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REIMBURSEMENT AND SECURITY AGREEMENT NO. 1
REIMBURSEMENT AND SECURITY AGREEMENT (this "Agreement"), dated as of
March 29, 2001, by and among Twinlab Corporation, a Delaware corporation
("Twinlab"), Twin Laboratories Inc., a Utah corporation ("TLI"), Advanced
Research Press, Inc., a New York corporation ("ARP"), Changes International,
Inc., a Florida corporation ("Changes"), PR Nutrition, Inc., a California
corporation ("PRN"), Health Factors International, Inc., a Delaware corporation
("HFI"), Xxxxxxx Laboratories, Inc., a Delaware corporation ("Xxxxxxx," and,
together with Twinlab, TLI, ARP, Changes, PRN and HFI, the "Companies"), and
Xxxx Xxxxxxxx ("DB") and Xxxx Xxxxxxxx ("RB," and, together with DB, the
"Blechmans").
WHEREAS, concurrently herewith, the Companies have entered into the
Financing Agreement;
WHEREAS, as a financial accommodation to the Companies, to support the
obligations of the Companies under the Financing Agreement, the Blechmans have
entered into the Guaranty;
WHEREAS, pursuant to the Guaranty, the Blechmans have agreed, among
other things, to pay the Guaranty Amounts to CIT;
WHEREAS, to induce the Blechmans to enter into the Guaranty, the
Companies have agreed to reimburse the Blechmans for any and all Reimbursement
Obligations;
NOW, THEREFORE, in consideration of the premises and representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Defined Terms. The following terms, as used herein, have
the following meanings:
"Business Day" shall mean any day other than a Saturday or
Sunday or other day on which commercial banking institutions in the City of New
York are authorized by law to close or are otherwise closed for business to the
general public.
"CIT" shall mean The CIT Group/Business Credit, Inc.
"Collateral" shall have the meaning assigned to it in the
Financing Agreement, except that such Collateral shall not include any Real
Estate (as defined in the Financing Agreement).
"Financing Agreement" shall mean the Financing Agreement,
dated March 29, 2001, among CIT, CIT as agent for the lenders, any other party
which becomes a lender thereto
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pursuant to Section 12.9 of the Financing Agreement, and the Companies, as the
same may be amended, restated, supplemented, renewed, replaced or otherwise
modified from time to time whether or not with the same agent or lenders and
irrespective of any changes in the terms and conditions thereof.
"Government Order" shall mean any order, writ, rule, judgment,
injunction, decree, stipulation, determination, decision, consent, agreement or
award entered into by or with any governmental authority.
"Guaranty" shall mean, collectively, (a) the Guaranty, of even
date herewith, between the Blechmans and CIT, (b) the Security Agreement, of
even date herewith, between the Blechmans and CIT, and (c) the Control
Agreement, of even date herewith, among the Blechmans, CIT and Solomon Xxxxx
Xxxxxx Inc.
"Guaranty Amounts" shall mean any indebtedness, liability,
obligation or expense of any kind incurred by the Blechmans under or in
connection with the Guaranty.
"Intercreditor Agreement" shall mean the Intercreditor
Agreement, of even date herewith, among Xxxx Xxxxxxxx, Xxxx Xxxxxxxx and CIT.
"Law" shall mean all applicable provisions of all
constitutions, treaties, statutes, laws (including, but not limited to, common
law), rules, regulations, ordinances, codes or orders of any governmental
authority.
"Lien" shall mean any security interest, mortgage, pledge,
hypothecation, assignment for security purposes, deposit arrangement for
security purposes, encumbrance, lien (statutory or other), or similar
arrangement of any kind or nature.
"Permitted Lien" shall mean (a) the security interest granted
to CIT pursuant to the Financing Agreement, (b) liens created hereunder and (c)
the Permitted Encumbrances (as defined in the Financing Agreement).
"Reimbursement Obligations" shall mean the Guaranty Amounts
and any indebtedness, liability or obligation of any kind incurred by the
Blechmans under or in connection with this Agreement, including, without
limitation, those expenses set forth in Section 6.09.
"UCC" shall mean the Uniform Commercial Code as in effect the
State of New York, as the same may be amended from time to time.
ARTICLE II.
REIMBURSEMENT PROVISIONS
Section 2.01. Reimbursement Obligations. The Companies jointly and
severally agree to pay the Blechmans all Reimbursement Obligations. Unless
otherwise specified herein, Reimbursement Obligations shall be due and payable
on demand. Amounts payable hereunder
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by the Companies shall be payable without offset or counterclaim of any kind.
Interest shall be payable on any and all Reimbursement Obligations from the date
such Reimbursement Obligations become payable until payment in full at a rate
per annum equal to the prime rate charged from time to time by Citibank N.A.
Section 2.02. General Provisions as to Payments. The Companies shall
make each payment of Reimbursement Obligations in immediately available funds
not later than 1:00 p.m. (New York City time) on the date when due to the
Blechmans at the address for notice specified in Section 6.03. Any payment
received after 1:00 p.m. (New York City time) shall be deemed to have been made
on the next succeeding Business Day for all purposes. If any Reimbursement
Obligation shall be due on a day which is not a Business Day, it shall be made
on the next succeeding day which is a Business Day and such extension time shall
in such case be included in computing any interest if payable along with such
payment. All fees payable hereunder shall be computed on the basis of a 360-day
year and assessed for the actual number of days elapsed and interest shall be
computed on the basis of a 365/66-day year and assessed for the actual number of
days elapsed.
Section 2.03. Obligations Absolute. The Companies' obligations under
this Agreement shall be absolute, unconditional and irrevocable, and shall be
discharged strictly in accordance with the terms hereof, under all circumstances
whatsoever, including, without limitation, the following circumstances:
(a) any lack of validity or enforceability of the Guaranty or
any other agreement, instrument or document relating thereto;
(b) any amendment or waiver of or any consent to departure
from the Guaranty;
(c) any other defense whatsoever that might constitute a
defense available to, or discharge of, the Companies or the Blechmans;
and
(d) the existence of any claim, setoff, defense or other
rights which the Companies may have against the Blechmans or the
Blechmans may have against CIT, whether in connection with this
Agreement or any unrelated transaction;
(e) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
ARTICLE III.
COLLATERAL
Section 3.01. Grant of Security Interest. As security for the prompt
payment in full of all Reimbursement Obligations, each of the Companies hereby
grants to the Blechmans a security interest in and to all of its right, title
and interest in and to the Collateral. The security interest granted to the
Blechmans under this Agreement shall be junior and subordinated to the
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security interest granted to CIT under the Financing Agreement in the manner
provided in the Intercreditor Agreement.
Section 3.02. Covenants.
The Companies covenant to the Blechmans as follows:
(a) The Companies will, promptly upon request by the
Blechmans, execute and deliver or use reasonable best efforts to give
any notices, execute and file or procure any financing statements or
other documents, all in form and substance reasonably satisfactory to
the Blechmans, xxxx any chattel paper constituting Collateral, deliver
any chattel paper or instruments constituting Collateral to the
Blechmans and take any other actions that are necessary or, in the
reasonable opinion of the Blechmans, desirable to perfect or continue
the perfection and the priority of the Blechmans' security interest in
the Collateral, to protect the Collateral against the rights, claims,
or interests of third parties other than holders of Permitted Liens or
to effect the purposes of this Agreement. The Companies hereby
authorize the Blechmans to file any financing or continuation
statements with respect to the Collateral without the signature of the
Companies to the extent permitted by applicable law. The Companies will
pay all reasonable costs incurred in connection with any of the
foregoing.
(b) Except for the Permitted Liens, the Companies shall not
directly or indirectly create, incur, assume or suffer to exist any
Liens on or with respect to the Collateral.
Section 3.03. Duty of Blechmans. The sole duty of the Blechmans with
respect to the custody, safekeeping and physical preservation of the Collateral
in their possession, under Section 9-207 of the UCC or otherwise, shall be to
comply with the specific duties and responsibilities set forth herein and to
exercise reasonable care to assure the safe custody of the Collateral. The
powers conferred on the Blechmans in this Agreement are solely for the
protection of their interests in the Collateral and shall not impose any duty
upon the Blechmans to exercise any such powers. None of the Blechmans shall be
liable for any action lawfully taken or omitted to be taken by any of them under
or in connection with the Collateral or this Agreement, except for their gross
negligence or willful misconduct.
ARTICLE IV.
DEFAULTS AND REMEDIES
Section 4.01. Events of Default. Any of the following events or
circumstances shall constitute an "Event of Default" hereunder:
(a) failure by the Companies to pay any Reimbursement
Obligation when due;
(b) any Company shall (i) apply for or consent to the
appointment for such Company of a receiver, trustee, custodian or
liquidator of all or a substantial part of its
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assets, (ii) generally fail to pay, or admit in writing its inability
to pay, its debts as they mature, (iii) make a general assignment for
the benefit of creditors, (iv) be adjudicated a bankrupt or insolvent
or (v) file a voluntary petition in bankruptcy or a petition or an
answer seeking reorganization or an arrangement with creditors or to
take advantage of any insolvency law or an answer admitting the
material allegations of a petition filed against such Company in any
bankruptcy, reorganization or insolvency proceeding or corporate action
shall be taken by such Company for the purpose of effecting any of the
foregoing or an order for relief under the federal Bankruptcy Code
shall have been entered in respect of such Company or similar action
shall have been taken or similar relief shall have been granted under
the laws of any other country or jurisdiction;
(c) without the application, approval or consent of the
Blechmans, a proceeding shall be instituted, in any court of competent
jurisdiction, seeking in respect of any Company: adjudication in
bankruptcy, reorganization, dissolution, winding up, liquidation, a
composition or arrangement with creditors, a receiver, custodian,
liquidator or the like of such Company or of all or any substantial
part of its assets, or other like relief in respect of such Company
unless such proceeding is being contested by it in good faith, and the
same shall continue unstayed and in effect for any period of 60
consecutive days; or
(d) any Default or Event of Default under the Financing
Agreement (as such terms are defined in the Financing Agreement).
Section 4.02. Remedies Upon Event of Default. If an Event of Default
occurs and is continuing, the Blechmans may, without notice to or demand upon
the Companies:
(a) declare all unpaid Reimbursement Obligations, together
with the accrued interest thereon, to be, and the same shall thereupon
become, immediately due and payable, without presentment, protest or
further demand or notice of any kind, all of which are hereby expressly
waived by the Companies; or
(b) exercise their rights and remedies as a secured party
under the UCC, including, without limitation, the right to take
possession of the Collateral; or
(c) take any other action permitted to be taken by them under
this Agreement or under applicable law.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
Each of the Companies hereby represents, covenants and
warrants to the Blechmans as follows:
Section 5.01. Existence, Power and Qualification. Such Company is a
duly organized and validly existing company, has the power to own its properties
and to carry on its business as
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is now being conducted, and is duly qualified to do business and is in good
standing in every jurisdiction in which the character of the properties owned by
it or in which the transaction of its business makes its qualification
necessary.
Section 5.02. Power and Authority. Such Company has full power and
authority to enter into and perform its obligations under this Agreement and to
grant the security interest in the Collateral hereunder. Such Company has taken
all necessary action to authorize the execution, delivery and performance of
this Agreement in accordance with its terms and to grant the security interest
in the Collateral hereunder.
Section 5.03. Validity. This Agreement constitutes the legal, valid and
binding obligation of such Company, enforceable against such Company in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, or other similar laws of general application relating to
or affecting the enforcement of creditors' rights generally, and by general
principles of equity.
Section 5.04. No Conflict. The execution, delivery and performance of
this Agreement by such Company will not violate, conflict with, or constitute
any default under any provision of (a) such Company's charter or by-laws, (b)
any Law or Government Order applicable to such Company or its properties or
assets, or (c) any mortgage, agreement, contract or other undertaking or
instrument to which such Company is a party or by which such Company's
properties or assets are bound.
Section 5.05. Pending Matters. No action or investigation is pending
or, to the best of such Company's knowledge, threatened before or by any court
or administrative agency which might result in any material adverse change in
the financial condition, operations or prospects of such Company. Such Company
is not in violation of any agreement, the violation of which might reasonably be
expected to have a material adverse effect on its business or assets, and such
Company is not in violation of any Governmental Order to which it is subject.
Section 5.06. Title to Collateral. Such Company is the legal and
beneficial owner of the Collateral owned by it. The security interest created
hereby in the Collateral is a valid, enforceable and, upon delivery, in the case
of Collateral in which a lien is perfected by delivery; appropriate notation, in
the case of Collateral in which a lien is perfected by notation; and filing in
the appropriate state and/or county office, in the case of Collateral in which a
lien is perfected by filing, perfected security interest in the Collateral
subject only to Permitted Liens. As of the date hereof, there are no other Liens
on the Collateral or any portion thereof, except for Permitted Liens, and no
financing statement, notice of Lien, assignment or collateral assignment,
mortgage or deed of trust covering the Collateral or any portion thereof exists
or is on file in any public office, except with respect to Permitted Liens.
Section 5.07. Survival of Representations and Warranties. All
representations and warranties made herein or made in any certificate delivered
pursuant hereto shall survive the execution hereof or thereof.
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ARTICLE VI.
MISCELLANEOUS
Section 6.01. Term of Agreement. This Agreement is effective commencing
on the date hereof. This Agreement shall remain in full force and effect until
the later of (a) the date on which the Blechmans' obligations under the Guaranty
are terminated or expired and (b) the date on which all Reimbursement
Obligations of the Companies to the Blechmans have been irrevocably paid and
satisfied in full. Any other termination of this Agreement shall not terminate
or in otherwise affect in any way any liability or obligation of any party
hereto to the extent such liability or obligation relates to events occurring or
circumstances existing prior to or as of, or as a result of, such termination.
Section 6.02. Method of Communication. Except as otherwise provided in
this Agreement, all notices and communications hereunder shall be in writing.
Any notice shall be effective if delivered by hand delivery or sent via
telecopy, recognized overnight courier service or certified mail, return receipt
requested, and shall be presumed to be received by a party hereto (a) on the
date of delivery if delivered by hand or sent by telecopy, (b) on the next
Business Day if sent by recognized overnight courier service and (c) on the
third Business Day following the date sent by certified mail, return receipt
requested.
Section 6.03. Notices. Notices to any party shall be sent to it at the
following addresses, or any other address as to which all the other parties are
notified in writing.
If to the Companies: c/o Twin Laboratories Inc.
000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx, Chief Financial Officer
Telephone No.: (000) 000-0000, ext. 8101
Telecopy No.: (000) 000-0000
With copies to: Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
If to the Blechmans: c/o Twin Laboratories Inc.
000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
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With copies to: Xxxxxx Xxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx Xxxxxx
Telephone No. (000) 000-0000
Telecopy No. (000) 000-0000
Section 6.04. Amendments and Waivers. None of the terms or provisions
of this Agreement may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by the parties hereto.
Section 6.05. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 6.06. Integration. This Agreement represents the agreement of
the parties hereto with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the parties hereto
relative to subject matter hereof not expressly set forth or referred to herein.
Section 6.07. No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Blechmans, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
Section 6.08. Compensation. In consideration for the obligations
assumed by them pursuant to the Guaranty and this Agreement, the Blechmans shall
be entitled to receive compensation from the Companies in an amount to be
approved by a majority of the directors of Twinlab other than the Blechmans,
subject to compliance with any contractual obligations of the Companies.
Section 6.09. Payment of Expenses; Indemnity. The Companies shall (a)
pay all reasonable out-of-pocket expenses of the Blechmans in connection with
(i) the preparation, execution and delivery of this Agreement, whenever the same
shall be executed and delivered, (ii) the preparation, execution and delivery of
any waiver, amendment or consent by the Blechmans relating to this Agreement,
including without limitation reasonable fees and disbursements of counsel for
the Blechmans and (iii) the administration and enforcement of any rights and
remedies of the Blechmans under this Agreement, including consulting with
accountants and attorneys concerning the nature, scope or value of any right or
remedy of the Blechmans hereunder or any factual matters in connection
therewith, which expenses shall include without limitation the reasonable fees
and disbursements of the Blechmans, and (b)
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defend, indemnify and hold harmless the Blechmans from and against any losses,
penalties, fines, liabilities, judgments, settlements, damages, costs and
expenses, suffered by any such person in connection with any claim,
investigation, litigation or other proceeding (whether or not the Blechmans are
a party thereto) and the prosecution and defense thereof, arising out of or in
any way connected with this Agreement, including without limitation, reasonable
attorney's and consultant's fees of the Blechmans, except to the extent that any
of the foregoing directly result from the gross negligence or willful misconduct
of the party seeking indemnification therefor.
Section 6.10. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Blechmans and their respective successors
and assigns, except that no party hereunder may assign or transfer any of its
rights or obligations under this Agreement without the prior written consent of
the other parties hereto.
Section 6.11. WAIVERS OF JURY TRIAL. THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
Section 6.12. Section Headings. The section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
Section 6.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO LAWS RELATING TO CONFLICT OF LAWS.
Section 6.14. Counterparts. This Agreement may be signed in any number
of counterparts, each which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
TWINLAB CORPORATION
By:_______________________
Name: Xxxx Xxxx
Title: Chief Financial Officer
TWIN LABORATORIES INC.
By:_______________________
Name: Xxxx Xxxx
Title: Chief Financial Officer
ADVANCED RESEARCH PRESS, INC.
By:_______________________
Name: Xxxxx Xxxxxxxx
Title: CEO and President
CHANGES INTERNATIONAL, INC.
By:_______________________
Name: Xxxx Xxxx
Title: Chief Financial Officer
PR NUTRITION, INC.
By:_______________________
Name: Xxxx Xxxxxxxx
Title: CEO and President
HEALTH FACTORS INTERNATIONAL, INC.
By:_______________________
Name: Xxxx Xxxxxxxx
Title: CEO and President
XXXXXXX LABORATORIES, INC.
By:_______________________
Name: Xxxx Xxxxxxxx
Title: CEO and President
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Xxxx Xxxxxxxx
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Xxxx Xxxxxxxx
