuance is,
in the opinion of the Board of Directors of such entity, in the interest of such
entity, and not disadvantageous to the Banks.
Section 7.6. Inspection of Property, Books and Records.
44
Permit, and cause the Guarantors to permit, any
representatives of the Agent to (a) visit and inspect any of their respective
properties, (b) conduct an environmental audit of any of their respective
properties and (c) examine and make abstracts from any of the books and records
of any Co-Borrower and any Guarantor at any reasonable time during normal
business hours and as often as may reasonably be desired.
Section 7.7. Hazardous Material.
None of the Co-Borrowers or the Guarantors shall cause or
permit any property owned or occupied by the Co-Borrowers or the Guarantors to
be used to generate, manufacture, refine, transport, treat, store, handle,
dispose, transfer, produce or process Hazardous Materials, except in compliance
with all applicable federal, state and local laws or regulations nor shall any
such entity cause or permit, as a result of any intentional or unintentional act
or omission on the part of such entity or any tenant or subtenant, a release of
Hazardous Materials onto any property owned or occupied by any such entity or
onto any other property. Each of the Co-Borrowers and the Guarantors shall
comply with all applicable federal, state and local laws, ordinances, rules and
regulations, whenever and by whomever triggered, and shall obtain and comply
with, any and all approvals, registrations or permits required thereunder. Each
of the Co-Borrowers and the Guarantors shall execute any documentation required
by any Bank in connection with the covenants contained herein. The Co-Borrowers
and the Guarantors shall indemnify each Bank (including, without limitation, the
Agent) against any liability, loss, cost, damage or expense (including, without
limitation, reasonable attorneys' fees) arising from (a) the imposition or
recording of a Lien by any local, state, or federal governments or governmental
agency or authority pursuant to any federal, state or local statute or
regulation relating to Hazardous Materials or the removal thereof; (b) claims of
any private parties regarding violations of laws regulating Hazardous Materials;
and (c) costs and expenses (including, without limitation, reasonable attorneys'
fees and fees incidental to the securing of repayment of such costs and
expenses) incurred by the Agent in connection with the removal of any such Lien
or in connection with compliance by the Agent or any such entity with any
statute, regulation or order regulating Hazardous Materials.
Section 7.8. Subsidiary Guaranties.
s
Cause any Subsidiary of any Co-Borrower or any Guarantor
hereafter formed to execute and deliver to the Agent, for the benefit of the
Banks, a Guaranty substantially in the form of Exhibit D hereto and to execute a
Guarantor's Security Agreement substantially in the form of Exhibit E hereto,
pursuant to which it shall grant to the Agent, for the benefit of the Banks, a
lien upon all of its personal property in order to secure its obligations under
its guaranty.
Section 7.9. Pension Funding.
Comply with the following and cause each ERISA Affiliate of
the Co-Borrowers or any Guarantor to comply with the following:
(i) engage solely in transactions which would not
subject any of such entities to either a civil
penalty assessed pursuant to Section 502 (i) of
45
ERISA or a tax imposed by Section 4975 of the
Internal Revenue Code in either case in an amount
in excess of $25,000;
(ii) make full payment when due of all amounts which,
under the provisions of any Plan or ERISA, such
Co-Borrower, Guarantor or ERISA Affiliate of any
of same is required to pay as contributions
thereto;
(iii) all applicable provisions of the Internal Revenue
Code and the regulations promulgated thereunder,
including but not limited to Section 412 thereof,
and all applicable rules, regulations and
interpretations of the Accounting Principles Board
and the Financial Accounting Standards Board;
(iv) not fail to make any payments in an aggregate
amount greater than $25,000 to any Multiemployer
Plan that such Co-Borrower, Guarantor or any ERISA
Affiliate may be required to make under any
agreement relating to such Multiemployer Plan, or
any law pertaining thereto; or
(v) not take any action regarding any Plan which could
result in the occurrence of a Prohibited
Transaction.
Section 7.10. Dissolution of PDI Labs Inc.
Within 90 days of the date of this Agreement, cause PDI Labs
Inc. to be dissolved and provide the Agent with a certified copy of its
Certificate of Dissolution.
ARTICLE 8.
NEGATIVE COVENANTS
Each Co-Borrower and each of the Guarantors hereby covenant
that so long as the Notes remain outstanding and unpaid or so long as the
Commitments have not been terminated, neither the Co-Borrowers, nor any of them,
nor any of the Guarantors will, nor will they permit any Subsidiary to, directly
or indirectly:
Section 8.1. Limitation on Indebtedness.
Create, incur, assume or suffer to exist, any Consolidated
Indebtedness, except (a) Indebtedness of the Co-Borrowers under this Agreement
or the Notes; (b) accounts payable (other than for borrowed money) incurred in
the ordinary course of business as presently conducted, provided that the same
shall not be overdue or, if overdue, are being contested in good faith and by
appropriate proceedings; (c) Indebtedness between Co-Borrowers or Guarantors and
between a Guarantor and a Co-Borrower; (d) other Indebtedness owing by the
Co-Borrowers or the Guarantors on the date of this Agreement and which was
reflected in the balance sheet referred to in Section 5.1 hereof provided same
is not extended, renewed or refinanced; (e) Subordinated Debt; (f) indebtedness
which constitutes the deferred purchase price
46
of any property or assets, not in excess of $250,000 in any fiscal year of the
Co-Borrowers (computed on a non-cumulative basis), (g) purchase money
indebtedness incurred to finance specific Capital Expenditures, subject to the
limitations of Section 8.2(g) of this Agreement with respect to purchase money
mortgages and purchase money security interests; and (h) indebtedness resulting
from notes issued by the Co-Borrowers or either of them in connection with and
subject to the limitations of Section 8.5(g) of this Agreement, provided,
however, that said indebtedness shall not exceed $6,000,000 in the aggregate at
any time.
Section 8.2. Limitation on Liens.
Create, incur, assume or suffer to exist, any Lien of any kind
upon any of their property or assets, income or profits, whether now owned or
hereafter acquired, except (a) the Liens existing as of the date of this
Agreement referred to in the financial statements referred to in Section 5.1
hereof, provided, however, that such Liens are not spread to cover other or
additional indebtedness or property of any Co-Borrower or Guarantor; (b) Liens
for taxes not yet due or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of a Co-Borrower or Guarantor, as the case may be, in accordance
with GAAP; (c) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business for sums which
are not overdue for a period of more than 45 days or which are being contested
in good faith and by appropriate proceedings; (d) pledges or deposits in
connection with worker's compensation, unemployment insurance and other social
security legislation; (e) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business; (f) easements, rights-of-way,
restrictions and other similar encumbrances incurred in the ordinary course of
business which, in the aggregate, are not substantial in amount, and which do
not in any case materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of any
Co-Borrower or any Guarantor; (g) Liens covering real or personal property in
existence at the time of acquisition thereof by a Co-Borrower or a Guarantor,
and purchase money mortgages and purchase money security interests (including
the Lien or retained security title of a conditional vendor) covering real or
personal property hereafter acquired by a Co-Borrower or a Guarantor in the
ordinary course of business, provided such Lien shall not exceed 100% of the
purchase price of the property so encumbered and no such Lien covers, or is
extended to cover, any other property owned by a Co-Borrower or a Guarantor; and
(h) Liens in favor of the Agent.
Section 8.3. Limitation on Contingent Obligations.
Assume, guarantee, indorse or otherwise in any way be or
become responsible or liable for the obligations of any Person (all such
transactions being herein called "guarantees"), whether by agreement to purchase
or repurchase obligations, or by agreement to supply funds for the purpose of
paying, or enabling such entity to pay, any obligations (whether through
purchasing stock, making a loan, advance or capital contributions or by means or
agreeing to maintain or cause such Person to maintain, a minimum working capital
or net worth of any such Person, or otherwise) in an aggregate amount exceeding
$1,000,000, provided, however, that the aggregate amount permitted under this
Section 8.3 and Section 8.5(h) and (k) of this Agreement
47
shall not exceed $2,000,000 with respect to any one Person and $2,500,000 in the
aggregate at any time, except (a) guarantees by endorsement of instruments for
deposit or collection in the ordinary course of business, and (b) guarantees in
respect of indebtedness of Subsidiaries, provided that the indebtedness in
respect of which such guarantees are given is permitted by subsection 8.1
hereof; and guarantees in favor of the Banks.
Section 8.4. Prohibition of Fundamental Changes.
Enter into any transaction of merger or consolidation or
liquidate or dissolve itself (or suffer any liquidation or dissolution) or
convey, sell, lease, transfer or otherwise dispose of, in one transaction or a
series of related transactions, all or a substantial part of its property,
business, or assets, including its accounts receivable, or stock or securities
convertible into stock of any Subsidiary, make any material change in the
present method of conducting business, or change its fiscal year end, except
that: (a) any Guarantor may be merged into, or consolidated with, a Co-Borrower
(provided that the Co-Borrower shall be the continuing or surviving corporation)
or with any one or more Guarantors and (b) any Subsidiary may sell, lease,
transfer or otherwise dispose of any of its assets to the Co-Borrowers.
Section 8.5. Limitation on Investments, Loans and Advances.
Make or suffer to exist any advances or loans to, or
Investments (by way of transfers of property, contributions to capital,
acquisitions of stock, or securities or evidences of indebtedness, acquisitions
of businesses or acquisitions of assets other than in the ordinary course of
business, or otherwise), in, any Person except (a) Investments in certificates
of deposit issued by any domestic commercial bank with a capital and surplus of
at least $250,000,000 provided, however, that such certificates of deposit shall
have a maturity of one year or less from the date of purchase; (b) investments
in direct obligations of the United States of America or any agency thereof, or
marketable obligations directly and fully guaranteed by the United States of
America, provided, however, that any such obligations shall have a maturity of
five years or less from the date of acquisition; (c) investments in money market
mutual funds having assets in excess of $2,500,000,000; (d) investments in
commercial paper or medium term notes, provided, however, that any such
commercial paper or medium term notes shall have a maturity of three years or
less from the date of acquisition and shall be rated at least "A-1" or the
equivalent thereof by Standard & Poors Corporation (or has a similar rating by
any similar organization which rates commercial paper or medium term notes); (e)
investments in repurchase obligations with a term of not more than seven days
for underlying securities of the type described in clause (b); (f) stock or
obligations issued in settlement of claims against any other Person by reason of
any event of bankruptcy or composition or readjustment of debt or reorganization
of any debtor of any Co-Borrower, any Guarantor or any Subsidiary; (g) Permitted
Acquisitions; (h) loans and advances to any other Person not to exceed
$2,500,000, provided, however, that the aggregate amount permitted under this
Section 8.5(h) and 8.5(k) of this Agreement shall not exceed $2,000,000 with
respect to any one Person and $2,500,000 in the aggregate at any time; (i) loans
or advances to a Guarantor; (j) purchases of securities publicly traded on a
national exchange in an aggregate amount not to exceed $250,000; (k) any other
Investments in any Person(s) not to exceed $2,000,000, provided, however, that
the aggregate amount permitted under this Section 8.5(k) and 8.5(h) and Section
8.3 of this Agreement shall not exceed $2,000,000 with respect to any one
48
Person and $2,500,000 in the aggregate at any time; (l) tax exempt securities
rated A-1 or better by Standard & Poors and P-1 or better by Xxxxx'x Investors
Service; and (m) purchases by either Co-Borrower of shares of such Co-Borrowers'
capital stock, provided that prior to and immediately following such purchases,
there shall exist no Default or Event of Default under Agreement or any related
Facility Documents and provided that the aggregate consideration paid for such
purchases on a consolidated basis shall not exceed $1,000,000 in any fiscal year
or $3,000,000 during the term of this Agreement. For purposes of clause (j)
above, the Co-Borrowers shall not be deemed to have purchased securities earned
pursuant to an Exclusive Supply and Licensing Agreement, dated [March 24, 1997]
between PDK Labs Inc. and Compare Generiks, Inc.
Section 8.6. Prohibition of Certain Prepayments.
Except as otherwise permitted by this Agreement, make any
prepayment of principal of any debt, with a maturity of more than one year, for
borrowed money or for the deferred purchase price of property or services,
except (i) at the stated maturity of such debt, and (ii) as required by
mandatory prepayment provisions relating thereto (subject to any subordination
provisions applicable thereto).
Section 8.7. Limitation on Leases.
Enter into any agreement, or be or become liable under any
agreement, for the lease, hire or use of any personal property (other than the
presently outstanding leases described on Schedule 8.7 hereof provided that such
leases are not amended, modified or supplemented) which would cause the
aggregate maximum amount of all obligations of the Co-Borrowers and the
Guarantors pursuant to such agreements in any fiscal year of the Co-Borrowers to
exceed $750,000. This provision shall not apply to Capital Leases.
Section 8.8. Sale and Leaseback.
Enter into any arrangement with any person whereby any
Co-Borrower or Guarantor shall sell or transfer any property, real or personal,
whether now owned or hereafter acquired, and thereafter rent or lease such
property or other property which such Co-Borrower or Guarantor intends to use
for substantially the same purpose or purposes as the property being sold or
transferred.
Section 8.9. Prohibitions Regarding Subordinated Debt.
Make any optional prepayment of, or purchase, redeem or
otherwise acquire, or amend any provision pertaining to the subordination or the
terms of payment of, any Subordinated Debt.
Section 8.10. Transactions with Affiliates.
Enter into any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service, with
any Affiliate, except in the ordinary
49
course of business and pursuant to the reasonable requirements of a
Co-Borrower's or a Guarantor's business and upon fair and reasonable terms no
less favorable to such Co-Borrower or such Guarantor than it would obtain in a
comparable arm's length transaction with a Person not an Affiliate.
Section 8.11. Management.
Fail to retain Xxxxxxx X. Xxxxxxxx in a reasonably active full
time capacity as the President of each of PDK, and as an officer of
Futurebiotics, responsible for the day-to-day operations of each of the
Co-Borrowers.
Section 8.12. Change in Control.
At any time from the date hereof (i) a majority of the members
of the Board of Directors of PDK have been elected, having been nominated other
than by the management or preceding Board of Directors; (ii) PDK shall fail or
cease to maintain the voting control of such classes of voting stock of
Futurebiotics which at all times will entitle the holder thereof to elect a
majority of the members of the Board of Directors of Futurebiotics; or (iii) PDK
and Futurebiotics shall be unable to issue consolidated financial statements in
accordance with GAAP.
Section 8.13. Limitation on Capital Expenditures.
Make any Capital Expenditures (excluding Capital Expenditures
resulting from acquisitions of property, plant and equipment described in
Section 8.5(g) of this Agreement) including purchase money indebtedness if,
after giving effect thereto, the aggregate amount of such expenditures by PDK
and its Subsidiaries would exceed $2,000,000 during any fiscal year, including
the fiscal year ending November 30, 1997.
Section 8.14. Limitation on Dividends and Stock Acquisitions.
Declare or pay any dividends or make any other distribution
(whether in cash or property) on any shares of its capital stock now or
hereafter outstanding, or except as permitted under Section 8.5 (m) hereof,
purchase, redeem, retire or otherwise acquire for value any shares of its
capital stock or warrants or, options therefor now or hereafter outstanding (all
such dividends, distributions, purchases and other actions being hereinafter
collectively called "Stock Payments", except that (a) a Subsidiary may make
Stock Payments to the Co-Borrowers, or either of them; (b) the Co-Borrowers may
declare stock splits and pay dividends payable solely in shares of any class of
their capital stock; and (c) PDK may declare or pay dividends on its preferred
stock in an aggregate amount not to exceed $365,000 in the aggregate in each
fiscal year of PDK.
50
ARTICLE 9.
FINANCIAL COVENANTS.
Each of the Co-Borrowers and each of the Guarantors hereby
covenant that so long as the Notes remain outstanding and unpaid or so long as
the Commitments shall not have been terminated:
Section 9.1. Leverage.
The Co-Borrowers shall maintain, on a consolidated basis, a
ratio of (i) Total Unsubordinated Liabilities to (ii) Capital Base of not more
than 1.70:1.00.
Section 9.2. Minimum Coverage Ratio.
The Co-Borrowers shall maintain at all times a Consolidated
Coverage Ratio of not less than 1.75:1.00. This covenant shall be tested
quarterly on a rolling four quarters basis.
Section 9.3. Minimum Liquidity Ratio.
The Co-Borrowers shall maintain at all times, on a
consolidated basis, a ratio of (i) Consolidated Liquid Assets to (ii)
Consolidated Current Liabilities of not less than 0.60:1.00.
Section 9.4. Minimum Consolidated Net Income.
The Co-Borrowers shall maintain a minimum Consolidated Net
Income of $500,000 for any four-quarterly period and the Co-Borrowers shall not
suffer to exist two consecutive quarterly periods where Consolidated Net Income
is less than $0.
ARTICLE 10.
EVENTS OF DEFAULT.
Section 10.1. Events of Default.
Any of the following events shall be an "Event of Default":
(a) The Co-Borrowers shall: (i) fail to pay the principal of
or interest on any Note or any fee or other amount due hereunder; or (ii) fail
to pay any Bank any amount when due and payable in connection with any L/C
Obligation or Acceptance Obligation;
(b) Any representation or warranty made or deemed made by the
Co-Borrowers or the Guarantor in this Agreement or in any other Facility
Document or which is contained in any certificate, document, opinion, financial
or other statement furnished at any time under or in connection with any
Facility Document shall prove to have been incorrect in any material respect on
or as of the date made or deemed made;
51
(c) The Co-Borrowers shall: (i) fail to perform or observe any
term, covenant or agreement contained in Section 2.3, Section 7.1 or Articles 8
or 9; or (ii) fail to perform or observe any term, covenant or agreement on its
part to be performed or observed (other than the obligations specifically
referred to in Section 10.1(a)) in any Facility Document and (in the case of
this clause (ii)) such failure shall continue for 20 consecutive days;
(d) Any Co-Borrower or Guarantor shall: (i) fail to pay any
Debt, including but not limited to indebtedness for borrowed money (other than
the payment obligations described in (a) above), of such entity or any interest
or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise); or (ii) fail to perform or
observe any term, covenant or condition on its part to be performed or observed
under any agreement or instrument relating to any such Debt, when required to be
performed or observed, if the effect of such failure to perform or observe is to
accelerate, or to permit the acceleration of, after the giving of notice or
passage of time, or both, the maturity of such Debt, whether or not such failure
to perform or observe shall be waived by the holder of such Debt; or (iii) any
such Debt shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment) prior to the stated
maturity thereof; provided that it shall not constitute an Event of Default
hereunder if the Debt referred to in clauses (i), (ii) and (iii) above, in any
case or in the aggregate has a principal balance of less than $250,000;
(e) Any Co-Borrower or Guarantor (i) shall generally not, or
be unable to, or shall admit in writing its or their inability to, pay its or
their debts as such debts become due; or (ii) shall make an assignment for the
benefit of creditors, petition or apply to any tribunal for the appointment of a
custodian, receiver or trustee for it or a substantial part of its assets; or
(iii) shall commence any proceeding under any bankruptcy, reorganization,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or (iv) shall have had any
such petition or application filed or any such proceeding shall have been
commenced, against it or them, in which an adjudication or appointment is made
or order for relief is entered, or which petition, application or proceeding
remains undismissed for a period of 30 days or more; or shall be the subject of
any proceeding under which its assets may be subject to seizure, forfeiture or
divestiture; or (v) by any act or omission shall indicate its consent to,
approval of or acquiescence in any such petition, application or proceeding or
order for relief or the appointment of a custodian, receiver or trustee for all
or any substantial part of its property; (vi) shall suffer any such
custodianship, receivership or trusteeship to continue discharged for a period
of 30 days or more; or (vii) shall cease to be Solvent;
(f) One or more judgments, decrees or orders for the payment
of money in excess of $250,000 in the aggregate shall be rendered against the
Co-Borrowers, or either of them, or any Guarantor and such judgments, decrees or
orders shall continue unsatisfied and in effect for a period of 30 consecutive
days without being vacated, discharged, satisfied or stayed or bonded pending
appeal;
(g) An event or condition specified in Section 7.1(f) hereof
shall occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, any Co-Borrower, Guarantor or any ERISA
52
Affiliate shall incur or in the opinion of the Banks shall be reasonably likely
to incur a liability to a Plan, a Multiemployer Plan or PBGC (or any combination
of the foregoing) which is, in the determination of the Banks, material in
relation to the financial condition, operations, business or prospects of the
such entity;
(h) Any Forfeiture Proceeding shall have been adversely
determined against any Co-Borrower or Guarantor provided that the aggregate
value of the property of the Borrower or the Corporate Guarantor subject thereto
equals or exceeds $250,000;
(i) Any of the Security Agreements or the Guarantor Security
Agreements shall at any time after its execution and delivery and for any reason
cease: (a) to create a valid and perfected and, except as otherwise specifically
provided therein, first priority security interest in and to the property
purported to be subject to such documents; or (b) to be in full force and effect
or shall be declared null and void, or the validity of enforceability thereof
shall be contested by a Co-Borrower or Guarantor or any of the Co-Borrowers or
Guarantors shall deny that it has any further liability or obligation under to
which it is a party, or any Co-Borrower or Guarantor shall fail to perform any
of its obligations under any such agreement;
(j) A Material Adverse Change shall have occurred with respect
to (i) the Co-Borrowers, or either of them, (ii) the Co-Borrowers and the
Guarantors, taken as a whole, or (iii) any Guarantor having $500,000 or more in
assets; or
(k) A default shall occur under any Facility Document after
giving effect to any applicable grace or cure period, if any.
Section 10.2. Remedies.
If any Event of Default shall occur and be continuing, the
Agent shall, upon request of the Required Banks, by notice to the Co-Borrowers
(a) declare the Commitments to be terminated, whereupon the same shall forthwith
terminate, and (b) declare the outstanding principal of the Notes, all interest
thereon and all other amounts payable under this Agreement and the Notes
(including, without limitation, all amounts of L/C Obligations, whether or not
the beneficiaries of the then outstanding Letters of Credit shall have presented
the documents required thereunder, and all amounts of Acceptance Obligations,
whether or not the acceptances relating thereto have matured) to be forthwith
due and payable, whereupon the Notes, all such interest and all such amounts
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Co-Borrowers; provided that, in the case of an Event of Default referred
to in Section 10.1(e) or Section 10.1(h) above, the Commitments shall be
immediately terminated, and the Notes, all interest thereon and all other
amounts payable under this Agreement and the Notes (including amounts payable in
respect of L/C Obligations and Acceptance Obligations) shall be immediately due
and payable without notice, presentment, demand, protest or other formalities of
any kind, all of which are hereby expressly waived by the Co-Borrowers.
53
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Co-Borrowers shall at such time deposit
in a cash collateral account opened by the Agent an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts
held in such cash collateral account shall be applied by the Agent to the
payment of drafts drawn under such Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or been fully drawn
upon and, if any, shall be applied to repay other obligations of the
Co-Borrowers hereunder and under the Notes.
Except as expressly provided above in this Section,
presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
ARTICLE 11.
THE AGENT; RELATIONS AMONG BANKS
Section 11.1. Appointment, Powers and Immunities of Agent.
Each Bank hereby irrevocably (but subject to removal by the
Required Banks pursuant to Section 11.9) appoints and authorizes the Agent to
act as its agent hereunder and under any other Facility Document with such
powers as are specifically delegated to the Agent by the terms of this Agreement
and any other Facility Document, together with such other powers as are
reasonably incidental thereto. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and any
other Facility Document, and shall not by reason of this Agreement be a trustee
for any Bank. The Agent shall not be responsible to the Banks for any recitals,
statements, representations or warranties made by the Co-Borrowers, or any
officer or official of the Co-Borrowers, or any other Person contained in this
Agreement or any other Facility Document, or in any certificate or other
document or instrument referred to or provided for in, or received by any of
them under, this Agreement or any other Facility Document, or for the value,
legality, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Facility Document or any other document or
instrument referred to or provided for herein or therein, or for the failure by
the Co-Borrowers to perform any of their obligations hereunder or thereunder.
The Agent may employ agents and attorneys-in-fact and shall not be responsible,
except as to money or securities received by it or its authorized agents, for
the negligence or misconduct of any such agents or attorneys-in-fact selected by
it with reasonable care. Neither the Agent nor any of its directors, officers,
employees or agents shall be liable or responsible for any action taken or
omitted to be taken by it or them hereunder or under any other Facility Document
or in connection herewith or therewith, except for its or their own gross
negligence or willful misconduct. The Co-Borrowers shall pay any fee agreed upon
with respect to the Agent's services hereunder as set forth in a letter from the
Agent to the Co-Borrowers dated the date hereof.
Section 11.2. Reliance by Agent.
The Agent shall be entitled to rely upon any certification, notice or
other communication (including any thereof by telephone, telefax, telex,
telegram or cable) believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and
54
upon advice and statements of legal counsel, independent accountants and other
experts selected by the Agent. The Agent may deem and treat each Bank as the
holder of the Loans made by it for all purposes hereof unless and until a notice
of the assignment or transfer thereof satisfactory to the Agent signed by such
Bank shall have been furnished to the Agent but the Agent shall not be required
to deal with any Person who has acquired a participation in any Loan from a
Bank. As to any matters not expressly provided for by this Agreement or any
other Loan Document, the Agent shall in all cases be fully protected in acting,
or in refraining from acting, hereunder in accordance with instructions signed
by the Required Banks, and such instructions of the Banks and any action taken
or failure to act pursuant thereto shall be binding on all of the Banks and any
other holder of all or any portion of any Loan.
Section 11.3. Defaults.
The Agent shall not be deemed to have knowledge of the
occurrence of a Default or Event of Default (other than the non-payment of
principal of or interest or fees on the Loans to the extent the same is required
to be paid to the Agent for the account of the Banks) unless the Agent has
received notice from a Bank or the Co-Borrowers specifying such Default or Event
of Default. In the event that the Agent receives such a notice of the occurrence
of a Default or Event of Default, the Agent shall give prompt notice thereof to
the Banks (and shall give each Bank prompt notice of each such non-payment). The
Agent shall (subject to Section 11.8) take such action with respect to such
Default or Event of Default which is continuing as shall be directed by the
Required Banks; provided that, unless and until the Agent shall have received
such directions, the Agent may take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interest of the Banks; and provided further that the Agent
shall not be required to take any such action which it determines to be contrary
to law.
Section 11.4. Rights of Agent as a Bank.
With respect to its Commitment and the Loans made by it, the
Agent in its capacity as a Bank hereunder shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
acting as the Agent, and the term "Bank" or "Banks" shall, unless the context
otherwise indicates, include the Agent in its capacity as a Bank. The Agent or
any Bank and their respective affiliates may (without having to account therefor
to any other Bank) accept deposits from, lend money to (on a secured or
unsecured basis), and generally engage in any kind of banking, trust or other
business with, the Co-Borrowers or the Guarantors (and any of their affiliates).
In the case of the Agent, it may do so as if it were not acting as the Agent,
and the Agent may accept fees and other consideration from the Co-Borrowers or
the Guarantors for services in connection with this Agreement or otherwise
without having to account for the same to the Banks. Although the Agent or a
Bank or their respective affiliates may in the course of such relationships and
relationships with other Persons acquire information about the Co-Borrowers or
the Guarantors or affiliates and such other Persons neither the Agent nor such
Bank shall have any duty to disclose such information to the other Banks.
55
Section 11.5. Indemnification of Agent.
The Banks agree to indemnify the Agent (to the extent not
reimbursed under Section 2.12 or under the applicable provisions of the Facility
Documents, but without limiting the obligations of the Co-Borrowers under
Section 2.12 or such provisions) ratably in accordance with the aggregate unpaid
principal amount of the Loans made by the Banks (without giving effect to any
participation, in all or any portion of such Loans, sold by them to any other
Person) (or, if no Loans are at the time outstanding, ratably in accordance with
their respective Commitments), for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of this
Agreement, any other Loan Document or any other documents contemplated by or
referred to herein or the transactions contemplated hereby or thereby
(including, without limitation, the costs and expenses which the Co-Borrowers
are obligated to pay under Sections 2.12 or otherwise or under the applicable
provisions of any other Loan Document but excluding, unless a Default or Event
of Default has occurred, normal administrative costs and expenses incidental to
the performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents or instruments; provided
that no Bank shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the party to be indemnified.
Section 11.6. Documents.
The Agent will forward to each Bank, promptly after the
Agent's receipt thereof, a copy of each report, notice or other document
required by this Agreement or any other Facility Document to be delivered to the
Agent for such Bank.
Section 11.7. Non-Reliance on Agent and Other Banks.
Each Bank agrees that it has, independently and without
reliance on the Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Co-Borrowers and the Guarantors and decision to enter into this Agreement and
that it will, independently and without reliance upon the Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or any other Loan Document. The Agent shall
not be required to keep itself informed as to the performance or observance by
the Co-Borrowers or the Guarantors of this Agreement or any other Loan Document
or any other document referred to or provided for herein or therein or to
inspect the properties or books of the Co-Borrowers or the Guarantors. Except
for notices, reports and other documents and information expressly required to
be furnished to the Banks by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Co-Borrowers or
the Guarantors (or any of their affiliates) which may come into the possession
of the Agent or of its affiliates. The Agent shall not be required to file this
Agreement, any other Loan Document or any document or instrument referred to
herein or therein, for record or give
56
notice of this Agreement, any other Facility Document or any document or
instrument referred to herein or therein, to anyone.
Section 11.8. Failure of Agent to Act.
Except for action expressly required of the Agent hereunder,
the Agent shall in all cases be fully justified in failing or refusing to act
hereunder unless it shall have received further assurances (which may include
cash collateral) of the indemnification obligations of the Banks under Section
11.5 in respect of any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action.
Section 11.9. Resignation or Removal of Agent.
Subject to the appointment and acceptance of a successor Agent
as provided below, the Agent may resign at any time by giving written notice
thereof at least ten Business Days prior thereto to the Banks and the
Co-Borrowers, the Agent may be removed at any time with cause by the Required
Banks and the Agent may be removed at any time without cause by the Required
Banks if with the prior written consent of the Co-Borrowers; provided that the
Co-Borrowers and the other Banks shall be promptly notified thereof. Upon any
such resignation or removal, the Required Banks shall have the right to appoint
a successor Agent. If no successor Agent shall have been so appointed by the
Required Banks and shall have accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation or the Required Banks' removal
of the retiring Agent, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a Bank. The Required Banks or the
retiring Agent, as the case may be, shall upon the appointment of a successor
Agent promptly so notify the Co-Borrowers and the other Banks. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article 11 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent.
Section 11.10. Amendments Concerning Agency Function.
The Agent shall not be bound by any waiver, amendment,
supplement or modification of this Agreement or any other Loan Document which
affects its duties hereunder or thereunder unless it shall have given its prior
consent thereto.
Section 11.11. Liability of Agent.
The Agent shall not have any liabilities or responsibilities
to the Co-Borrowers on account of the failure of any Bank to perform its
obligations hereunder or to any Bank on account of the failure of the Borrower
to perform its obligations hereunder or under any other Loan Document.
57
Section 11.12. Transfer of Agency Function.
Without the consent of the Co-Borrowers or any Bank, the Agent
may at any time or from time to time transfer its functions as Agent hereunder
to any of its offices wherever located, provided that the Agent shall promptly
notify the Co-Borrowers and the Banks thereof.
Section 11.13. Non-Receipt of Funds by the Agent.
Unless the Agent shall have been notified by a Bank or the
Co-Borrowers (either one as appropriate being the "Payor") prior to the date on
which such Bank is to make payment hereunder to the Agent of the proceeds of a
Loan or the Co-Borrowers are to make payment to the Agent, as the case may be
(either such payment being a "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Agent, the Agent may assume that the Required Payment has been
made and may, in reliance upon such assumption (but shall not be required to),
make the amount thereof available to the intended recipient on such date and, if
the Payor has not in fact made the Required Payment to the Agent, the recipient
of such payment shall, on demand, repay to the Agent the amount made available
to it together with interest thereon for the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day (when
the Agent recovers such amount from a Bank) or equal to the rate of interest
applicable to such Loan (when the Agent recovers such amount from the
Co-Borrowers) and, if such recipient shall fail to make such payment promptly,
the Agent shall be entitled to recover such amount, on demand, from the Payor,
with interest as aforesaid.
Section 11.14. Several Obligations and Rights of Banks.
The failure of any Bank to make any Loan to be made by it on
the date specified therefor shall not relieve any other Bank of its obligation
to make its Loan on such date, but no Bank shall be responsible for the failure
of any other Bank to make a Loan to be made by such other Bank. The amounts
payable at any time hereunder to each Bank shall be a separate and independent
debt, and each Bank shall be entitled to protect and enforce its rights arising
out of this Agreement, and it shall not be necessary for any other Bank to be
joined as an additional party in any proceeding for such purpose.
Section 11.15. Pro Rata Treatment of Loans, Etc.
Except to the extent otherwise provided: (a) each borrowing
shall be made from the Banks, each reduction or termination of the amount of the
Commitments shall be applied to the Commitments of the Banks, and each payment
of the fees hereunder shall be made by and held for the account of the Banks,
pro rata in accordance with their respective Commitment Proportions; (b) each
prepayment and payment of principal of or interest on Loans of a particular type
and a particular Interest Period shall be made to the Agent for the account of
the Banks holding Loans of such type and Interest Period pro rata in accordance
with the respective unpaid principal amounts of such Loans of such Interest
Period held by such Banks.
58
Section 11.16. Sharing of Payments Among Banks.
If a Bank shall obtain payment of any principal of or interest
on any Loan made by it through the exercise of any right of setoff, banker's
lien, counterclaim, or by any other means, it shall promptly purchase from the
other Banks a participation in the Loans made by the other Banks in such
amounts, and make such other adjustments from time to time as shall be equitable
to the end that all the Banks shall share the benefit of such payment (net of
any expenses which may be incurred by such Bank in obtaining or preserving such
benefit) pro rata in accordance with the unpaid principal and interest on the
Loans held by each of them. To such end the Banks shall make appropriate
adjustments among themselves (by the resale of any such participation sold or
otherwise) if such payment is rescinded or must otherwise be restored. The
Co-Borrowers agree that any Bank so purchasing a participation in the Loans made
by other Banks may exercise all rights of setoff, banker's lien, counterclaim or
similar rights with respect to such participation. Nothing contained herein
shall require any Bank to exercise any such right or shall affect the right of
any Bank to exercise, and retain the benefits of exercising, any such right with
respect to any other indebtedness of the Co-Borrowers.
ARTICLE 12.
MISCELLANEOUS.
Section 12.1. Amendments and Waivers.
Except as otherwise expressly provided in this Agreement, any
provision of this Agreement may be amended or modified only by an instrument in
writing signed by the Co-Borrowers, the Agent and the Required Banks, and any
provision of this Agreement may be waived by the Co-Borrowers (if such provision
requires performance by the Agent or the Banks) or by the Agent acting with the
consent of the Required Banks (if such provision requires performance by the
Co-Borrowers); provided, however, that no amendment modification or waiver
shall, unless by an instrument signed by all of the Banks or by the Agent acting
with the consent of all of the Banks: (a) increase or extend the term, or extend
the time or waive any requirement for the reduction or termination of the
Commitments, (b) extend the date fixed for the payment of principal of or
interest on any Loan, (c) reduce the amount of any payment of principal thereof
or the rate at which interest is payable thereon or any fee payable hereunder,
(d) alter the terms of this Section 12.1, (e) amend the definition of the term
"Required Banks", (f) change the Commitment of any Bank or the fees payable to
any Bank except as otherwise provided herein, (g) permit the Co-Borrowers to
transfer or assign any of their obligations hereunder or under the Facility
Documents or (h) release any of the collateral securing the obligations of the
Co-Borrowers hereunder. No failure on the part of the Agent or any Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof or preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 12.2. Usury
59
Anything herein to the contrary notwithstanding, the
obligations of the Co-Borrowers under this Agreement and the Notes shall be
subject to the limitation that payments of interest shall not be required to the
extent that receipt thereof would be contrary to provisions of law applicable to
a Bank limiting rates of interest which may be charged or collected by such
Bank. If, the interest rate provided herein exceeds the maximum rate permitted
by law to be collected at any time and subsequently, as a result of a change in
law, the Agent or the Banks are legally permitted to recover the difference
between interest that would have been paid in accordance with the terms of this
Agreement and interest actually paid by the Co-Borrowers, the Co-Borrowers shall
promptly, on demand, pay such difference to the Agent for the benefit of the
Banks.
Section 12.3. Expenses.
The Co-Borrowers shall reimburse the Agent on demand for all
reasonable costs, expenses, and charges (including, without limitation,
reasonable fees, charges and disbursements of external legal counsel for the
Agent) incurred by the Agent or by the Agent on behalf of the Banks in
connection with the preparation, execution and delivery of this Agreement and
the Facility Documents. In addition, the Co-Borrowers shall reimburse the Agent
and, upon the occurrence and continuance of an Event of Default, each Bank for
all of its reasonable costs and expenses in connection with the enforcement or
preservation of any rights under this Agreement, the Notes or the other Facility
Documents. The Co-Borrowers agree to indemnify the Agent and each Bank and their
respective directors, officers employees and agents from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages or expenses
incurred by any of them arising out of or by reason of any investigation or
litigation or other proceedings (including any threatened investigation or
litigation or other proceedings) relating to any actual or proposed use by the
Co-Borrowers or any of their Affiliates of the proceeds of the Loans or
otherwise arising out of or related to this agreement, including without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation or litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence, willful misconduct or bad faith of the Person to
be indemnified).
Section 12.4. Survival.
The obligations of the Co-Borrowers under Sections 2.3(b),
2.13 and 12.3 shall survive the repayment of the Loans and the termination of
the Commitments for a period corresponding to the maximum applicable statute of
limitations in effect in the State of New York from time to time.
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Section 12.5. Assignment; Participation.
This Agreement shall be binding upon, and shall inure to the
benefit of, the Co-Borrowers, the Agent, the Banks and their respective
successors and assigns, except that the Co-Borrowers may not assign or transfer
their rights or obligations hereunder. Each Bank may sell participations in or,
with the consent of the Agent, assign all or any part of any Loan to another
bank or other entity, in which event (a) in the case of an assignment, upon
notice thereof by the Bank to the Co-Borrowers with a copy to the Agent, the
assignee shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights, benefits and obligations as it would have if it were
a Bank hereunder and, to the extent of such assignment, the assignor shall be
released from its obligations hereunder; and (b) in the case of a participation,
the participant shall have no rights under the Facility Documents and all
amounts payable by the Co-Borrowers hereunder shall be determined as if such
Bank had not sold such participation. If any Bank assigns all or part of its
Commitments hereunder, (i) the parties to such Assignment shall execute an
Assignment and Acceptance Agreement in the form of Exhibit F hereto, (ii) the
Co-Borrowers shall execute new Notes in favor of the Banks in accordance with
the new allocations after giving effect to the assignment and (iii) the parties
to such assignment shall pay to the Agent a processing and recording fee of
$1,500 plus the reasonable costs and expenses of the Agent's counsel. The
agreement executed by such Bank in favor of the participant shall not give the
participant the right to require such Bank to take or omit to take any action
hereunder except action directly relating to (i) the extension of a payment date
with respect to any portion of the principal of or interest on any amount
outstanding hereunder allocated to such participant, (ii) the reduction of the
principal amount outstanding hereunder or (iii) the reduction of the rate of
interest payable on such amount or any amount of fees payable hereunder to a
rate or amount, as the case may be, below that which the participant is entitled
to receive under its agreement with such Bank. Such Bank may furnish any
information concerning the Co-Borrowers and the Guarantors in the possession of
such Bank from time to time to assignees and participants (including prospective
assignees and participants). Notwithstanding the foregoing, or any other
provision of this Agreement, the Agent agrees that it shall not permit its
Commitment Proportion to be less than 50% unless, in the Agent's sole judgment,
it is required to do so by any law, rule, regulation or order of any
governmental authority having jurisdiction over it.
Section 12.6. Notices
Unless the party to be notified otherwise notifies the other
party in writing as provided in this Section, and except as otherwise provided
in this Agreement, notices shall be given to the Agent by telephone, confirmed
by telecopy or other writing, and to the Banks and to the Co-Borrowers by
certified or registered mail or by recognized overnight delivery services to
such party at its address on the signature page of this Agreement provided that
notices to the Co-Borrowers shall be effective if delivered at the following
address: PDK Labs Inc., 000 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000, Attn:
Xxxxxxx Xxxxxxxx, Telecopier: (000) 000-0000 with a copy to Xxxxxxxxx &
Xxxxxxxxx, LLP, 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn:
Xxxxxx Xxxxxxxxx, Esq., Telecopier (000) 000-0000; provided that failure to
deliver a copy of such notice to Xxxxxxxxx & Xxxxxxxxx, LLP, shall not effect
the validity of any notice which is otherwise properly given. Notices shall be
effective: (a) if given by registered or certified mail, 72 hours after deposit
in the mails with postage prepaid, addressed as aforesaid;
61
(b) if given by recognized overnight delivery service, on the Banking Day
following deposit with such service addressed as aforesaid; and (c) if given by
telecopy, when the telecopy is transmitted to the telecopy number as aforesaid;
provided that all notices to the Agent and the Banks shall be effective upon
receipt.
Section 12.7. Setoff.
The Co-Borrowers agree that, in addition to (and without
limitation of) any right of setoff, banker's lien or counterclaim a Bank may
otherwise have, each Bank shall be entitled, at its option without any prior
notice to the Co-Borrowers (any such notice being expressly waived by the
Co-Borrowers to the extent permitted by applicable law), to offset balances
(general or special, time or demand, provisional or final) held by it for the
account of the Co-Borrowers at any of such Bank's offices, in Dollars or in any
other currency, against any amount payable by the Co-Borrowers, or either of
them, to such Bank under this Agreement or such Bank's Note which is not paid
when due), in which case it shall promptly notify the Co-Borrowers, or either of
them, and the Agent thereof; provided that such Bank's failure to give such
notice shall not affect the validity thereof. Payments by the Co-Borrowers
hereunder shall be made without setoff or counterclaim.
Section 12.8. Jurisdiction; Immunities.
(a) THE CO-BORROWERS HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY NEW YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW
YORK, NASSAU OR SUFFOLK COUNTIES OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE NOTES, AND THE CO-BORROWERS HEREBY IRREVOCABLY
AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. THE CO-BORROWERS IRREVOCABLY
CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING (BY CERTIFIED OR REGISTERED MAIL) OF COPIES OF SUCH PROCESS TO
THE CO-BORROWERS AT THE ADDRESS SPECIFIED IN SECTION 12.6. THE CO-BORROWERS
AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW. THE CO-BORROWERS FURTHER WAIVE ANY OBJECTION TO
VENUE IN SUCH STATE AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN SUCH STATE
ON THE BASIS OF FORUM NON CONVENIENS. THE CO-BORROWERS FURTHER AGREE THAT ANY
ACTION OR PROCEEDING BROUGHT AGAINST THE AGENT SHALL BE BROUGHT ONLY IN NEW YORK
STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK, NASSAU OR SUFFOLK
COUNTIES. THE CO-BORROWERS AND THE BANKS WAIVE ANY RIGHT THEY MAY HAVE TO JURY
TRIAL.
(b) NOTHING IN THIS SECTION 12.8 SHALL AFFECT THE RIGHT OF THE
AGENT OR ANY BANK TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF THE AGENT OR ANY BANK TO
62
BRING ANY ACTION OR PROCEEDING AGAINST THE CO-BORROWERS, OR THEIR PROPERTY IN
THE COURTS OF ANY OTHER JURISDICTIONS.
(c) TO THE EXTENT THAT THE CO-BORROWERS HAVE OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER FROM SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID
OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY,
THE CO-BORROWERS HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE NOTES.
Section 12.9. Table of Contents; Headings.
Any table of contents and the headings and captions hereunder
are for convenience only and shall not affect the interpretation or construction
of this Agreement.
Section 12.10. Severability.
The provisions of this Agreement are intended to be severable.
If for any reason any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
Section 12.11. Counterparts.
This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any party hereto say execute this Agreement by signing any such counterpart.
Section 12.12. Integration.
The Facility Documents set forth the entire agreement among
the parties hereto relating to the transactions contemplated thereby and
supersede any prior oral or written statements or agreements with respect to
such transactions.
Section 12.13. Joint and Several Obligations.
The obligations of the Co-Borrowers hereunder constitute joint
and several obligations of the Co-Borrowers and may be enforced against either
of the Co-Borrowers to the full extent thereof, without proceeding against the
other.
Section 12.14. Governing Law.
This Agreement shall be governed by, and interpreted and
construed in accordance with, the law of the State of New York.
63
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
THE CO-BORROWERS:
PDK LABS INC.
By: /s/ Xxxxxxx Xxxxxxxx
--------------------------
Xxxxxxx Xxxxxxxx
President
FUTUREBIOTICS INC.
By: /s/ Xxxxxxxx Xxxxxxxx
--------------------------
Xxxxxxxx Xxxxxxxx
President
THE BANKS:
EUROPEAN AMERICAN BANK, as Agent and as a Bank
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
000 Xxxxxxxx Xxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Vice President
Telephone No.: (000) 000-0000
Telefax No.: (000) 000-0000
64
Exhibit A
FORM OF
REVOLVING CREDIT NOTE
$15,000,000 Hauppauge, New York
August 20, 1997
FOR VALUE RECEIVED, PDK LABS INC., a New York corporation, having its
principal place of business at 000 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000
("PDK") and FUTUREBIOTICS, INC., a Delaware corporation, having its principal
place of business at 000 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx 00000 (the
"Co-Borrowers"), jointly and severally promise to pay to the order of EUROPEAN
AMERICAN BANK (the "Bank") at the office of EUROPEAN AMERICAN BANK (the "Agent")
located at 000 Xxxxxxxx Xxxxxxxx Xxxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 on or before
the Revolving Credit Termination Date, the principal sum of FIFTEEN MILLION
DOLLARS ($15,000,000) or, if less, the aggregate unpaid principal amount of all
Revolving Credit Loans made by Bank to the Co-Borrowers pursuant to the
Agreement (as defined below).
The Co-Borrowers shall pay interest on the unpaid principal balance of
this Note from time to time outstanding, at said office, at the rates of
interest, at the times and for the periods set forth in the Agreement.
All payments including prepayments on this Note shall be made in lawful
money of the United States of America in immediately available funds. Except as
otherwise provided in the Agreement, if a payment becomes due and payable on a
day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day, and interest shall be payable thereon at the rate
herein specified during such extension.
The Co-Borrowers hereby authorize Bank to enter from time to time the
amount of each Revolving Credit Loan to the Co-Borrowers and the amount of each
payment on a Revolving Credit Loan on the schedule annexed hereto and made a
part hereof. Failure of Bank to record such information on such schedule shall
not in any way effect the obligation of Co-Borrowers to pay any amount due under
this Note.
This Note is one of the Revolving Credit Notes referred to in that
certain Credit Agreement dated as of August 20, 1997 among the Co-Borrowers, the
Guarantor, and the Agent and the Banks party thereto of even date herewith (the
"Agreement"), as such Agreement may be amended from time to time, and is subject
to prepayment and its maturity is subject to acceleration upon the terms
contained in said Agreement. All capitalized terms used in this Note and not
defined herein shall have the meanings given them in the Agreement.
If any action or proceeding be commenced to collect this Note or enforce
any of its provisions, the Co-Borrowers agree to pay all reasonable costs and
expenses of such action or proceeding and reasonable attorneys fees and expenses
and further expressly waive any and every right to interpose any counterclaim in
any such action or proceeding. The Co-Borrowers hereby submit to the
jurisdiction of the Supreme Court of the State of New York and agree with Bank
that personal jurisdiction over the Co-Borrowers shall rest with the Supreme
Court of the State of New York for purposes of any action on or related to this
Note, the liabilities, or the enforcement of either or all of the same. The
Co-Borrowers hereby expressly waive any and every right to a trial by jury in
any action on or related to this Note, the liabilities or the enforcement of
either or all of the same. Bank may transfer this Note and may deliver the
security or any part thereof to the transferee or transferees, who shall
thereupon become vested with all the powers and rights above given to Bank in
respect thereto, and Bank shall thereafter be forever relieved and fully
discharged from any liability or responsibility in the matter. The failure of
any holder of this Note to insist upon strict performance of each and/or all of
the terms and conditions hereof shall not be construed as or deemed to be a
waiver of any such term or condition.
The Co-Borrowers and all endorsers and guarantors hereof waive
presentment and demand for payment, notice of non-payment, protest, and notice
of protest.
The terms of this Note may not be changed orally, but only by an
instrument duly executed by the Co-Borrowers and the Bank.
This Note shall be construed in accordance with and governed by the laws
of the State of New York.
PDK LABS INC.
By:
--------------------
Xxxxxxx Xxxxxxxx
President
FUTUREBIOTICS, INC.
By:
-------------------
Xxxxxxxx Xxxxxxxx
President
2
Schedule of Revolving Credit Loans
----------------------------------
Amount of Name of
Principal Unpaid Last Day of Person
Making Amount of Interest Paid or Principal Interest Making
Date Loan Rate Prepaid Balance Period Notation
---- ---- ---- ------- ------- ------ --------
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3
Amount of Name of
Principal Unpaid Last Day of Person
Making Amount of Interest Paid or Principal Interest Making
Date Loan Rate Prepaid Balance Period Notation
---- ---- ---- ------- ------- ------ --------
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4
Exhibit B
---------
TERM PROMISSORY NOTE
$6,300,000 Hauppauge, New York
August 20, 1997
PDK LABS INC., a corporation organized under the laws of the State of
New York, having a principal place of business at 000 Xxxxxxxxx Xxxx, Xxxxxxxxx,
Xxx Xxxx and FUTUREBIOTICS, INC., a corporation organized under the laws of the
State of Delaware, having a principal place of business at 000 Xxxxxxxxx Xxxx,
Xxxxxxxxx, Xxx Xxxx, (the "Co-Borrowers"), for value received, hereby, jointly
and severally, promise to pay to the order of EUROPEAN AMERICAN BANK (the
"Bank") at the office of EUROPEAN AMERICAN BANK (the "Agent") located at 000
Xxxxxxxx Xxxxxxxx Xxxxxxx, Xxxxxxxxx, Xxx Xxxx 00000, the principal sum of Six
Million Three Hundred Thousand Dollars ($6,300,000) in sixty (60) equal
consecutive monthly installments of $105,000, in lawful money of the United
States of America and in immediately available funds, in the manner provided in
the Credit Agreement referred to below on the 1st day of each calendar month
commencing on October 1, 1997, with a final payment due on September 1, 2002.
The Co-Borrowers shall pay interest on the unpaid principal balance of
this Term Note from time to time outstanding, at said office, at the rates of
interest, at the times and for the periods set forth in the Agreement.
All payments including prepayments on this Term Note shall be made in
lawful money of the United States of America in immediately available funds.
Except as otherwise provided in the Agreement, if a payment becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day, and interest shall be payable
thereon at the rate herein specified during such extension.
This Note is one of the Term Notes referred to in that certain Credit
Agreement dated as of August 20, 1997 among the Co-Borrowers, the Guarantor, and
the Agent and the Banks party thereto of even date herewith (the "Agreement"),
as such Agreement may be amended from time to time, and is subject to prepayment
and its maturity is subject to acceleration upon the terms contained in said
Agreement. All capitalized terms used in this Term Note and not defined herein
shall have the meanings given them in the Agreement.
If any action or proceeding be commenced to collect this Term Note or
enforce any of its provisions, the Co-Borrowers agree to pay all reasonable
costs and expenses of such action or proceeding and reasonable attorneys fees
and expenses and further expressly waive any and every right to interpose any
counterclaim in any such action or proceeding. The Co-Borrowers hereby submit to
the jurisdiction of the Supreme Court of the State of New York and agree with
Bank that personal jurisdiction over the Co-Borrowers shall rest with the
Supreme Court of the State of New York for purposes of any action on or related
to this Note, the liabilities, or the enforcement of either or all of the same.
The Co-Borrowers hereby expressly waive any and every right to a trial by jury
in any action on or related to this Term Note, the liabilities or the
enforcement of either or all of the same. Bank may transfer this Term Note and
may deliver the security or any part thereof to
the transferee or transferees, who shall thereupon become vested with all the
powers and rights above given to Bank in respect thereto, and Bank shall
thereafter be forever relieved and fully discharged from any liability or
responsibility in the matter. The failure of any holder of this Term Note to
insist upon strict performance of each and/or all of the terms and conditions
hereof shall not be construed as or deemed to be a waiver of any such term or
condition.
The Co-Borrowers and all endorsers and guarantors hereof waive
presentment and demand for payment, notice of non-payment, protest, and notice
of protest.
The terms of this Term Note may not be changed orally, but only by an
instrument duly executed by the Co-Borrowers and the Bank.
This Term Note shall be construed in accordance with and governed by the
laws of the State of New York.
PDK LABS INC.
By:
----------------------------
Xxxxxxx Xxxxxxxx
President
FUTUREBIOTICS, INC.
By:
----------------------------
Xxxxxxxx Xxxxxxxx
President
2
Exhibit C
---------
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT (this "Security Agreement") is made this
-----
day of , 1997, by and between:
----------
, a New York corporation having its principal place of
---------------
business at (hereinafter referred to
-----------------------------------------
as the "Debtor"), and
EUROPEAN AMERICAN BANK, a New York banking corporation, having an office
at 000 Xxxxxxxx Xxxxxxxx Xxxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 (the Agent) as
collateral agent for itself and each other Bank, if any, that is or hereafter
becomes a party to the Credit Agreement referred to below (the Secured Parties).
W I T N E S S E T H
-------------------
WHEREAS, and the Debtor (collectively the Co-Borrowers),
---------------
and the Secured Parties have entered into a Credit Agreement dated
(as it may hereafter be amended or otherwise modified from time
---------------
to time, being the "Credit Agreement") pursuant to which the Secured Parties may
lend to the Co-Borrowers the aggregate principal amounts set forth therein, upon
and subject to the terms and conditions thereof;
WHEREAS, it is a condition precedent to the obligation of the Secured
Parties to extend credit to the Co-Borrowers provided for in the Credit
Agreement that the Debtor shall execute and deliver this Security Agreement; and
WHEREAS, all capitalized terms used herein without definition shall have
the respective meanings ascribed thereto in the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Secured Parties to continue to extend credit to the Co-Borrowers, the Debtor
agrees with the Agent and the Secured Parties as follows:
1. Security Interest.
(a) Grant of Security. As security for the Obligations (as defined in
Section 1(b) hereof), the Debtor hereby assigns and pledges to the Agent on
behalf of the Secured Parties, and hereby grants to the Agent on behalf of the
Secured Parties a first priority security interest in, all of the Debtors right,
title and interest, whether now existing or hereafter arising or acquired, in
and to the following (collectively, the "Collateral"):
(i) All personal property of the Debtor, whether now or
hereafter existing or now owned or hereafter acquired and wherever located, of
every kind and description, tangible or intangible, including, without
limitation, the balance of every deposit account now or hereafter
existing of the Debtor with the Secured Parties or any of them or any of their
affiliates or with any agent of the Secured Parties or any of them or any of
their affiliates to the extent such account is maintained such agent in its
capacity as agent of any kind for the Secured Parties or any of them or any of
their affiliates, and all goods, equipment, furniture, inventory (including,
without limitation, all raw materials, finished goods and work-in-process),
accounts, contract rights, chattel paper, notes receivable, instruments,
documents (including, without limitation, documents of title, warehouse receipts
and all other shipping documents and instruments of any kind whatsoever, whether
relating to goods in transit or otherwise), general intangibles, credits,
claims, demands and any other obligations of any kind, whether now or hereafter
arising, of the Debtor, and, as to all of the foregoing, any and all additions
and accessions thereto, all substitutions and replacements therefor and all
products and proceeds thereof (including, without limitation, all proceeds of
insurance thereon).
The term "accounts" shall mean, without limiting the generality
of the foregoing, any and all now existing or hereafter arising rights to
payment held by the Debtor, whether in the form of accounts receivable, notes,
drafts, acceptances or other forms of obligations and receivables now or
hereafter received by or belonging to the Debtor for (A) inventory sold or
leased by it, (B) services rendered by it, or (C) advances or loans made by it
to any Person; together with all guarantees and security therefor and all
proceeds thereof, whether cash proceeds or otherwise, including, without
limitation, all right, title and interest of the Debtor in the inventory that
gave rise to any such accounts, including, without limitation, the right to
stoppage in transit and all returned, rejected, rerouted or repossessed
inventory.
(ii) All choses in action, any rights arising under any
judgment, statute or rule, all corporate and business records, customer lists,
credit files, computer program print-outs, and other computer materials and
records contained in any and all types of storage media, now in use or hereafter
created, including, but not limited to, floppy disks, hard disks,
magneto-optical disks, or CD-ROM disks, whether on-site or at a different
location, all inventories, trademarks, trade styles, trade names, designs,
patents, copyrights, licenses, license agreements, and any applications for
patents and/or trademarks.
(iii) Any and all additions and accessions to the foregoing
Collateral, all substitutions and replacements therefor and all products and
proceeds thereof (including, without limitation, proceeds of insurance thereon).
(b) Security for Obligations. This Security Agreement secures the
payment of all obligations of Debtor to the Secured Parties, or any of them, now
or hereafter existing under the Credit Agreement or this Security Agreement,
including, in each case, any modifications or amendments thereto, or under any
promissory notes or other documents evidencing indebtedness under or related to
or contemplated by the Credit Agreement, or any other obligation of Debtor to
the Secured Parties, whether principal, interest, fees, expenses or otherwise,
together with all costs of collection or enforcement, including, without
limitation, reasonable attorneys fees incurred in any collection efforts or in
any judicial proceeding (including, without limitation, bankruptcy or
reorganization) (all such obligations being the "Obligations").
2
(c) Debtor Remains Liable. Anything herein to the contrary
notwithstanding, (i) the Debtor shall remain liable to perform all of its duties
and obligations under the transactions giving rise to the Collateral to the same
extent as if this Security Agreement had not been executed, (ii) the exercise by
the Agent on behalf of the Secured Parties of any of the rights hereunder shall
not release the Debtor from any of its duties or obligations under the
transactions giving rise to the Collateral, which shall remain unchanged as if
this Security Agreement had not been executed, and (iii) neither the Agent nor
any of the Secured Parties shall have any obligation or liability under the
transactions giving rise to the Collateral by reason of this Security Agreement,
nor shall the Agent or any of the Secured Parties be obligated to perform any of
the obligations or duties of the Debtor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
(d) Continuing Agreement. This Security Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until payment in full of the Obligations and until the Credit
Agreement shall no longer be in effect.
2. Debtors Title; Liens and Encumbrances.
The Debtor represents and warrants that the Debtor is, or to the extent
that this Security Agreement states that the Collateral is to be acquired after
the date hereof, will be, the owner of the Collateral, having good and
marketable title thereto, free from any and all liens, security interests,
encumbrances and claims. The Debtor will not create or assume or permit to exist
any such lien, security interest, encumbrance or claim on or against the
Collateral except as created by this Securi Agreement and as permitted under
Section 8.2 of the Credit Agreement, and the Debtor will promptly notify the
Agent of any such other claim, lien, security interest or other encumbrance made
or asserted against the Collateral and will defend the Collateral against any
such claim, lien, security interest or other encumbrance.
3. Representations and Warranties;
Location of Collateral and Records;
Business and Trade Names of Debtor.
(a) The Debtor represents and warrants that it has no place of business,
offices where Debtors books of account and records are kept, or places where the
Collateral is used, stored or located, except as set forth on Schedule I annexed
hereto, and covenants that the Debtor will promptly notify the Agent of any
change in the foregoing representation. The Debtor shall at all times maintain
its records as to the Collateral at its chief place of business at the address
referred to on Sched and at none other. The Debtor further covenants that except
for Collateral delivered to the Agent or an agent for the Agent, the Debtor will
not store, use or locate any of the Collateral at any place other than as listed
on Schedule I annexed hereto. To the extent that any Collateral is located at a
location which is not owned by the Debtor, the Debtor shall deliver to the Agent
for the benefit of the Secured Parties landlords waivers in form and substance
satisfactory to the Agent.
(b) The Debtor represents and warrants that it currently uses, and
during the last five years has used, no business or trade names, except as set
forth on Schedule I annexed hereto,
3
and covenants that the Debtor will promptly notify the Agent, in sufficient
detail, of any changes in, additions to, or deletions from the business or trade
names used by the Debtor for billing purposes.
(c) The Debtor represents and warrants that it has complied and is in
compliance with the provisions of the Fair Labor Standards Act, including,
without limitation, the minimum wage and overtime rules of that Act, and
covenants that the Debtor will continue to comply with the provisions of such
Act.
4. Perfection of Security Interest.
The Debtor will execute all such financing statements pursuant to the
Uniform Commercial Code or other notices appropriate under applicable law as the
Agent or the Secured Parties may require, each in form satisfactory to the Agent
and will pay all filing or recording costs with respect thereto, and all costs
of filing or recording this Security Agreement or any other instrument,
agreement or document executed and delivered pursuant hereto or to the Credit
Agreement (including the cost of a federal, state or local mortgage,
documentary, stamp or other taxes), in each case, in all public offices where
filing or recording is deemed by the Agent to be necessary or desirable. The
Debtor hereby authorizes the Agent to take all action (including, without
limitation, the filing of any Uniform Commercial Code financing statements or
amendments thereto without the signature of the Debtor or by signing of the
Debtors name to any such financing statements as its attorney-in-fact,) which
the Agent may deem necessary or desirable to perfect or otherwise protect the
liens and security interests created hereunder and to obtain the benefits of
this Security Agreement.
5. General Covenants.
The Debtor shall:
(a) furnish the Agent from time to time at the Agents request written
statements and schedules further identifying and describing the Collateral in
such detail as the Agent may reasonably require;
(b) advise the Agent promptly, in sufficient detail, of any substantial
change in the Collateral, and of the occurrence of any event which would have a
material adverse effect on the value of the Collateral or on the Secured Parties
security interest therein;
(c) comply with all acts, rules, regulations and orders of any
legislative, administrative or judicial body or official applicable to the
Collateral or any part thereof or to the operation of the Debtors business
except where the failure to comply (a) is non-material and (b) has no effect on
the value of the Collateral or on the ability of the Secured Parties to exercise
its rights and remedies hereunder; provided, however, that the Debtor may
contest any acts, rules, regulations, orde and directions of such bodies or
officials in any reasonable manner which will not, in the Agents opinion,
adversely affect Agents or the Secured Parties rights or the priority of their
security interests in the Collateral;
4
(d) perform and observe all covenants, restrictions and conditions
contained in the Credit Agreement providing for payment of taxes, maintenance of
insurance and otherwise relating to the Collateral, as though such covenants,
restrictions and conditions were fully set forth in this Security Agreement;
(e) promptly notify the Agent of all disputes with account debtors
involving amounts in excess of $250,000.00;
(f) promptly execute and deliver to the Agent such further deeds,
mortgages, assignments, security agreements or other instruments, documents,
certificates and assurances and take such further action as the Agent may from
time to time in its sole discretion deem necessary to perfect, protect or
enforce the Agents or the Secured Parties security interests in the Collateral
or otherwise to effect the intent of this Security Agreement and the Credit
Agreement;
(g) keep or cause to be kept the Collateral in good working order,
repair, running and marketable condition, ordinary wear and tear excepted, at
the Debtors own cost and expense; and
(h) not assign, sell, mortgage, lease, transfer, pledge, grant a
security interest in or lien upon, encumber or otherwise dispose of or abandon,
any part or all of the Collateral, without the express prior written consent of
the Agent (exercisable in the sole discretion of the Secured Parties), except
(i) for the sale from time to time in the ordinary course of business of the
Debtor of such items of Collateral as may constitute part of the business
inventory of the Debtor; and (ii) as otherwise expressly provided in the Credit
Agreement.
6. Assignment of Insurance.
At or prior to the date hereof, the Debtor shall deliver to Secured
Parties copies of, or certificates of the issuing companies with respect to,
endorsements of any and all policies of insurance owned by the Debtor covering
or in any manner relating to the Collateral, in form and substance satisfactory
to the Secured Parties naming the Secured Parties as additional insured party as
their interests may appear with respect to liability coverage and the Agent on
behalf of the Secured Parties a loss payee with respect to property and extended
insurance coverage, and indicating that no such policy will be terminated, or
reduced in coverage or amount, without at least thirty (30) days prior written
notice from the insurer to the Agent. As further security for the due payment
and performance of the Obligations, the Debtor hereby assigns to the Agent for
the benefit of the Secured Parties all sums, including returned or unearned
premiums, which may become payable under or in respect of any policy of
insurance owned by the Debtor covering or in any manner relating to the
Collateral, and the Debtor hereby directs each insurance company issuing any
such policy to make payment of sums directly to the Agent for the benefit of the
Secured Parties. The Debtor hereby appoints the Agent as the Debtors
attorney-in-fact and authorizes the Agent in the Debtors or in the Agents name
to endorse any check or draft representing any such payment and to execute any
proof of claim, subrogation receipt and any other document required by such
insurance company as a condition to or otherwise in connection with such
payment, and, upon the occurrence of any Default or Event of Default, to cancel,
assign or surrender any such policies.
5
All such sums received by the Agent shall be applied by the Agent to
satisfaction of the Obligations or, to the extent that such sums represent
unearned premiums in respect of any policy of insurance on the Collateral
refunded by reason of cancellation, toward payment for similar insurance
protecting the respective interests of the Debtor and the Secured Parties, or as
otherwise required by applicable law.
7. Fixtures.
It is the intent of the Debtor and the Secured Parties that none of the
Collateral is or shall be regarded as fixtures, as that term is used or defined
in Article 9 of the Uniform Commercial Code, and the Debtor represents and
warrants that it has not made and is not bound by any lease or other agreement
which is inconsistent with such intent. Nevertheless, if the Collateral or any
part thereof is or is to become attached or affixed to any real estate, the
Debtor will, upon request, furnis the Agent with a disclaimer or subordination
in form satisfactory to the Agent or the holder of any interest in the real
estate to which the Collateral is attached or affixed, together with the names
and addresses of the record owners of, and all other persons having interest in,
and a general description of, such real estate.
8. Collections.
(a) The Debtor may collect all checks, drafts, cash or other remittances
(i) in payment of any of its accounts, contract rights or general intangibles
constituting part of the Collateral, (ii) in payment of any Collateral sold,
transferred, leased or otherwise disposed of, or (iii) in payment of or on
account of its accounts, contracts, contract rights, notes, drafts, acceptances,
general intangibles, choses in action and all other forms of obligations
relating to any of the Collateral sold, transferred, or leased or otherwise
disposed of, and all of the foregoing amounts so collected after the occurrence
of an Event of Default shall be held in trust by the Debtor for, and as the
property of, the Secured Parties and shall not be commingled with other funds,
money or property of the Debtor.
(b) Upon the written request of the Agent, the Debtor will immediately
upon receipt of all such checks, drafts, cash or other remittances in payment of
any of its accounts, contract rights or general intangibles constituting part of
the Collateral, deliver any such items to the Agent for the benefit of the
Secured Parties accompanied by a remittance report in form supplied or approved
by the Agent, such items to be delivered to the Agent in the same form received,
endorsed or otherwise assigned by the Debtor where necessary to permit
collection of such items and, regardless of the form of such endorsement, the
Debtor hereby waives presentment, demand, notice of dishonor, protest, notice of
and all other notices with respect thereto.
(c) Upon the written request of the Agent, the Debtor will immediately
upon receipt of all such checks, drafts, cash or other remittances in payment
for any Collateral sold, transferred, leased or otherwise disposed of, or in
payment or on account of its accounts, contracts, contract rights, notes,
drafts, acceptances, general intangibles, choses in action and all other forms
of obligations relating to any of the Collateral so sold, transferred, leased or
otherwise disposed of, deliver such items to the Agent accompanied by a
remittance report in form supplied or
6
approved by the Agent, such items to be delivered to the Agent in the same form
received, endorsed or otherwise assigned by the Debtor where necessary to permit
collection of such items and, regardless of the form of such endorsement, the
Debtor hereby waives presentment, demand, notice of dishonor, protest, notice of
protest and all other notices with respect thereto.
(d) Upon the written request of the Agent, the Debtor will promptly
notify the Agent in writing of the return or rejection of any goods represented
by any accounts, contract rights or general intangibles and the Debtor shall
forthwith account therefor to the Agent for the benefit of the Secured Parties
in cash without demand or notice and until such payment has been received by the
Agent the Debtor will receive and hold all such goods separate and apart, in
trust for and subject to the security interest in favor of the Agent for the
benefit of the Secured Parties, and the Agent is authorized to sell, for the
Debtors account and at the Debtors sole risk, all or any part of such goods.
(e) All of the foregoing remittances shall be applied and credited by
the Agent first to satisfaction of the Obligations or as otherwise required by
applicable law, and to the extent not so credited or applied, shall be paid over
to the Debtor.
9. Rights and Remedies.
In the event of the occurrence and continuance of any Event of Default,
the Agent, on behalf of the Secured Parties, shall at any time thereafter have
the right, with or without (to the extent permitted by applicable law) notice to
the Debtor, as to any or all of the Collateral, by any available judicial
procedure or without judicial process, to take possession of the Collateral and
without liability for trespass to enter any premises where the Collateral may be
located for the purpose of taking possession of or removing the Collateral, and,
generally, to exercise any and all rights afforded to a secured party under the
Uniform Commercial Code or other applicable law. Without limiting the generality
of the foregoing, the Debtor agrees that the Agent, on behalf of the Secured
Parties shall have the right to sell, lease, or otherwise dispose of all or any
part of the Collateral, either at public or private sale or at any brokers
board, in lots or in bulk, for cash or for credit, with or without warranties or
representations, and upon such terms and conditions, all as the Agent in its
sole discretion may deem advisable, and it or any of the Secured Parties shall
have the right to purchase at any such sale; and, if any Collateral shall
require rebuilding, repairing, maintenance, preparation, or is in process or
other unfinished state, the Agent shall have the right, at its sole option and
discretion, to do such rebuilding, repairing, preparation, processing or
completion of manufacturing, for the purpose of putting the Collateral in such
saleable or disposable form as it shall deem appropriate. At the Agents request,
the Debtor shall assemble the Collateral and make it available to the Agent at
places which the Agent shall select, whether at the Debtors premises or
elsewhere, and make available to the Agent, without rent, all of the Debtors
premises and facilities for the purpose of the Agents taking possession of,
removing or putting the Collateral in saleable or disposable form. The proceeds
of any such sale, lease or other disposition of the Collateral shall be applied
first to the expenses of retaking, holding, storing, processing and preparing
for sale, selling, and the like, and to the reasonable attorneys fees and legal
expenses incurred by the Agent and/or the Secured Parties, and then to
satisfaction of the Obligations, and to the payment of any other amounts
required by applicable law, after which the Agent shall account
7
to the Debtor for any surplus proceeds. If, upon the sale, lease or other
disposition of the Collateral, the proceeds thereof are insufficient to pay all
amounts to which the Secured Parties are legally entitled, the Debtor will be
liable for the deficiency, together with interest thereon, at the rate
prescribed in the Credit Agreement, and the reasonable fees of any attorneys
employed by the Agent and/or the Secured Parties to collect such deficiency. To
the extent permitted by applicable law, the Debtor waives all claims, damages
and demands against the Agent and the Secured Parties arising out of the
repossession, removal, retention or sale of the Collateral.
10. Costs and Expenses.
Any and all fees, costs and expenses, of whatever kind or nature,
including reasonable attorneys fees and legal expenses incurred by the Agent
and/or the Secured Parties, in connection with the preparation of this Security
Agreement and all other documents relating hereto and the consummation of this
transaction, the filing or recording of financing statements and other documents
(including all taxes in connection therewith) in public offices, the payment or
discharge of any taxes, insuran premiums, encumbrances or otherwise protecting,
maintaining or preserving the Collateral and the Secured Parties security
interest therein, whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions or proceedings arising out of or related to
the transaction to which this Security Agreement relates, shall be borne and
paid by the Debtor on demand by the Agent and the Secured Parties and until so
paid shall be added to the principal amount of the Obligations and shall bear
interest at the rate prescribed in the Credit Agreement.
11. Power of Attorney.
The Debtor authorizes the Agent and does hereby make, constitute and
appoint the Agent, and any officer or agent of the Agent, with full power of
substitution, as the Debtors true and lawful attorney-in-fact, with power, in
its own name or in the name of the Debtor: (a) to endorse any notes, checks,
drafts, money orders, or other instruments of payment (including payments
payable under or in respect of any policy of insurance) in respect of the
Collateral that may come into possession of t Agent; (b) to sign and endorse any
invoice, freight or express xxxx, xxxx of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in connection
with accounts, and other documents relating to Collateral; (c) to pay or
discharge any taxes, liens, security interest or other encumbrances at any time
levied or placed on or threatened against the Collateral; (d) to demand,
collect, receipt for, compromise, settle and xxx for monies due in respect of
the Collateral; (e) to receive, open and dispose of all mail addressed to the
Debtor and to notify the Post Office authorities to change the address for
delivery of mail addressed to the Debtor to such address as the Agent may
designate; and (f) generally to do, at the Agents option and at the Debtors
expense, at any time, or from time to time, all acts and things which the Agent
deems necessary to protect, preserve and realize upon the Collateral and the
Secured Parties security interest therein in order to effect the intent of this
Security Agreement and the Credit Agreement, all as fully and effectually as the
Debtor might or could do; and the Debtor hereby ratifies all that said attorney
shall lawfully do or cause to be done by virtue hereof. All acts of said
attorney or designee are hereby ratified and approved and said attorney or
designee shall not be liable for any acts of commission or omission, nor for any
error or judgment or mistake of fact or
8
law except for its own gross negligence or willful misconduct. This power of
attorney shall be irrevocable for the term of this Security Agreement and
thereafter as long as any of the Obligations shall be outstanding.
12. Notices.
Unless the party to be notified otherwise notifies the other party in
writing as provided in this Section, notices shall be given hereunder by
telecopy, by certified or registered mail or by recognized overnight delivery
services to any party at its address on the signature page of this Security
Agreement. Notices shall be effective (a) if given by registered or certified
mail, on the third day after deposit in the mails with postage prepaid,
addressed as aforesaid; (b) if given by recogni overnight delivery service, on
the business day following deposit with such service, addressed as aforesaid; or
(c) if given by telecopy, when the telecopy is transmitted to the telecopy
number as aforesaid; provided that all notices to the Agent and the Secured
Parties shall be effective on receipt.
13. Other Security.
To the extent that the Obligations are now or hereafter secured by
property other than the Collateral or by the guarantee, endorsement or property
of any other person, then the Agent shall have the right in its sole discretion
to pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Agents and/or the
Secured Parties rights and remedies hereunder.
14. Deposits.
Any and all deposits or other sums at any time credited by or due from
any of the Secured Parties to the Debtor, whether in regular or special
depository accounts or otherwise, shall at all times constitute additional
Collateral for the Obligations, and may be set-off by the Secured Parties, or
any of them, against any Obligations at any time, whether or not other
collateral held by the Agent on behalf of the Secured Parties is considered to
be adequate.
15. Miscellaneous.
(a) Beyond the safe custody thereof, the Agent shall have no duty as to
the collection of any Collateral in its possession or control or in the
possession or control of any agent or nominee of the Agent, or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto.
(b) No course of dealing between the Debtor and the Agent or the Secured
Parties, nor any failure to exercise, nor any delay in exercising, on the part
of the Agent or the Secured Parties, any right, power or privilege hereunder or
under the Credit Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege
9
(c) All of the Agents and the Secured Parties rights and remedies with
respect to the Collateral, whether established hereby or by the Credit
Agreement, or by any other agreements, instruments or documents or by law, shall
be cumulative and may be exercised singly or concurrently.
(d) The provisions of this Security Agreement are severable, and if any
clause or provision shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Security Agreement in any jurisdiction.
(e) This Security Agreement (including this subsection) is subject to
modification only by a writing signed by all of the parties hereto.
(f) The benefits and burdens of this Security Agreement shall inure to
the benefit of and be binding upon the respective successors and assigns of the
parties hereto; provided, however, that the rights and obligations of the Debtor
under this Security Agreement shall not be assigned or delegated without the
prior written consent of the Agent and the Secured Parties (exercisable in their
sole discretion), and any purported assignment or delegation without such
consent shall be void.
16. Term of Agreement.
The term of this Security Agreement shall commence on the date hereof
and this Security Agreement shall continue in full force and effect, and be
binding upon the Debtor, until all of the Obligations have been fully paid and
performed and such payment and performance have been acknowledged in writing by
the Agent on behalf of the Secured Parties, whereupon this Security Agreement
shall terminate.
10
WITNESS the execution hereof as of the day and year first above written.
, as Debtor
---------------
By:
-------------------------------------
President
Address for Notices:
The Banks:
EUROPEAN AMERICAN BANK,
as Agent and as a Secured Party
By:
-------------------------------------
Xxxxxx X. Xxxxxx
Vice President
Address for Notices:
European American Bank
000 Xxxxxxxx Xxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
11
SCHEDULE I
TO
SECURITY AGREEMENT
------------------
Offices Where Records Are Kept:
-------------------------------
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Other Locations Where Collateral
Is Stored, Used or Located:
---------------------------
000 Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
000 Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Business and Trade Names
Used by Debtor:
---------------
None
12
SCHEDULE A
TO
UCC-1 FINANCING STATEMENT
NAMING , AS DEBTOR, AND
---------------
EUROPEAN AMERICAN BANK,
AS AGENT FOR ITSELF AND CERTAIN OTHER BANKS
AS SECURED PARTIES
------------------
All of the Debtors right, title and interest, whether now existing or
hereafter arising, in and to the following:
(a) All personal property of the Debtor, whether now or hereafter
existing or now owned or hereafter acquired and wherever located, of every kind
and description, tangible or intangible, including, without limitation, the
balance of every deposit account now or hereafter existing of the Debtor with
the Secured Parties or any of them or any of their affiliates or with any agent
of the Secured Parties or any of them or any of their affiliates to the extent
such account is maintained by such agent in its capacity as agent of any kind
for the Secured Parties or any of them or any of their affiliates and all goods,
equipment, furniture, inventory (including, without limitation, all raw
materials, finished goods and work-in-process), accounts, contract rights,
chattel paper, notes receivable, instruments, documents (including, without
limitation, documents of title, warehouse receipts and all other shipping
documents and instruments of any kind whatsoever, whether relating to goods in
transit or otherwise), general intangibles, credits, claims, demands and any
other obligations of any kind, whether now or hereafter arising, of the Debtor
and, as to all the foregoing, any and all additions and accessions thereto, all
substitutions and replacements therefor and all products and proceeds thereof
(including, without limitation, proceeds of insurance thereon).
The term "accounts" shall mean, without limiting the generality of the
foregoing, any and all now existing or hereafter arising rights to payment held
by the Debtor, whether in the form of accounts receivable, notes, drafts,
acceptances or other forms of obligations and receivables now or hereafter
received by or belonging to the Debtor for (A) inventory sold or leased by it,
(B) services rendered by it, or (C) advances or loans made by it to any Person,
together with all guarantees and security therefor and all proceeds thereof,
whether cash proceeds or otherwise, including, without limitation, all right,
title and interest of the Debtor in the inventory which gave rise to any such
accounts, including, without limitation, the right to stoppage in transit and
all returned, rejected, rerouted or repossessed inventory.
(b) All choses in action, any rights arising under any judgment, statute
or rule, all corporate and business records, customer lists, credit files,
computer program print-outs, and other computer materials and records contained
in any and all types of storage media, now in use or hereafter created,
including, but not limited to, floppy disks, hard disks, magneto-optical disks,
or CD-ROM disks, whether on-site or at a different location, all inventories,
trademarks, trade styles, trade names designs, patents, copyrights, licenses,
license agreements, and any applications for patents and/or trademarks.
13
(c) Any and all additions and accessions to the foregoing Collateral,
all substitutions and replacements therefor and all products and proceeds
thereof (including, without limitation, proceeds of insurance thereon).
(d) All sums, including returned or unearned premiums, which may become
payable under or in respect of any policy of insurance owned by the Debtor
covering or in any manner relating to the Collateral.
(e) Any and all deposits or other sums at any time credited by or due
from the Secured Parties to the Debtor whether in regular or special depository
accounts or otherwise.
14
Exhibit D
GUARANTY
--------
WHEREAS, European American Bank and the parties identified as Banks
therein (the Banks) have entered into a Credit Agreement (the Credit Agreement),
dated August 20, 1997, with PDK Labs Inc. and Futurebiotics, Inc. (the Debtors);
and
WHEREAS, under the terms of the Credit Agreement, the Banks have agreed
to extend credit to the Debtors, which indebtedness will be evidenced by certain
promissory notes of the Debtors (the Notes), to be dated on and after August 20,
1997, in the aggregate principal amount of $23,500,000;
WHEREAS, the undersigned (the Guarantor) is a direct or indirect
subsidiary of one or more of the Debtors and has derived or will derive direct
benefit from the extension of credit to the Debtors; and
WHEREAS, the Banks will not extend such credit unless, among other
conditions, the undersigned Guarantor shall have executed and delivered this
Guaranty;
NOW, THEREFORE, in consideration of the Banks extending such credit to
the Debtors and other benefits accruing to the Guarantor, the receipt and
sufficiency of which are hereby acknowledged, the Guarantor hereby makes the
following representations and warranties to the Banks and hereby covenants and
agrees with the Banks as follows:
1. The Guarantor irrevocably and unconditionally, guarantees to the
Banks (i) timely payment in full by Debtors to the Banks of all payments due
pursuant to the Notes (it being understood that this is a guarantee of payment
and not of collection), and (ii) timely payment and/or performance, as
applicable, of all other payment and performance obligations of Debtors pursuant
to the Notes, the Credit Agreement and all other documents and instruments
executed in connection therewith, or pursua to any amendment, modification or
supplement to any of the foregoing (all of the foregoing under clauses (i) and
(ii) being collectively referred to as the Guaranteed Obligations). If Debtors
shall default in payment of any amount due pursuant to the Notes beyond any
applicable grace period or otherwise default beyond any applicable grace period
in the performance of the Guaranteed Obligations, the Guarantor irrevocably and
unconditionally agrees to pay to the Banks upon demand the amount in default or
to cure the default if it is a non-payment default (it being understood,
however, that a non-payment may result in the acceleration of all indebtedness
and a demand for payment in full by the Guarantor under the Guaranty). The
Guarantor understands, agrees and confirms that the Banks may enforce this
Guaranty up to the full amount of the Guaranteed Obligations owing against the
Guarantor without proceeding against the Debtors, or any of them, against any
security for the Guaranteed Obligations or against any other guarantor under any
other guarantee covering the Guaranteed Obligations.
2. The Guarantor hereby acknowledges the Guaranteed Obligations and
hereby expressly waives: (i) presentment and demand for payment of the principal
of or interest thereon or any other sums of any nature whatsoever with respect
thereto, (ii) notice of acceptance of this Guaranty, or of the extension of
credit to the Debtors, (iii) notice of any default hereunder or under any
agreements between the Banks and the Debtors with respect to the Guaranteed
Obligations, and of all indulgences with respect thereto, (iv) demand on the
Debtors for observance or performance of, or enforcement of any terms or
provisions of any agreements between the Banks and the Debtors with respect to
the Guaranteed Obligations, (v) to the maximum extent permitted by applicable
law and except as otherwise provided herein, the benefit of all laws now or
hereafter in effect in any way limiting or restricting the liability of the
Guarantor under this Guaranty, including any and all right to stay of execution
and exemption of property in any action to enforce the liability of the
Guarantor hereunder and (vi) any other event or circumstance which may
constitute a release of or defense to the obligors under any of the Guaranteed
Obligations or the Guarantor under this Guaranty. In the event this Guaranty
shall be enforced by suit or otherwise, the Guarantor shall pay the Banks, on
demand, for all reasonable fees and expenses incurred by the Banks in connection
therewith, including, without limitation, the reasonable fees and expenses of
the Banks' counsel.
3. The Banks, in their sole and absolute discretion, may at any time and
from time to time without the consent of, or notice to, the Guarantor without
incurring responsibility to the Guarantor, without impairing or releasing the
obligations of Guarantor hereunder, upon or without any terms or conditions and
in whole or in part (but in all events subject to the applicable provisions of
the Credit Agreement);
(a) by agreement with the Debtors, change the manner,
place or terms of payment of, and/or change or extend the time of payment of,
increase the amount of, or renew or alter any of the Guaranteed Obligations, any
security therefor, or any liability incurred directly or indirectly in respect
thereof, and the Guaranty herein made shall apply to the Guaranteed Obligations
as so changed, extended, increased, renewed or altered;
(b) exercise or refrain from exercising any rights
against the Debtors, or any of them, or others or otherwise act or refrain from
acting;
(c) release, settle or compromise any of the Guaranteed
Obligations, any security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of Debtors, or any of them, to creditors of
Debtors, or any of them, other than Guarantor;
(d) consent to or waive any breach of, or any act,
omission or default under, the Credit Agreement or the Notes, or any of the
instruments or agreements referred to therein, or otherwise amend, modify or
supplement any of the foregoing;
(e) agree to the substitution, exchange, release or
other disposition of all or any part of any property securing the Guaranteed
Obligations;
2
(f) make advances for the purposes of performing any
term or covenant contained in any agreement between the Banks and the Debtors
with respect to which the Debtors may be in default;
(g) assign or otherwise transfer all or any part of the
Guaranteed Obligations; and
(h) deal in all respects with the Debtors as if this
Guaranty were not in effect.
4. No invalidity, irregularity or unenforceability of all or any part of
the Guaranteed Obligations or of any security therefor shall affect, impair or
be a defense to this Guaranty, and this Guaranty is a primary obligation of the
Guarantor.
5. This Guaranty is a continuing one and all liabilities to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of the
Banks (whether acting individually or through an agent), or any of them, in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly specified are cumulative and not exclusive of any rights or remedies
which the Banks (whether acting individually or through an agent), or any of
them, or any subsequent holder of any Guaranteed Obligations would otherwise
have. No notice to or demand on the Guarantor in any case shall entitle the
Guarantor to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Banks (whether acting
individually or through an agent), or any of them, or any holder of any
Guaranteed Obligations to any other or further action in any circumstances
without notice or demand.
6. This is a guarantee of payment and not of collection, and the
liability of the Guarantor under this Guaranty shall be primary, direct and
immediate, and not conditional or contingent upon pursuit by the Banks of any
remedies they may have against the Debtors, or any of them, with respect to the
Guaranteed Obligations, whether pursuant to the terms thereof or by law, or
against any other person or entity or against any other collateral. Without
limiting the generality of the foregoing, Banks shall not be required to make
any demand on the Debtors, or any of them, or to sell at foreclosure or
otherwise pursue or exhaust their remedies against the property securing the
Debtors obligations for the Guaranteed Obligations or against the Debtors, or
any of them, or against any other person or entity or against any other
collateral whatsoever, before, simultaneously with or after enforcing their
rights and remedies hereunder against the Guarantor. Any one or more successive
or concurrent actions may be brought hereon against the Guarantor either in the
same action, if any, brought against the Debtors, or any of them, or in separate
actions, as often as the Banks may deem advisable.
7. The Guarantor represents and warrants to the Banks that:
3
(a) It is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all corporate power and authority to own all of its properties and to carry
on its business as presently conducted and as contemplated by this Guaranty and
has corporate power and authority to execute and deliver this Guaranty and to
perform its obligations hereunder.
(b) This Guaranty is and will be the legal, valid and
binding obligation of the Guarantor, enforceable in accordance with its terms,
and the execution, delivery and performance of this Guaranty and such other
agreements, documents and instruments and the performance of the transactions
contemplated hereunder have been and will be duly and validly authorized and
approved by the Board of Directors, and do not and will not require any consent
or approval of any third party or of the stockholders of the Guarantor other
than consents which have previously been obtained.
(c) The execution and delivery of this Guaranty do not,
and the consummation of the transactions contemplated hereby will not,
constitute a violation of, and are not, and will not, be a default under or
conflict with the terms of the Certificate of Incorporation or By-laws of the
Guarantor, or any contract, lease, indenture, agreement, order, judgment, or
decree to which it is a party or by which it is bound or to which any of its
assets are subject, which in any case, or in the aggregate, could have a
material adverse effect on its ability to carry out its obligations under this
Guaranty, and do not, and will not, violate or constitute a default under any
statute, rule, regulation, order or ordinance of any governmental, judicial or
arbitral body, which in any case, or in the aggregate, could have a material
adverse effect on its ability to carry out its obligations under this Guaranty.
(d) Neither the execution, delivery or performance of
this Guarantee, nor the consummation of the transactions contemplated hereby,
requires the Guarantor to obtain any consent, authorization, approval or
registration under any law, rule or regulation, other than as contemplated
hereby or as previously obtained.
(e) There is no suit, action or legal, administrative,
arbitration or other proceeding of any nature pending, or, to the knowledge of
the Guarantor, threatened, against it which might affect the legality or
validity of this Guaranty, or the transactions contemplated hereby, and there is
not any factual basis known to it for any such suit, action or proceeding.
8. This Guaranty shall be binding upon the Guarantor and its successors
and assigns and shall inure to the benefit of the Banks and their respective
successors and permitted assigns. This Guaranty may not under any circumstances
be assigned by the Guarantor to any other person or entity without the express
prior written consent of each of the Banks.
9. Neither this Guaranty nor any provision hereof may be changed,
waived, discharged or terminated except with the written consent of each of the
Banks.
4
10. In the event that either Bank shall receive any payments on account
of any of the Guaranteed Obligations, whether directly or indirectly, and it
shall subsequently be determined that such payments were for any reason
improper, or a claim shall be made against such Bank that the same were
improper, and such Bank pursuant to court order shall return the same, the
Guarantor shall be liable, with the same effect as if the said payment had never
been paid to, or received by such Bank, for t amount of such repaid or returned
payments, notwithstanding the fact that they may theretofore have been credited
on account of the Guaranteed Obligations or any of them. Moreover, this Guaranty
shall remain effective or be reinstated, as the case may be, if at any time
payment or performance, or any part thereof, or any or all of the Guarantors
obligations under this Guaranty is rescinded or must otherwise be restored or
returned by the Banks, or any of them, in connection with the insolvency,
bankruptcy or reorganization of the Guarantor or otherwise, all as though such
payment or performance had not been rendered. Notwithstanding any compromise,
release, discharge, settlement, extension or adjustment of the Debtors
obligations or any amendment, modification or stay of the Banks rights against
the Debtor that may occur in any bankruptcy or reorganization case or proceeding
concerning the Debtor, whether or not assented to by the Banks, the Guarantor
shall remain fully obligated to discharge the Guarantors obligations hereunder
in accordance with the terms of this Guaranty in effect on the date hereof. The
Guarantor assumes all risks of a bankruptcy or reorganization with respect to
the Debtor. In furtherance of this Section, the Banks shall not otherwise
indicate the satisfaction of the obligations of the parties represented herein
until the expiration of all applicable bankruptcy-related periods of time during
which the Debtor, the Guarantor or any third party would have the right to
commence a bankruptcy or reorganization proceeding with regard to the Debtor or
the Guarantor.
11. All notices and other communications provided for under this
Guaranty and under any other document executed in connection herewith shall be
in writing (including telegraphic or telefax communications) and, unless the
party to be notified otherwise notifies the other party in writing as provided
herein, notices shall be given by telecopier, by certified or registered mail or
by recognized overnight delivery service. If such notice is delivered to the
Guarantor such notice shall be addressed to the Guarantor at ,
-------------------
telecopier , Attn: and, if to the
-------------------- --------------------
Banks, at the Agents address listed on the signature pages of the Credit
Agreement; or as to each party, at such other address as shall be designated by
such party in a written notice to the other parties complying as to delivery
with the terms of this Section 11. Notices shall be effective: (a) if given by
registered or certified mail, on the third day after deposit in the mails with
postage prepaid, addressed as aforesaid; (b) if given by recognized overnight
delivery service, on the business day following deposit with such service,
addressed as aforesaid; and (c) if given by telecopy, when the telecopy is
transmitted to the telecopy number, as aforesaid; provided that all notices to
the Banks shall be effective on receipt.
12. This Guaranty and the rights and obligations of the Banks and of the
undersigned hereunder shall be governed and be construed in accordance with the
laws of the State of New York applicable to agreements made and to be wholly
performed in the State of New York. The Guarantor hereby irrevocably submits to
the jurisdiction of any New York State or United States Federal Court sitting in
New York County, Nassau County or Suffolk County
5
over any action or proceeding arising out of or relat to the Guaranty, and the
Guarantor hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York State or Federal court.
The Guarantor irrevocably consents to service of any and all process in any such
action or proceeding by the mailing (by registered or certified mail) of copies
of such process to it at its address specified in Section 11. The Guarantor
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. The Guarantor further waives any objection
to venue in such State or Federal court and any objection to an action or
proceeding in such State or Federal court on the basis of forum non conveniens.
Nothing in this Section shall limit the rights of any Bank to serve legal
process in any other manner permitted by law or affect the right of the Banks to
bring any action or proceeding against the Guarantor in the courts of any other
jurisdiction. To the extent that the Guarantor has or hereafter may acquire
immunity from jurisdiction of any court or from any legal process with respect
to themselves or their property, the Guarantor hereby waives, to the extent
permitted by applicable law, such immunity in respect of its obligations
hereunder.
13. THE PARTIES HERETO WAIVE ANY RIGHT TO A TRIAL BY JURY IN CONNECTION
HEREWITH TO THE EXTENT PERMITTED BY APPLICABLE LAW.
IN WITNESS WHEREOF, the Guarantor have caused this Guaranty to be
executed and delivered as of .
-------------
THE GUARANTOR:
By:
-------------------------------------
President
6
Exhibit E
---------
GUARANTORS
----------
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT (this Security Agreement) is made this day
-----
of August, 1997, by and between:
, a corporation, having an
-------------------- --------------------
office at
----------------------------------------------------------------------
(hereinafter referred to as the Debtor), and
EUROPEAN AMERICAN BANK, a New York banking corporation, having an office
at 000 Xxxxxxxx Xxxxxxxx Xxxxxxx, Xxxxxxxxx, Xxx Xxxx 00000 (the Agent) as
collateral agent for itself and any other Bank that is now or hereafter becomes
a party to the Credit Agreement referred to below (the Secured Parties).
W I T N E S S E T H
WHEREAS, PDK Labs Inc. and Futurebiotics, Inc. (the Co-Borrowers) and
the Secured Parties have entered into a Credit Agreement dated August 20, 1997
(as it may hereafter be amended or otherwise modified from time to time, being
the Credit Agreement) pursuant to which the Secured Parties may lend to the
Co-Borrowers the aggregate principal amounts set forth therein, upon and subject
to the terms and conditions thereof;
WHEREAS, the Debtor has executed a Guaranty dated the date hereof (as it
may hereafter be amended or otherwise modified from time to time, the Guaranty)
pursuant to which the Debtor has guaranteed the obligations of the Co-Borrowers
to the Secured Parties;
WHEREAS, it is a condition precedent to the obligation of the Secured
Parties to extend credit to the Co-Borrowers provided for in the Credit
Agreement that the Debtor shall execute and deliver this Security Agreement; and
WHEREAS, all capitalized terms used herein without definition shall have
the respective meanings ascribed thereto in the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Secured Parties to continue to extend credit to the Co-Borrowers, the Debtor
agrees with the Secured Parties as follows:
1. Security Interest.
(a) Grant of Security. As security for the Obligations (as defined in
Section 1(b) hereof), the Debtor hereby assigns and pledges to the Agent on
behalf of the Secured Parties, and hereby grants to the Agent on behalf of the
Secured Parties a first priority security interest in, all of
the Debtors right, title and interest, whether now existing or hereafter arising
or acquired, in and to the following (collectively, the Collateral):
(i) All personal property of the Debtor, whether now or hereafter
existing or now owned or hereafter acquired and wherever located, of every kind
and description, tangible or intangible, including, without limitation, the
balance of every deposit account now or hereafter existing of the Debtor with
the Secured Parties or any of them or any of their affiliates or with any agent
of the Secured Parties or any of them or any of their affiliates to the extent
such account is maintained such agent in its capacity as agent of any kind for
the Secured Parties or any of them or any of their affiliates, and all goods,
equipment, furniture, inventory (including, without limitation, all raw
materials, finished goods and work-in-process), accounts, contract rights,
chattel paper, notes receivable, instruments, documents (including, without
limitation, documents of title, warehouse receipts and all other shipping
documents and instruments of any kind whatsoever, whether relating to goods in
transit or otherwise), general intangibles, credits, claims, demands and any
other obligations of any kind, whether now or hereafter arising, of the Debtor,
and, as to all of the foregoing, any and all additions and accessions thereto,
all substitutions and replacements therefor and all products and proceeds
thereof (including, without limitation, all proceeds of insurance thereon).
The term accounts shall mean, without limiting the generality of the
foregoing, any and all now existing or hereafter arising rights to payment held
by the Debtor, whether in the form of accounts receivable, notes, drafts,
acceptances or other forms of obligations and receivables now or hereafter
received by or belonging to the Debtor for (A) inventory sold or leased by it,
(B) services rendered by it, or (C) advances or loans made by it to any Person;
together with all guarantees and security therefor and all proceeds thereof,
whether cash proceeds or otherwise, including, without limitation, all right,
title and interest of the Debtor in the inventory that gave rise to any such
accounts, including, without limitation, the right to stoppage in transit and
all returned, rejected, rerouted or repossessed inventory.
(ii) All choses in action, any rights arising under any judgment,
statute or rule, all corporate and business records, customer lists, credit
files, computer program print-outs, and other computer materials and records
contained in any and all types of storage media, now in use or hereafter
created, including, but not limited to, floppy disks, hard disks,
magneto-optical disks, or CD-ROM disks, whether on-site or at a different
location, all inventories, trademarks, trade styles, trade names, designs,
patents, copyrights, licenses, license agreements, and any applications for
patents and/or trademarks.
(iii) Any and all additions and accessions to the foregoing
Collateral, all substitutions and replacements therefor and all products and
proceeds thereof (including, without limitation, proceeds of insurance thereon).
(b) Security for Obligations. This Security Agreement secures the
payment of all obligations of Debtor to the Secured Parties, or any of them, now
or hereafter existing under the Guaranty or this Security Agreement, including,
in each case, any modifications or amendments thereto, or otherwise, whether for
principal, interest, fees, expenses or otherwise, together with all
2
costs of collection or enforcement, including, without limitation, reasonable
attorneys fees incurred in any collection efforts or in any judicial proceeding
(including, without limitation, bankruptcy or reorganization) (all such
obligations being the Obligations).
(c) Debtor Remains Liable. Anything herein to the contrary
notwithstanding, (i) the Debtor shall remain liable to perform all of its duties
and obligations under the transactions giving rise to the Collateral to the same
extent as if this Security Agreement had not been executed, (ii) the exercise by
the Agent on behalf of the Secured Parties of any of the rights hereunder shall
not release the Debtor from any of its duties or obligations under the
transactions giving rise to the Collateral, which shall remain unchanged as if
this Security Agreement had not been executed, and (iii) neither the Agent nor
any of the Secured Parties shall have any obligation or liability under the
transactions giving rise to the Collateral by reason of this Security Agreement,
nor shall the Agent or any of the Secured Parties be obligated to perform any of
the obligations or duties of the Debtor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
(d) Continuing Agreement. This Security Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until payment in full of the Obligations and until the Guaranty shall
no longer be in effect.
2. Debtors Title; Liens and Encumbrances.
The Debtor represents and warrants that the Debtor is, or to the extent
that this Security Agreement states that the Collateral is to be acquired after
the date hereof, will be, the owner of the Collateral, having good and
marketable title thereto, free from any and all liens, security interests,
encumbrances and claims. The Debtor will not create or assume or permit to exist
any such lien, security interest, encumbrance or claim on or against the
Collateral except as created by this Securi Agreement and as permitted under
Section 8.2 of the Credit Agreement, and the Debtor will promptly notify the
Agent of any such other claim, lien, security interest or other encumbrance made
or asserted against the Collateral and will defend the Collateral against any
such claim, lien, security interest or other encumbrance.
3. Representations and Warranties;
Location of Collateral and Records;
Business and Trade Names of Debtor.
(a) The Debtor represents and warrants that it has no place of business,
offices where Debtors books of account and records are kept, or places where the
Collateral is used, stored or located, except as set forth on Schedule I annexed
hereto, and covenants that the Debtor will promptly notify the Agent of any
change in the foregoing representation. The Debtor shall at all times maintain
its records as to the Collateral at its chief place of business at the address
referred to on Sched and at none other. The Debtor further covenants that except
for Collateral delivered to the Agent or an agent for the Agent, the Debtor will
not store, use or locate any of the Collateral at any place other than as listed
on Schedule I annexed hereto. To the extent that any Collateral is located at a
location which is not owned by the Debtor, the Debtor shall deliver to the Agent
for the benefit of the Secured Parties landlords waivers in form and substance
satisfactory to the Agent.
3
(b) The Debtor represents and warrants that it currently uses, and
during the last five years has used, no business or trade names, except as set
forth on Schedule I annexed hereto, and covenants that the Debtor will promptly
notify the Agent, in sufficient detail, of any changes in, additions to, or
deletions from the business or trade names used by the Debtor for billing
purposes.
(c) The Debtor represents and warrants that it has complied and is in
compliance with the provisions of the Fair Labor Standards Act, including,
without limitation, the minimum wage and overtime rules of that Act, and
covenants that the Debtor will continue to comply with the provisions of such
Act.
4. Perfection of Security Interest.
The Debtor will execute all such financing statements pursuant to the
Uniform Commercial Code or other notices appropriate under applicable law as the
Agent or the Secured Parties may require, each in form satisfactory to the Agent
and will pay all filing or recording costs with respect thereto, and all costs
of filing or recording this Security Agreement or any other instrument,
agreement or document executed and delivered pursuant hereto to the Guaranty or
to the Credit Agreement (includi the cost of all federal, state or local
mortgage, documentary, stamp or other taxes), in each case, in all public
offices where filing or recording is deemed by the Agent to be necessary or
desirable. The Debtor hereby authorizes the Agent to take all action (including,
without limitation, the filing of any Uniform Commercial Code financing
statements or amendments thereto without the signature of the Debtor or by
signing of the Debtors name to any such financing statements as its
attorney-in-fact,) which the Agent may deem necessary or desirable to perfect or
otherwise protect the liens and security interests created hereunder and to
obtain the benefits of this Security Agreement.
5. General Covenants.
The Debtor shall:
(a) furnish the Agent from time to time at the Agents request written
statements and schedules further identifying and describing the Collateral in
such detail as the Agent may reasonably require;
(b) advise the Agent promptly, in sufficient detail, of any substantial
change in the Collateral, and of the occurrence of any event which would have a
material adverse effect on the value of the Collateral or on the Secured Parties
security interest therein;
(c) comply with all acts, rules, regulations and orders of any
legislative, administrative or judicial body or official applicable to the
Collateral or any part thereof or to the operation of the Debtors business
except where the failure to comply (a) is non-material and (b) has no effect on
the value of the Collateral or on the ability of the Secured Parties to exercise
its rights and remedies hereunder; provided, however, that the Debtor may
contest any acts, rules, regulations, orde and directions of such bodies or
officials in any reasonable manner which will
4
not, in the Agents opinion, adversely affect Agents or the Secured Parties
rights or the priority of their security interests in the Collateral;
(d) perform and observe all covenants, restrictions and conditions
contained in the Credit Agreement and applicable to the Co-Borrowers providing
for payment of taxes, maintenance of insurance and otherwise relating to the
Collateral, as though such covenants, restrictions and conditions were fully set
forth in this Security Agreement and were applicable to it;
(e) promptly notify the Agent of all disputes with account debtors
involving amounts in excess of $250,000.00;
(f) promptly execute and deliver to the Agent such further deeds,
mortgages, assignments, security agreements or other instruments, documents,
certificates and assurances and take such further action as the Agent may from
time to time in its sole discretion deem necessary to perfect, protect or
enforce the Agents or the Secured Parties security interests in the Collateral
or otherwise to effect the intent of this Security Agreement;
(g) keep or cause to be kept the Collateral in good working order,
repair, running and marketable condition, ordinary wear and tear excepted, at
the Debtors own cost and expense; and
(h) not assign, sell, mortgage, lease, transfer, pledge, grant a
security interest in or lien upon, encumber or otherwise dispose of or abandon,
any part or all of the Collateral, without the express prior written consent of
the Agent (exercisable in the sole discretion of the Secured Parties), except
(i) for the sale from time to time in the ordinary course of business of the
Debtor of such items of Collateral as may constitute part of the business
inventory of the Debtor; and (ii) as otherwise expressly provided in the Credit
Agreement.
6. Assignment of Insurance.
At or prior to the date hereof, the Debtor shall deliver to Secured
Parties copies of, or certificates of the issuing companies with respect to,
endorsements of any and all policies of insurance owned by the Debtor covering
or in any manner relating to the Collateral, in form and substance satisfactory
to the Secured Parties naming the Secured Parties as additional insured party as
their interests may appear with respect to liability coverage and the Agent on
behalf of the Secured Parties a loss payee with respect to property and extended
insurance coverage, and indicating that no such policy will be terminated, or
reduced in coverage or amount, without at least thirty (30) days prior written
notice from the insurer to the Agent. As further security for the due payment
and performance of the Obligations, the Debtor hereby assigns to the Agent for
the benefit of the Secured Parties all sums, including returned or unearned
premiums, which may become payable under or in respect of any policy of
insurance owned by the Debtor covering or in any manner relating to the
Collateral, and the Debtor hereby directs each insurance company issuing any
such policy to make payment of sums directly to the Agent for the benefit of the
Secured Parties. The Debtor hereby appoints the Agent as the Debtors
attorney-in-fact and authorizes the Agent in the Debtors or in the Agents name
to endorse any check or draft representing any such payment and to execute any
proof of claim, subrogation receipt and any other document required by such
insurance company as a condition to or otherwise in connection with such
5
payment, and, upon the occurrence of any Default or Event of Default, to cancel,
assign or surrender any such policies. All such sums received by the Agent shall
be applied by the Agent to satisfaction of the Obligations or, to the extent
that such sums represent unearned premiums in respect of any policy of insurance
on the Collateral refunded by reason of cancellation, toward payment for similar
insurance protecting the respective interests of the Debtor and the Secured
Parties, or as otherwise required by applicable law.
7. Fixtures.
It is the intent of the Debtor and the Secured Parties that none of the
Collateral is or shall be regarded as fixtures, as that term is used or defined
in Article 9 of the Uniform Commercial Code, and the Debtor represents and
warrants that it has not made and is not bound by any lease or other agreement
which is inconsistent with such intent. Nevertheless, if the Collateral or any
part thereof is or is to become attached or affixed to any real estate, the
Debtor will, upon request, furnis the Agent with a disclaimer or subordination
in form satisfactory to the Agent or the holder of any interest in the real
estate to which the Collateral is attached or affixed, together with the names
and addresses of the record owners of, and all other persons having interest in,
and a general description of, such real estate.
8. Collections.
(a) The Debtor may collect all checks, drafts, cash or other remittances
(i) in payment of any of its accounts, contract rights or general intangibles
constituting part of the Collateral, (ii) in payment of any Collateral sold,
transferred, leased or otherwise disposed of, or (iii) in payment of or on
account of its accounts, contracts, contract rights, notes, drafts, acceptances,
general intangibles, choses in action and all other forms of obligations
relating to any of the Collateral sold, transferred, or leased or otherwise
disposed of, and all of the foregoing amounts so collected after the occurrence
of an Event of Default shall be held in trust by the Debtor for, and as the
property of, the Secured Parties and shall not be commingled with other funds,
money or property of the Debtor.
(b) Upon the written request of the Agent, the Debtor will immediately
upon receipt of all such checks, drafts, cash or other remittances in payment of
any of its accounts, contract rights or general intangibles constituting part of
the Collateral, deliver any such items to the Agent for the benefit of the
Secured Parties accompanied by a remittance report in form supplied or approved
by the Agent, such items to be delivered to the Agent in the same form received,
endorsed or otherwise assigned by the Debtor where necessary to permit
collection of such items and, regardless of the form of such endorsement, the
Debtor hereby waives presentment, demand, notice of dishonor, protest, notice of
and all other notices with respect thereto.
(c) Upon the written request of the Agent, the Debtor will immediately
upon receipt of all such checks, drafts, cash or other remittances in payment
for any Collateral sold, transferred, leased or otherwise disposed of, or in
payment or on account of its accounts, contracts,
6
contract rights, notes, drafts, acceptances, general intangibles, choses in
action and all other forms of obligations relating to any of the Collateral so
sold, transferred, leased or otherwise disposed of, deliver such items to the
Agent accompanied by a remittance report in form supplied or approved by the
Agent, such items to be delivered to the Agent in the same form received,
endorsed or otherwise assigned by the Debtor where necessary to permit
collection of such items and, regardless of the form of such endorsement, the
Debtor hereby waives presentment, demand, notice of dishonor, protest, notice of
protest and all other notices with respect thereto.
(d) Upon the written request of the Agent, the Debtor will promptly
notify the Agent in writing of the return or rejection of any goods represented
by any accounts, contract rights or general intangibles and the Debtor shall
forthwith account therefor to the Agent for the benefit of the Secured Parties
in cash without demand or notice and until such payment has been received by the
Agent the Debtor will receive and hold all such goods separate and apart, in
trust for and subject to the security interest in favor of the Agent for the
benefit of the Secured Parties, and the Agent is authorized to sell, for the
Debtors account and at the Debtors sole risk, all or any part of such goods.
(e) All of the foregoing remittances shall be applied and credited by
the Agent first to satisfaction of the Obligations or as otherwise required by
applicable law, and to the extent not so credited or applied, shall be paid over
to the Debtor.
9. Rights and Remedies.
In the event of the occurrence and continuance of any Event of Default,
the Agent, on behalf of the Secured Parties, shall at any time thereafter have
the right, with or without (to the extent permitted by applicable law) notice to
the Debtor, as to any or all of the Collateral, by any available judicial
procedure or without judicial process, to take possession of the Collateral and
without liability for trespass to enter any premises where the Collateral may be
located for the purpose of taking possession of or removing the Collateral, and,
generally, to exercise any and all rights afforded to a secured party under the
Uniform Commercial Code or other applicable law. Without limiting the generality
of the foregoing, the Debtor agrees that the Agent, on behalf of the Secured
Parties shall have the right to sell, lease, or otherwise dispose of all or any
part of the Collateral, either at public or private sale or at any brokers
board, in lots or in bulk, for cash or for credit, with or without warranties or
representations, and upon such terms and conditions, all as the Agent in its
sole discretion may deem advisable, and it or any of the Secured Parties shall
have the right to purchase at any such sale; and, if any Collateral shall
require rebuilding, repairing, maintenance, preparation, or is in process or
other unfinished state, the Agent shall have the right, at its sole option and
discretion, to do such rebuilding, repairing, preparation, processing or
completion of manufacturing, for the purpose of putting the Collateral in such
saleable or disposable form as it shall deem appropriate. At the Agents request,
the Debtor shall assemble the Collateral and make it available to the Agent at
places which the Agent shall select, whether at the Debtors premises or
elsewhere, and make available to the Agent, without rent, all of the Debtors
premises and facilities for the purpose of the Agents taking possession of,
removing or putting the Collateral in saleable or disposable form. The proceeds
of any such sale, lease or other disposition of the Collateral shall be applied
first to the expenses of retaking, holding, storing, processing and
7
preparing for sale, selling, and the like, and to the reasonable attorneys fees
and legal expenses incurred by the Agent and/or the Secured Parties, and then to
satisfaction of the Obligations, and to the payment of any other amounts
required by applicable law, after which the Agent shall account to the Debtor
for any surplus proceeds. If, upon the sale, lease or other disposition of the
Collateral, the proceeds thereof are insufficient to pay all amounts to which
the Secured Parties are legally entitled, the Debtor will be liable for the
deficiency, together with interest thereon, at the rate prescribed in the Credit
Agreement, and the reasonable fees of any attorneys employed by the Agent and/or
the Secured Parties to collect such deficiency. To the extent permitted by
applicable law, the Debtor waives all claims, damages and demands against the
Agent and the Secured Parties arising out of the repossession, removal,
retention or sale of the Collateral.
10. Costs and Expenses.
Any and all fees, costs and expenses, of whatever kind or nature,
including reasonable attorneys fees and legal expenses incurred by the Agent
and/or the Secured Parties, in connection with the preparation of this Security
Agreement and all other documents relating hereto and the consummation of this
transaction, the filing or recording of financing statements and other documents
(including all taxes in connection therewith) in public offices, the payment or
discharge of any taxes, insuran premiums, encumbrances or otherwise protecting,
maintaining or preserving the Collateral and the Secured Parties security
interest therein, whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions or proceedings arising out of or related to
the transaction to which this Security Agreement relates, shall be borne and
paid by the Debtor on demand by the Agent and the Secured Parties and until so
paid shall be added to the principal amount of the Obligations and shall bear
interest at the rate prescribed in the Credit Agreement.
11. Power of Attorney.
The Debtor authorizes the Agent and does hereby make, constitute and
appoint the Agent, and any officer or agent of the Agent, with full power of
substitution, as the Debtors true and lawful attorney-in-fact, with power, in
its own name or in the name of the Debtor: (a) to endorse any notes, checks,
drafts, money orders, or other instruments of payment (including payments
payable under or in respect of any policy of insurance) in respect of the
Collateral that may come into possession of t Agent; (b) to sign and endorse any
invoice, freight or express xxxx, xxxx of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications and notices in connection
with accounts, and other documents relating to Collateral; (c) to pay or
discharge any taxes, liens, security interest or other encumbrances at any time
levied or placed on or threatened against the Collateral; (d) to demand,
collect, receipt for, compromise, settle and xxx for monies due in respect of
the Collateral; (e) to receive, open and dispose of all mail addressed to the
Debtor and to notify the Post Office authorities to change the address for
delivery of mail addressed to the Debtor to such address as the Agent may
designate; and (f) generally to do, at the Agents option and at the Debtors
expense, at any time, or from time to time, all acts and things which the Agent
deems necessary to protect, preserve and realize upon the Collateral and the
Secured Parties security interest therein in order to effect the intent of this
Security Agreement, the Guaranty and the Credit Agreement, all as fully and
effectually as the Debtor might or could do; and the Debtor
8
hereby ratifies all that said attorney shall lawfully do or cause to be done by
virtue hereof. All acts of said attorney or designee are hereby ratified and
approved and said attorney or designee shall not be liable for any acts of
commission or omission, nor for any error or judgment or mistake of fact or law
except for its own gross negligence or willful misconduct. This power of
attorney shall be irrevocable for the term of this Security Agreement and
thereafter as long as any of the Obligations shall be outstanding.
12. Notices.
Unless the party to be notified otherwise notifies the other party in
writing as provided in this Section, notices shall be given hereunder by
telecopy, by certified or registered mail or by recognized overnight delivery
services to any party at its address on the signature page of this Security
Agreement. Notices shall be effective (a) if given by registered or certified
mail, on the third day after deposit in the mails with postage prepaid,
addressed as aforesaid; (b) if given by recogni overnight delivery service, on
the business day following deposit with such service, addressed as aforesaid; or
(c) if given by telecopy, when the telecopy is transmitted to the telecopy
number as aforesaid; provided that all notices to the Agent and the Secured
Parties shall be effective on receipt.
13. Other Security.
To the extent that the Obligations are now or hereafter secured by
property other than the Collateral or by the guarantee, endorsement or property
of any other person, then the Agent shall have the right in its sole discretion
to pursue, relinquish, subordinate, modify or take any other action with respect
thereto, without in any way modifying or affecting any of the Agents and/or the
Secured Parties rights and remedies hereunder.
14. Deposits.
Any and all deposits or other sums at any time credited by or due from
any of the Secured Parties to the Debtor, whether in regular or special
depository accounts or otherwise, shall at all times constitute additional
Collateral for the Obligations, and may be set-off by the Secured Parties, or
any of them, against any Obligations at any time, whether or not other
collateral held by the Agent on behalf of the Secured Parties is considered to
be adequate.
15. Miscellaneous.
(a) Beyond the safe custody thereof, the Agent shall have no duty as to
the collection of any Collateral in its possession or control or in the
possession or control of any agent or nominee of the Agent, or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto.
(b) No course of dealing between the Debtor and the Agent or the Secured
Parties, nor any failure to exercise, nor any delay in exercising, on the part
of the Agent or the Secured Parties, any right, power or privilege hereunder,
under the Guaranty or under the Credit
9
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other rig power or
privilege.
(c) All of the Agents and the Secured Parties rights and remedies with
respect to the Collateral, whether established hereby, by the Guaranty or by the
Credit Agreement, or by any other agreements, instruments or documents or by
law, shall be cumulative and may be exercised singly or concurrently.
(d) The provisions of this Security Agreement are severable, and if any
clause or provision shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Security Agreement in any jurisdiction.
(e) This Security Agreement (including this subsection) is subject to
modification only by a writing signed by all of the parties hereto.
(f) The benefits and burdens of this Security Agreement shall inure to
the benefit of and be binding upon the respective successors and assigns of the
parties hereto; provided, however, that the rights and obligations of the Debtor
under this Security Agreement shall not be assigned or delegated without the
prior written consent of the Agent and the Secured Parties (exercisable in their
sole discretion), and any purported assignment or delegation without such
consent shall be void.
16. Term of Agreement.
The term of this Security Agreement shall commence on the date hereof
and this Security Agreement shall continue in full force and effect, and be
binding upon the Debtor, until all of the Obligations have been fully paid and
performed and such payment and performance have been acknowledged in writing by
the Agent on behalf of the Secured Parties, whereupon this Security Agreement
shall terminate.
10
WITNESS the execution hereof as of the day and year first above written.
, as Debtor
--------------------
By:
-------------------------------------
President
Address for Notices:
The Banks:
EUROPEAN AMERICAN BANK,
as Agent and as a Secured Party
By:
-------------------------------------
Xxxxxx X. Xxxxxx
Vice President
Address for Notices:
European American Bank
000 Xxxxxxxx Xxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
11
SCHEDULE I
TO
SECURITY AGREEMENT
------------------
Offices Where Records Are Kept:
-------------------------------
Other Locations Where Collateral
Is Stored, Used or Located:
---------------------------
Business and Trade Names
Used by Debtor:
---------------
12
SCHEDULE A
TO
UCC-1 FINANCING STATEMENT
NAMING , AS DEBTOR, AND
--------------------
EUROPEAN AMERICAN BANK,
AS AGENT FOR ITSELF AND CERTAIN OTHER BANKS,
AS SECURED PARTIES
------------------
All of the Debtors right, title and interest, whether now existing or
hereafter arising, in and to the following:
(a) All personal property of the Debtor, whether now or hereafter
existing or now owned or hereafter acquired and wherever located, of every kind
and description, tangible or intangible, including, without limitation, the
balance of every deposit account now or hereafter existing of the Debtor with
the Secured Parties or any of them or any of their affiliates or with any agent
of the Secured Parties or any of them or any of their affiliates to the extent
such account is maintained by such agent in its capacity as agent of any kind
for the Secured Parties or any of them or any of their affiliates and all goods,
equipment, furniture, inventory (including, without limitation, all raw
materials, finished goods and work-in-process), accounts, contract rights,
chattel paper, notes receivable, instruments, documents (including, without
limitation, documents of title, warehouse receipts and all other shipping
documents and instruments of any kind whatsoever, whether relating to goods in
transit or otherwise), general intangibles, credits, claims, demands and any
other obligations of any kind, whether now or hereafter arising, of the Debtor
and, as to all the foregoing, any and all additions and accessions thereto, all
substitutions and replacements therefor and all products and proceeds thereof
(including, without limitation, proceeds of insurance thereon).
The term accounts shall mean, without limiting the generality of the
foregoing, any and all now existing or hereafter arising rights to payment held
by the Debtor, whether in the form of accounts receivable, notes, drafts,
acceptances or other forms of obligations and receivables now or hereafter
received by or belonging to the Debtor for (A) inventory sold or leased by it,
(B) services rendered by it, or (C) advances or loans made by it to any Person,
together with all guarantees and security therefor and all proceeds thereof,
whether cash proceeds or otherwise, including, without limitation, all right,
title and interest of the Debtor in the inventory which gave rise to any such
accounts, including, without limitation, the right to stoppage in transit and
all returned, rejected, rerouted or repossessed inventory.
(b) All choses in action, any rights arising under any judgment, statute
or rule, all corporate and business records, customer lists, credit files,
computer program print-outs, and other computer materials and records contained
in any and all types of storage media, now in use or hereafter created,
including, but not limited to, floppy disks, hard disks, magneto-optical disks,
or CD-ROM disks, whether on-site or at a different location, all inventories,
trademarks, trade styles, trade name designs, patents, copyrights, licenses,
license agreements, and any applications for patents and/or trademarks.
13
(c) Any and all additions and accessions to the foregoing Collateral,
all substitutions and replacements therefor and all products and proceeds
thereof (including, without limitation, proceeds of insurance thereon).
(d) All sums, including returned or unearned premiums, which may become
payable under or in respect of any policy of insurance owned by the Debtor
covering or in any manner relating to the Collateral.
(e) Any and all deposits or other sums at any time credited by or due
from the Secured Parties to the Debtor whether in regular or special depository
accounts or otherwise.
14
Exhibit W
TRADEMARK SECURITY AGREEMENT
THIS AGREEMENT is made on the ____ day of October, 1997, and entered
into between PDK Labs Inc. ("Debtor") and European American Bank, a New York
banking corporation, as Agent for the Banks (the "Secured Party"). All
capitalized terms used herein without definition shall have the respective
meanings ascribed thereto in the Credit Agreement (as defined below).
WHEREAS, Debtor and its affiliate, Futurebiotics, Inc. (the
"Co-Borrowers"), and Banks have entered into a Credit Agreement dated as of the
date hereof (as it may be hereafter amended, supplemented or otherwise modified
from time to time, being the "Credit Agreement") pursuant to which Secured Party
may lend to Co-Borrowers the aggregate principal amounts set forth therein, upon
and subject to the terms and conditions thereof;
WHEREAS, Debtor has executed a Security Agreement in favor of Secured
Party, dated as of August 20, 1997 (the "Security Agreement");
WHEREAS, Debtor wishes to grant further security and assurance to
Secured Party in order to secure the performance by Debtor of its obligations
under the Credit Agreement and all documents executed in connection therewith,
including all interest due thereunder ("Obligations"), and to that effect Debtor
agrees to grant to Secured Party a lien upon and securing interest in certain
trademark rights as more fully described herein.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Banks to extend credit to Debtor, Debtor agrees with Secured Party as
follows:
1. To secure the complete and timely satisfaction of all Obligations,
Debtor hereby grants to Secured Party a lien upon and security interest in all
of Debtor's right, title and interest in and to the trademarks listed on
Schedule A hereto (as they may be amended pursuant hereto from time to time),
all proceeds thereof (including but not limited to license royalties and
proceeds of infringement suits thereon), the right to xxx for past, present and
future infringements, all rights corresponding thereto throughout the world, all
reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof, and all applications for trademarks and
trademarks of Debtor hereafter filed or acquired, together with all goodwill
associated with any and all of the foregoing and all proceeds of any and all of
the foregoing (collectively, the "Trademarks"). Debtor is granting only a lien
upon and security interest in the Trademarks and, subject to such lien and
security interest, Debtor expressly retains full title to and ownership of, and
all goodwill associated with, the Trademarks.
2. Debtor represents, warrants and covenants that:
(a) The Trademarks are subsisting and have not been adjudged
invalid or unenforceable, in whole or in part;
(b) To the best of Debtor's knowledge and belief after due
inquiry, each of the Trademarks is valid and enforceable and, to the
best of Debtor's knowledge, no material infringement or unauthorized
use is presently being made of any Trademarks;
(c) Debtor is the sole and exclusive owner of the entire and
unencumbered right, title and interest in and to each of the
Trademarks, free and clear of any liens, charges and encumbrances,
including, without limitation, pledges, assignments, licenses, shop
rights and covenants by Debtor not to xxx third persons;
(d) Debtor has the unqualified right to enter into this Agreement
and perform its terms;
(e) Debtor's chief executive office is located at 000 Xxxxxxxxx
Xxxx, Xxxxxxxxx, Xxx Xxxx 00000; and
(f) Debtor has used, and will continue to use for the duration of
this Agreement, consistent standards of quality in its manufacture of
products sold under the Trademarks.
3. Debtor agrees that, until all of the Obligations shall have been
satisfied in full, it will not enter into any agreement which is inconsistent
with Debtor's obligations under this Agreement, without Secured Party's prior
written consent.
4. If, before the Obligations shall have been satisfied in full, Debtor
shall become entitled to the benefit of trademark application or trademark for
any reissue, division, continuation, renewal, extension, or continuation-in-part
of any trademark or any improvement on the Trademarks, the provisions of
paragraph 1 shall automatically apply thereto and Debtor shall give to Secured
Party prompt notice thereof in writing.
5. Debtor authorizes Secured Party to modify this Agreement by amending
Schedule A hereto to include any future trademarks and trademark applications
which are Trademarks under paragraph 1 or paragraph 4 hereof.
6. If any Event of Default shall have occurred and be continuing,
Secured Party shall have, in addition to all other rights and remedies given
them by this Agreement or the Security Agreement, those rights and remedies
allowed by law and the rights and remedies of a secured party under the Uniform
Commercial Code as enacted in any jurisdiction in which the Trademarks may be
located and, without limiting the generality of the foregoing, the Secured Party
may immediately, upon 10 days' prior written notice during which time, for
purposes of this Agreement only, Debtor shall have an opportunity to cure such
Event of Default, sell at public or private sale or otherwise realize upon, the
whole or from time to time any part of the Trademarks, or any interest which the
Debtor may have therein, and after deducting from the proceeds of sale or other
disposition of the Trademarks all expenses (including all reasonable expenses
for brokers' fees and legal services), shall apply the residue of such proceeds
toward the
2
payment of the Obligations. Any remainder of the proceeds after payment in full
of the Obligations shall be paid over to the Debtor.
7. If any Event of Default shall have occurred and be continuing,
Debtor hereby authorizes and empowers Secured Party to make, constitute and
appoint any officer or agent of Secured Party, as Secured Party may select in
their exclusive discretion, as Debtor's true and lawful attorney-in-fact, with
the power to endorse Debtor's name on all applications, documents, papers and
instruments necessary for Secured Party to use the Trademarks, or to grant or
issue any exclusive or nonexclusive license under the Trademarks to any third
person. Debtor hereby ratifies all that such attorney shall lawfully do or cause
to be done by virtue hereof. This power of attorney shall be irrevocable for the
life of this Agreement.
8. Any and all fees, costs and expenses, of whatever kind or nature,
including the reasonable attorneys' fees and disbursements incurred by Secured
Party in connection with the preparation of this Agreement and all other
documents relating hereto and the consummation of this transaction, the filing
or recording of any documents (including all taxes in connection therewith) in
public offices, the payment or discharge of any taxes, counsel fees, maintenance
fees, encumbrances or otherwise protecting, maintaining or preserving the
Trademarks, or in defending or prosecuting any actions or proceedings arising
out of or related to the Trademarks, shall be borne and paid by Debtor on demand
by Secured Party.
9. Debtor shall have the duty, until the Obligations are paid in full
to file and prosecute any and all continuations, continuations-in-part,
applications for reissue, applications for certificate of correction and like
matters, and to preserve and maintain all rights in the Trademarks, including,
without limitation, the payment of all maintenance fees when due. Any expenses
incurred in connection with the foregoing shall be borne by Debtor. The Debtor
shall not abandon any Trademark without the consent of Secured Party.
10. Debtor shall use all reasonable efforts to detect any infringers of
rights described herein and shall advise Secured Party in writing of any
material infringements detected. Secured Party shall have the right to demand
the Debtor to bring suit and, if Debtor fails to do so or at any time after a
Default or an Event of Default under the Credit Agreement, to bring suit in
their name, and to join Debtor, if necessary, as a party to such suit, to
enforce the Trademarks and any licenses thereunder. Debtor shall promptly, upon
demand, reimburse and indemnify Secured Party for all damages, costs and
expenses, including reasonably attorneys' fees and disbursements, incurred by
Secured Party pursuant to this paragraph 10. Notwithstanding the foregoing,
Secured Party shall have no duties with respect to the Trademarks, other than
the duties expressly set forth herein, and, without limiting the generality of
the foregoing, shall have no duty to prosecute any action for trademark
infringement.
11. Debtor hereby grants to Secured Party and its employees and agents
the right to visit Debtor's plants and facilities which manufacture, inspect or
store products sold under any of the trademarks included in the Trademarks, and
to inspect the products and quality control records relating thereto at
reasonable times during regular business hours upon notice. Debtor shall do any
and all acts required by Secured Party to ensure Debtor's compliance with
3
paragraph 2(f) hereof. Secured Party agrees to comply in all respects with
applicable governmental regulations in connection herewith.
12. All of Secured Party's rights and remedies with respect to the
Trademarks, whether established hereby or by the Security Agreement, or by any
other agreements or by law shall be cumulative and may be exercised singularly
or concurrently.
13. The provisions of this Agreement are severable, and if any clause
or provision shall be held invalid and unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision of this Agreement in any jurisdiction.
14. No course of dealing between Debtor and Secured Party, nor any
failure to exercise, nor any delay in exercising, on the part of Secured Party,
any right, power or privilege hereunder or under the Security Agreement shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
15. This Agreement is subject to modification only by a writing signed
by the parties, except as provided in paragraph 5.
16. The benefits and burdens of this Agreement shall inure to the
benefit of and be binding upon the respective successors and permitted assigns
of the parties.
17. The validity and interpretation of this Agreement and the rights
and obligations of the parties shall be governed by the laws of the State of New
York applicable to agreements made and to be wholly performed in the State of
New York.
IN WITNESS WHEREOF, the execution hereof under seal as of the day and
year first above written.
PDK LABS, INC.
ATTEST-CORPORATE SEAL By:
--------------------------
Name:
------------------------- Title:
ACCEPTED:
EUROPEAN AMERICAN BANK, as Agent
By:
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
4
SCHEDULE A
TRADEMARKS - PDK LABS INC.
Xxxx Registration No. Registration Date
---- ---------------- -----------------
Herb Alert 1,785,187 August 3, 1993
Jump Start 1,866,191 December 6, 1994
Pseudo 60's 1,979,774 June 11, 1996
Super Pseudo 60's 2,030,696 January 14, 1997
Two-Way 2,018,410 November 19, 1996
