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EXHIBIT 10.1
ALCO FINANCIAL SERVICES, LLC LOAN AGREEMENT
AND SECURITY AGREEMENT
This Agreement (the "Agreement") dated as of April 2nd, 1999 between the
undersigned Borrower and the undersigned Lender concerning loans and other
credit accommodations to be made by Lender to Borrower.
1. PARTIES
1.1. The "Borrower" is the person, firm, corporation or other entity,
identified as the Borrower in Section 10.7 and its successors and assigns. If
more than one Borrower is specified in Section 10.7, all references to Borrower
shall mean each of them, jointly and severally, individually and collectively,
and the successors and assigns of each.
1.2. The "Lender" is the person, firm, corporation or other entity, identified
as the Lender in Section 10.6 and its successors and assigns. If more than one
Lender is specified in Section 10.6, all references to Lender shall mean each of
them, jointly and severally, individually and collectively, and the successors
and assigns of each.
2. LOANS AND OTHER CREDIT ACCOMMODATIONS
2.1. Revolving Loans. Lender shall, subject to the terms and conditions
contained herein, make revolving loans to Borrower ("Revolving Loans") in
amounts requested by Borrower from time to time, but, not in excess of the Net
Availability existing immediately prior to the making of the requested loan and
provided the requested loan would not cause the outstanding Obligations to
exceed the Maximum Credit. Amounts advanced as part of the Revolving Loans shall
be advanced based on Eligible Accounts (as defined below) and Inventory Advances
(as defined below) shall be advanced based on Eligible Inventory;
2.1.1 "Eligible Accounts" are accounts receivable created by Borrower in the
ordinary course of its business which are and remain acceptable to Lender for
lending purposes. Criteria for Eligible Accounts are set forth below but may be
revised from time to time by Lender, in its sole judgment reasonably exercised
on thirty (30) days prior written notice to Borrower. In the event Lender
changes the Criteria for determining which accounts are Eligible Accounts and
Borrower does not agree to such changes, Borrower may, within thirty (30) days
after any such change, terminate this agreement and repay in full, without
penalty, the termination fee provided in paragraph 9.2 hereof, the Obligations
due and owing to Lender. Unless Borrower terminates the agreement and makes
payment in full of the Obligations, the changes in the criteria for determining
Eligible Accounts shall without further notice become effective thirty (30)
days after said change. Accounts which are considered as Eligible Accounts shall
not thereafter be determined as ineligible solely due to a change in the
criteria for determining Eligible Accounts. Accounts will be considered to be
Eligible Accounts if:
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2.1.1.1 such accounts arise from bona fide completed transactions and have not
remained unpaid for more than the number of days after the invoice date set
forth in Section 10.2;
2.1.1.2 the amount of the accounts reported to Lender are absolutely owing to
Borrower and do not arise from sales on consignment, guaranteed sale or other
terms under which payment by the account debtors may be conditional or
contingent;
2.1.1.3 the account debtor's chief executive office or principal place of
business is located in the United States;
2.1.1.4 such accounts do not arise from progress xxxxxxxx or retainages or
xxxx and hold sales;
2.1.1.5 there are no contra relationships, setoffs, counterclaims or disputes
existing with respect thereto and there are no other facts existing or
threatened which would impair or delay the collectibility of all or any portion
thereof;
2.1.1.6 the goods giving rise thereto were not at the time of the sale subject
to any liens except those permitted in this Agreement;
2.1.1.7 such accounts are not accounts with respect to which the account debtor
or any officer or employee thereof is an officer, employee or agent of or is
affiliated with Borrower, directly or indirectly, whether by virtue of family
membership, ownership, control, management or otherwise;
2.1.1.8 such accounts are not accounts with respect to which the account debtor
is the United States or any State or political subdivision thereof or any
department, agency or instrumentality of the United States, any State or
political subdivision, unless there has been compliance with any law, rule or
regulation applicable to The Federal Assignment of Claims Act of 1940, to the
Lender's satisfaction;
2.1.1.9 Borrower shall, within ten (10) days after an Account Advance, or more
frequently, as lender in its discretion may reasonably require, deliver to
Lender or Lender's representative such documents or copies thereof as Borrower
may have in its possession in connection with such accounts and Lender shall
have received a verification of such account, satisfactory to it, if sent to the
account debtor or any other obligor or any bailee;
2.1.1.10 there are no facts known to Borrower, existing or threatened which
might result in any adverse change in the account debtor's financial condition;
2.1.1.11 such accounts owed by a single account debtor or its affiliates do not
represent more than twenty (20%) percent of all otherwise Eligible Accounts
unless Lender in its sole discretion agrees in writing to a greater percentage,
(accounts excluded from Eligible Accounts solely by reason of this subsection
shall nevertheless be considered Eligible Accounts to the extent of the amount
of such accounts which do not exceed fifty (50%) percent of all otherwise
Eligible Accounts);
2.1.1.12 such accounts are not owed by an account debtor who is or whose
affiliates are past due upon other accounts owed to Borrower comprising more
than twenty five (25%) percent of the
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accounts of such account debtor or its affiliates owed to Borrower;
2.1.1.13 such accounts are owed by account debtors whose total indebtedness to
Borrower does not exceed the amount of any customer credit limits as
established, and changed, from time to time by Lender on notice to Borrower
(accounts excluded from Eligible Accounts solely by reason of this subsection
shall nevertheless be considered Eligible Accounts to the extent the amount of
such accounts does not exceed such customer credit limit); and
2.1.1.14 such accounts are owed by account debtors deemed creditworthy at all
times in the reasonable judgment of Lender.
2.1.2 The "Gross Availability" shall be calculated at any time as the product
obtained by multiplying the outstanding amount of Eligible Accounts, net of all
taxes, discounts, allowances and credits given or claimed, by the Eligible
Accounts Percentage set forth in Section 10.2 and the Eligible Inventory by the
Eligible Inventory Percentage (as herein defined) minus any Reserves as set
forth in 2.15.
2.1.3 The "Maximum Credit" is set forth in Section 10.1.1 hereof.
2.1.4 The "Net Availability" shall be calculated at any time as an amount
equal to the Gross Availability minus the aggregate amount of all then
outstanding Obligations of Borrower to Lender.
2.1.5 Lender shall have a continuing right to deduct reserves in determining
the Gross Availability ("Reserves"), and to increase and decrease such Reserves
from time to time, if and to the extent that, in Lender's reasonable judgment,
such Reserves are necessary to protect Lender against any state of facts which
does, or would, with notice or passage of time or both, constitute an Event of
Default or have an adverse effect on any Collateral. Lender may, at its option,
implement Reserves by designating as ineligible a sufficient amount of accounts
which would otherwise be Eligible Accounts so as to reduce Gross Availability by
the amount of the intended Reserve.
2.1.6 Intentionally Omitted.
2.2 Intentionally Omitted.
2.3 Intentionally Omitted.
2.3.1 Intentionally Omitted.
2.3.2 In addition to the fees and costs of any issuer in connection with
issuing or administering Accommodations, Borrower shall pay monthly to Lender,
on the first day of each month, a charge on open Accommodations at the rate per
annum set forth in Section 10.3.
2.3.3 Intentionally Omitted.
2.4 Lender may, in its sole discretion, make or permit Revolving Loans, other
Obligations in excess of the Maximum Credit, Gross or Net Availability or
applicable formulas or sublimits on such terms and conditions as Lender may
determine. All or any portion
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of such excess(es) shall become due and payable, at such time that Lender may
determine. Borrower may, upon written notice to Lender, and provided no Event of
Default has occurred, require Lender to reduce the Maximum Credit. Borrower, at
any time, may pay the Obligations without penalty.
3 INTEREST AND FEES
3.1 Borrower shall pay to Lender the interest, charges and fees in the amounts
and at the time as specified and detailed in the attachment to this Agreement as
Exhibit A-1 incorporated herein as though set forth in full. Interest shall be
calculated on the basis of a three hundred sixty (360) day year.
4 GRANT OF SECURITY INTEREST
4.1 To secure the payment and performance in full of all Obligations, Borrower
hereby grants to Lender a continuing security interest in and lien upon, and a
right of setoff against, and Borrower hereby assigns and pledges to Lender, all
of the Collateral as defined below including any Collateral not deemed eligible
for lending purposes.
4.2 "Obligations" shall mean any and all Revolving Loans, Term Loans, and all
other indebtedness, liabilities and obligations of every kind, nature and
description owing by Borrower to Lender and/or its affiliates, including
principal, interest, charges, fees and expenses, however evidenced whether as
principal, surety, endorser, guarantor or otherwise, whether arising under this
Agreement or otherwise, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal Term or after the
commencement of any case with respect to Borrower under Title 11 United States
Code Section 101 et seq. or any similar statute, whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, original, renewed or extended
and whether arising directly or howsoever acquired by Lender including from any
other entity outright, conditionally or as collateral security, by assignment,
merger with any other entity, participations of Borrower to others, assumption,
operation of law, subrogation or otherwise and shall also include all amounts
chargeable to Borrower under this Agreement or in connection with any of the
foregoing.
4.3 "Collateral" shall mean all of the following property of Borrower:
4.3.1 All now owned and hereafter acquired right, title and interest of
Borrower in, to and in respect of all: all accounts, interests in goods
represented by accounts, returned, reclaimed or repossessed goods with respect
thereto and rights as an unpaid vendor; contract rights; chattel paper; general
intangibles (including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets,
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goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licenser or licensee, choses in action and other claims, interests in equipment,
bank accounts, deposit accounts, or hereafter held in any capacity by Lender,
its affiliates or any entity which, at any time, participates in Lender's
financing of Borrower or at any other depository or other institution;
agreements or property securing or relating to any of the items referred to
above;
4.3.2 All now owned and hereafter acquired right, title and interest of
Borrower in, to and in respect of goods, including, but not limited to:
4.3.2.1 All inventory, wherever located, whether now owned or hereafter
acquired, of whatever kind, nature or description, including all raw materials,
work-in-process, finished goods, and materials to be used or consumed in
Borrower's business; and all names or marks affixed to or to be affixed thereto
for purposes of selling same by the seller, manufacturer, lessor or licenser
thereof,
4.3.2.2 All equipment and fixtures, wherever located, whether now owned or
hereafter acquired, including, without limitation, all machinery, equipment,
motor vehicles, furniture and fixtures, and any and all additions,
substitutions, replacements (including spare parts), and accessions thereof and
thereto;
4.3.2.3 All consumer goods, wherever located, whether now owned or hereafter
acquired, of whatever kind, nature or description;
4.3.3 Intentionally Omitted
4.3.4 All present and future books and records relating to any of the above
including, without limitation, all computer programs, printed output and
computer readable data in the possession or control of the Borrower, any
computer service bureau or other third party;
4.3.5 All products and proceeds of the foregoing in whatever form and wherever
located, including, without limitation, all insurance proceeds and all claims
against third parties for loss or destruction of or damage to any of the
foregoing.
5. COLLECTION AND ADMINISTRATION
5.1 Lockbox. Payments on all accounts and any other proceeds of Collateral
shall be made to Borrower's name or properly registered tradename at the lockbox
specified in Section 10.8. Borrower will hold in trust and safekeeping, the
accounts and any other proceeds of Collateral and immediately turn over to
Lender the identical check or other form of payment duly endorsed to Lender
(collectively "check" or "checks") received by Borrower, whenever any payment on
an account comes into Borrower's possession.
5.2 All Obligations shall be payable at Lender's office set forth below or at
Lender's bank designated in Section 10.6 or at such other bank or place as
Lender may expressly designate from time to time for purposes of this Section.
For purposes of determining Gross and Net Availability, remittances and other
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payments with respect to the Collateral and Obligations will be treated as
credited to the loan account of Borrower maintained by Lender and Collateral
balances to which they relate, upon the date of Lender's receipt of advice from
Lender's bank that such remittances or other payments have been credited to
Lender's account or in the case of remittances or other payments received
directly in kind by Lender, upon the date of Lender's deposit thereof at
Lender's bank, subject to final payment and collection. In computing interest
charges, the loan account of Borrower maintained by Lender will be credited with
remittances and other payments the number of Credit Days set forth in Section
10.2 after immediately available or collected funds have been credited to
Lender's account at such bank.
5.3 Lender shall render to Borrower, a monthly loan statement as soon as
practicable at the close of the preceding month. Each statement shall be in form
and substance customarily provided by Lender to each of its Borrowers and shall
be considered correct and binding upon Borrower as the amount owed by Borrower,
except to the extent that Lender receives, within thirty (30) days after the
mailing of such statement, written notice from Borrower of any specific
exceptions by Borrower to that statement.
5.4 Lender may, at any time, whether or not an Event of Default has occurred,
believes or has reason to believe an Event of Default has occurred may, with or
without notice to or assent of Borrower;
5.4.1 notify any account debtor that the accounts and other Collateral which
includes a monetary obligation have been assigned to Lender by Borrower and that
payment thereof is to be made to the order of and directly to Lender,
5.4.2 send, or cause to be sent by its designee, requests (which may identify
the sender by a pseudonym) for verification of accounts and other Collateral
directly to any debtor or any other obligor or any bailee with respect thereto,
and
5.4.3 demand, collect or enforce payment of any accounts or such other
Collateral, but without any duty to do so, and Lender shall not be liable for
any failure to collect or enforce payment thereof. At Lender's written request,
all invoices and statements sent to any account debtor, other obligor or bailee,
shall state that the accounts and such other Collateral have been assigned to
Lender and are payable directly and only to Lender.
5.5 Borrower hereby appoints Lender and any designee of Lender, which will
include Xxxxxxx X. Xxxxxxxx, as Borrower's attorney-in-fact and authorizes
Lender or such designee, at Borrower's sole expense, to exercise at any times in
Lender's or such designee's discretion all or any of the following powers, which
powers of attorney, being coupled with an interest, shall be irrevocable until
all Obligations have been paid in full:
5.5.1 receive, take, endorse, assign, deliver, accept and deposit, in the name
of Lender or Borrower, any and all cash,
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checks, commercial paper, drafts, remittances and other instruments and
documents relating to the Collateral or the proceeds thereof,
5.5.2 transmit to account debtors, other obligors or any bailees of Borrower,
notice of the interest of Lender in the Collateral or request from account
debtors or such other obligors or bailees at any time, in the name of Borrower
or Lender or any designee of Lender, information concerning the Collateral and
any amounts owing with respect thereto,
5.5.3 notify account debtors or other obligors to make payment directly to
Lender, or notify bailees as to the disposition of Collateral,
5.5.4 take or bring, in the name of Lender or Borrower, all steps, actions,
suits or proceedings deemed by Lender necessary or desirable to direct
collection of or other realization upon the accounts and other Collateral,
5.5.5 after an Event of Default, change the address for delivery of mail to
Borrower and to receive and open mail addressed to Borrower,
5.5.6 after an Event of Default, extend the time of payment of, compromise or
settle for cash, credit, return of merchandise, and upon any terms or
conditions, any and all accounts or other Collateral which includes a monetary
obligation and discharge or release the account debtor or other obligor, without
affecting any of the Obligations, and
5.5.7 execute in the name of Borrower and file against Borrower in favor of
Lender financing statements or amendments with respect to the Collateral.
5.6 Borrower hereby releases and exculpates Lender, its officers, employees and
designees, from any liability arising from any acts under this Agreement or in
furtherance thereof, whether as attorney-in-fact or otherwise, whether of
omission or commission, and whether based upon any error of judgment or mistake
of law or fact, except for willful misconduct. In no event will Lender have any
liability to Borrower for lost profits or other special or consequential
damages.
5.7 Borrower shall not, without the prior written consent of Lender in each
instance,
5.7.1 grant any extension of time of payment of any of the accounts or any
other Collateral which includes a monetary obligation,
5.7.2 compromise or settle any of the accounts or any such other Collateral for
less than the full amount thereof,
5.7.3 or release in whole or in part any account debtor or other person liable
for the payment of any of the accounts or any such other Collateral, or
5.7.4 grant any credits, discounts, allowances, deductions, return
authorizations or the like with respect to any of the accounts or any such other
Collateral.
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5.8 At such times as Lender may request and in the manner specified by Lender,
Borrower shall deliver to Lender or Lender's representative or designee original
invoices, agreements, proofs of rendition of services and delivery of goods and
other documents evidencing or relating to the transactions which gave rise to
accounts or other Collateral, together with customer statements, schedules
describing the accounts or other Collateral and/or statements of account and
confirmatory assignments to Lender of the accounts or other Collateral, in form
and substance satisfactory to Lender and duly executed by Borrower. Without
limiting the provisions of Section 5.7, Borrower's granting of credits,
discounts, allowances, deductions, return authorizations or the like will be
promptly reported to Lender in writing. In no event shall any such schedule or
confirmatory assignment (or the absence thereof or omission of any of the
accounts or other Collateral therefrom) limit or in any way be construed as a
waiver, limitation or modification of the security interests or rights of Lender
or the warranties, representations and covenants of Borrower under this
Agreement.
5.9 From time to time as requested by Lender, at the sole expense of Borrower,
Lender or its designee shall have access prior to an Event of Default during
reasonable business hours and on or after an Event of Default at any time, to
all of the premises where Collateral is located for the purposes of inspecting
the Collateral, including Borrower's books and records, and Borrower shall
permit Lender or its designee to make such copies of such books and records or
extracts therefrom as Lender may request. Without expense to Lender or its
designee, Lender or its designee may use such of Borrower's personnel,
equipment, including computer equipment, programs, printed output and computer
readable media, supplies and premises for the collection of accounts and
realization on other Collateral as Lender, in its discretion reasonably
exercised, deems appropriate. Borrower hereby irrevocably authorizes all
accountants and third parties to disclose and deliver to Lender or its designee
at Borrower's expense all financial information, books and records, work papers,
management reports and other information in their possession regarding Borrower.
Prior to an Event of Default, audits by Lender shall be limited to two (2) times
per year.
5.10 Lender shall have received a certificate from the relevant officer of
Borrower to the effect that Borrower knows of no facts which Borrower's computer
systems, software and applications would cause Borrower to reasonably believe
that the Year 2000 Problem would cause a material adverse effect.
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6. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 Borrower hereby represents, warrants and covenants to Lender the following,
the truth and accuracy of which, and compliance with which, shall be continuing
conditions of the making of loans or other credit accommodations by Lender to
Borrower.
6.2 Borrower shall keep and maintain its books and records in accordance with
generally accepted accounting principles, consistently applied. Borrower shall,
at its sole expense, on or before the twenty-fifth (25th) day of each month,
deliver to Lender true and complete monthly agings of its accounts receivable
and accounts and accounts payable, monthly inventory reports and monthly
internally prepared interim financial statements, all in such form, and together
with such other information when available with respect to the business of
Borrower or any guarantor, as Lender may reasonably request. Annually, Borrower
shall deliver true and correct financial statements of Borrower prepared
according to generally accepted accounting principles, as soon as available, but
in no event later than one hundred twenty (120) days after the end of Borrower's
fiscal year. Lender may require that annual financial statements be audited by
an independent certified public accountant acceptable to Lender.
6.3 Borrower may from time to time render invoices to account debtors under its
trade names set forth in Section 10.7 after Lender has received prior written
notice from Borrower of the use of such trade names and as to which, Borrower
agrees that:
6.3.1 each trade name does not refer to another corporation or other legal
entity,
6.3.2 all accounts and proceeds thereof (including any returned merchandise)
invoiced under any such trade names are owned exclusively by Borrower and are
subject to the security interest of Lender and the other terms of this
Agreement, and
6.3.3 all schedules of accounts and confirmatory assignments including any
sales made or services rendered using the trade name shall show Borrower's name
as assignor and Lender is authorized to receive, endorse and deposit to any loan
account of Borrower maintained by Lender all checks or other remittances made
payable to any trade name of Borrower representing payment with respect to such
sales or services.
6.4 Borrower shall promptly notify Lender in writing of any loss, damage,
investigation, action, suit, proceeding or claim relating to a material portion
of the Collateral or which may result in any material adverse change in
Borrower's business, assets, liabilities or condition, financial or otherwise.
6.5 Borrower's books and records concerning accounts and its chief executive
office are and shall be maintained only at the address set forth in Section
10.7. Borrower's only other places of business and the only other locations of
Collateral, if any,
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are and shall be the addresses set forth in Section 10.7 hereof, except Borrower
may change such locations or open a new place of business after thirty (30) days
prior written notice to Lender. Prior to any change in location or opening of
any new place of business, Borrower shall execute and deliver or cause to be
executed and delivered to Lender such financing statements, financing documents
and security and other agreements as Lender may require, including, without
limitation, those described in Section 6.14.
6.6 Borrower has and at all times will continue to have good and marketable
title to all of the Collateral, free and clear of all liens, security interests,
claims or encumbrances of any kind except, if any, those set forth on Schedule A
hereto.
6.7 Borrower shall not without prior written consent of Lender which shall not
unreasonably be withheld directly or indirectly:
6.7.1 sell, lease, transfer, assign, abandon or otherwise dispose of any part of
the Collateral or any material portion of its other assets (other than sales of
inventory to buyers in the ordinary course of business) or
6.7.2 consolidate with or merge with or into any other entity, or permit any
other entity to consolidate with or merge with or into Borrower or
6.7.3 form or acquire any interest in any firm, corporations
or other entity.
6.8 Borrower shall at all times maintain, with financially sound and reputable
insurers, casualty insurance with respect to the Collateral and other assets.
Borrower shall at request of Lender, name Lender as loss payee of such
insurance. All such insurance policies shall be in such form, substance, amounts
and coverage as may be satisfactory to Lender and shall provide for thirty (30)
days' prior written notice to Lender of cancellation or reduction of coverage.
Borrower hereby irrevocably appoints Lender and any designee of Lender as
attorney-in-fact for Borrower to obtain at Borrower's expense, and, after an
Event of Default, to adjust or settle any claim or other matter under or arising
pursuant to such insurance or to amend or cancel such insurance. Borrower shall
deliver to Lender, in kind, all instruments representing proceeds of insurance
received by Borrower. Lender may apply any insurance proceeds received at any
time to the cost of repairs to or replacement of any portion of the Collateral
and/or, at Lender's option, to payment of or as security for any of the
Obligations, whether or not due, in any order or manner as Lender determines.
6.9 Borrower is and at all times will continue to be in compliance with the
requirements of all material laws, rules, regulations and orders of any
governmental authority relating to its business (including laws, rules,
regulations and orders relating to taxes, payment and withholding of payroll
taxes,
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employer and employee contributions and similar items, securities, employee
retirement and welfare benefits, employee health and safety, or environmental
matters) and all material agreements or other instruments binding on Borrower or
its property. All inventory produced by Borrower shall be produced in accordance
with the requirements of the Federal Fair Labor Standards Act of 1938, as
amended and all rules, regulations and orders related thereto. Borrower shall
pay and discharge all taxes, assessments and governmental charges against
Borrower or any Collateral prior to the date on which penalties are imposed or
liens attach with respect thereto, unless the same are being contested in good
faith and, at Lender's option, Reserves are established for the amount contested
and penalties which may accrue thereon.
6.10 With respect to each account deemed an Eligible Account, except as
reported in writing to Lender, Borrower has no knowledge that any of the
criteria for eligibility are not or are no longer satisfied. As to each account,
except as disclosed in writing to Lender at the time such account arises;
6.10.1 each is valid, legally enforceable and fully assignable to Lender and
represents an undisputed bona fide indebtedness incurred by the account debtor
for the sum reported to Lender;
6.10.2 each arises from an absolute and unconditional sale of goods, without any
right of return or consignment, or from a completed rendition of services;
6.10.3 each is not, at the time such account arises, subject to any defense,
offset, dispute, contra relationship, counterclaim, or any given or claimed
credit, allowance or discount, and;
6.10.4 all statements made and all unpaid balances and other information
appearing in the invoices, agreements, proofs of rendition of services and
delivery of goods and other documentation relating to the accounts, and all
confirmatory assignments, schedules, statements of account and books and records
with respect thereto, are true and correct and in all respects what they purport
to be.
6.11 With respect to Borrower's equipment, Borrower shall keep the equipment in
good order and repair, and in running and marketable condition, ordinary wear
and tear excepted.
6.12 Intentionally Omitted.
6.13 Borrower will not without the written consent of the Lender, directly or
indirectly:
6.13.1 lend or advance money or property to, guarantee or assume indebtedness
of, or invest in (by capital contribution or otherwise) any person, firm,
corporation or other entity; or
6.13.2 declare, pay or make any dividend, redemption or other distribution on
account of any shares of any class of stock of Borrower now or hereafter
outstanding, unless no Event of Default has occurred and Lender, in its sole
discretion, determines that
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any such payment will not have a material adverse impact on the Borrower's
business or financial condition; or
6.13.3 make any payment of the principal amount of or interest on any
indebtedness owing to any officer, director, shareholder, or affiliate of
Borrower, unless no Event of Default has occurred and Lender, in its sole
discretion, determines that any such payment will not have a material adverse
impact on the Borrower's business or financial condition; or
6.13.4 make any loans or advances to any officer, director, employee,
shareholder or affiliate of Borrower, in excess of $5,000,
6.13.5 enter into any sale, lease or other transaction with any officer,
director, employee, shareholder or affiliate of Borrower on terms that are less
favorable to Borrower than those which might be obtained at the time from
persons who are not an officer, director, employee, shareholder or affiliate of
Borrower.
6.14 Borrower shall pay, on Lender's demand, all costs, expenses, filing fees
and taxes payable in connection with preparation, execution, delivery,
recording, administration, collection, liquidation, enforcement and defense of
the Obligations, Lender's rights in the Collateral, this Agreement and all other
existing and future agreements or documents contemplated herein or related
hereto, including any amendments, waivers, supplements or consents which may
hereafter be made or entered into in respect hereof, or in any way involving
claims by or against Lender directly or indirectly arising out of or related to
the relationship between Borrower and Lender or any guarantor and Lender,
including, but not limited to the following, whether incurred before, during or
after the initial or any renewal Term or after the commencement of any case with
respect to Borrower or any guarantor under the United States Bankruptcy Code or
any similar statute:
6.14.1 all costs and expenses of filing or recording (including Uniform
Commercial Code financing statement filing taxes and fees, documentary taxes,
intangibles taxes and mortgage recording taxes and fees, if applicable);
6.14.2 all appraisal fees, search fees and lockbox fees;
6.14.3 all fees relating to the wire transfer of loan proceeds and other funds;
6.14.4 all expenses and costs heretofore and from time to time hereafter
incurred by Lender during the course of periodic field examinations of the
Collateral and Borrower's operations, which shall be limited to two (2) times
per year unless an Event of Default exists, plus a per them charge at the rate
of $ 750 per person, per day for Lender's examiners in the field and office; and
6.14.5 the reasonable costs and disbursements of in-house and outside counsel
to Lender.
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6.15 At the request of Lender, at any time and from time to time, at Borrower's
sole expense, Borrower shall execute and deliver or cause to be executed and
delivered to Lender, such agreements, documents and instruments, including
waivers, assignments, consents and subordination agreements from mortgagees or
other holders of security interests or liens, landlords or bailees, and do or
cause to be done such further acts as Lender, in its discretion, deems necessary
or desirable to create, preserve, perfect or validate any security interest of
Lender or the priority thereof in the Collateral and otherwise to effectuate the
provisions and purposes of this Agreement.
Borrower hereby authorizes Lender to file financing statements or amendments
against Borrower in favor of Lender with respect to the Collateral, without
Borrower's signature and to file as financing statements any carbon,
photographic or other reproductions of this Agreement or any financing
statements signed by Borrower.
7. EVENTS OF DEFAULT AND REMEDIES
7.1 All Obligations shall be immediately due and payable, without notice or
demand, and any provisions of this Agreement as to future loans and credit
accommodations by Lender shall terminate automatically, upon the termination or
non-renewal of this Agreement or, at Lender's option, upon or at any time after
the occurrence or existence of any one or more of the following "Events of
Default":
7.1.1 Borrower fails to pay when due any of the Obligations or fails to perform
any of the terms of this Agreement or any other existing or future financing,
security or other agreement between Borrower and Lender or any affiliate of
Lender and such default continues for ten (10) days after written notice thereof
to Borrower;
7.1.2 Any representation, warranty or statement of fact made by Borrower to
Lender in this Agreement or any other agreement, schedule, confirmatory
assignment or otherwise, or to any affiliate of Lender, shall prove inaccurate
or misleading;
7.1.3 Any guarantor revokes, terminates or fails to perform any of the terms of
any guaranty, endorsement or other agreement of such party in favor of Lender or
any affiliate of Lender;
7.1.4 Any judgment or judgments aggregating in excess of $50,000 or any
injunction or attachment is obtained against Borrower or any guarantor which
remains unstayed for a period of ten (10) days or is enforced;
7.1.5 Borrower or any guarantor, being a natural person, dies, or Borrower or
any guarantor which is a partnership or corporation, is dissolved, or Borrower
or any guarantor which is a corporation fails to maintain its corporate
existence in good standing, or the usual business of Borrower or any guarantor
ceases or is suspended;
7.1.6 Any change in the chief executive officer, chief operating officer, chief
financial officer or controlling ownership of Borrower;
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7.1.7 Borrower or any guarantor becomes insolvent, makes an assignment for the
benefit of creditors, makes or sends notice of a bulk transfer or calls a
general meeting of its creditors or principal creditors;
7.1.8 Any petition or application for any relief under the bankruptcy laws of
the United States now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed by or against Borrower or any guarantor;
7.1.9 The indictment, which is not dismissed within thirty (30) days after said
filing, of Borrower or any guarantor under any criminal statute, or commencement
or threatened commencement of criminal or civil proceedings against Borrower or
any guarantor, pursuant to which statute or proceedings the penalties or
remedies sought or available include forfeiture of any of the property of
Borrower or such guarantor;
7.1.10 Any default or event of default under any financing, security or other
agreement, document or instrument at any time executed and/or delivered to, with
or in favor of Lender or any of its affiliates by an affiliate of Borrower which
is not cured within the period provided in any such agreements; or
7.1.11 Lender in good faith believes that either (i) the prospect of payment or
performance of the Obligations is impaired or (ii) the Collateral is not
sufficient to fully secure the Obligations.
7.2. Upon the occurrence of an Event of Default and at any time thereafter,
Lender shall have all rights and remedies provided in this Agreement, any other
agreements between Borrower and Lender, the Uniform Commercial Code or other
applicable law, all of which rights and remedies may be exercised without notice
to Borrower, all such notices being hereby waived. All rights and remedies of
Lender are cumulative and not exclusive and are enforceable, in Lender's
discretion, alternatively, successively, concurrently or on any one or more
occasions and in any order Lender may determine. Without limiting the
indebtedness due Lender, Lender or its designee may:
7.2.1 accelerate the payment of all Obligations and demand immediate payment
thereof to Lender or its designee may;
7.2.2 with or without judicial process or the aid or assistance of others,
enter upon any premises on or in which any of the Collateral may be located and
take possession of the Collateral or complete processing, manufacturing and
repair of all or any portion of the Collateral;
7.2.3 require Borrower to the extent permitted by law, at Borrower's expense,
to assemble and make available to Lender any part or all of the Collateral at
any place and time designated by Lender;
7.2.4 collect, foreclose, receive, appropriate, setoff and realize of,
compromise or settle for cash, credit, return of merchandise, and upon any terms
or conditions, any and all
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accounts or other Collateral which includes a monetary obligation and discharge
or release the account debtor or other obligor, without affecting any of the
Obligations;
7.2.5 sell, lease, transfer, assign, deliver or otherwise dispose of any and
all Collateral (including, without limitation, entering into contracts with
respect thereto, by public or private sales at any exchange, broker's board, any
office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such
public sale, all of the foregoing being free from any right or equity of
redemption of Borrower, which right or equity of redemption is, to the extent
permitted by law, hereby expressly waived and released by Borrower. If any of
the Collateral is sold or leased by Lender upon credit terms or for future
delivery, the Obligations shall not be reduced as a result thereof until payment
therefor is finally collected by Lender. If notice of disposition of Collateral
is required by law, seven (7) days prior notice by Lender to Borrower
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrower waives any other notice. In
the event Lender institutes any action to recover any Collateral or seeks
recovery of any Collateral by way of prejudgment remedy, Borrower waives the
posting of any bond which might otherwise be required.
7.3 Lender may apply the cash proceeds of Collateral actually received by Lender
from any sale, lease, foreclosure or other disposition of the Collateral to
payment of any of the Obligations, in whole or in part (including reasonable
attorneys' fees and legal expenses incurred by Lender with respect thereto or
otherwise chargeable to Borrower) and in such order as Lender may elect, whether
or not then due. Borrower shall remain liable to Lender for the payment of any
deficiency together with interest at the highest rate provided for herein and
all costs and expenses of connection or enforcement, including reasonable
attorneys' fees and legal expenses.
7.4 Lender may, at its option, cure any default by Borrower under any agreement
with a third party or pay or bond on appeal any judgment entered against
Borrower, discharge taxes, liens, security interest or other encumbrances at any
time levied on or existing with respect to the Collateral and pay any amount,
incur any expense or perform any act which, in Lender's sole judgment is
necessary or appropriate to preserve, protect, insure, maintain, or realize upon
the Collateral. Lender may charge Borrower's loan account for any amounts so
expended, such amounts to be repayable by Borrower on demand. Lender shall be
under no obligation to effect such cure, payment, bonding or discharge, and
shall not, by doing so, be deemed to have assumed any obligation or liability of
Borrower.
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8. JURY TRIAL WAIVER: CERTAIN OTHER WAIVER AND CONSENTS
8.1. BORROWER AND LENDER EACH WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION
OR PROCEEDING INSTITUTED BY EITHER OF THEM AGAINST THE OTHER WHICH PERTAINS
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE OBLIGATIONS, THE COLLATERAL, ANY
ALLEGED TORTUOUS CONDUCT BY BORROWER OR LENDER, OR, IN ANY WAY, DIRECTLY OR
INDIRECTLY, ARISES OUT OF OR RELATES TO THE RELATIONSHIP BETWEEN BORROWER AND
LENDER. IN NO EVENT WILL LENDER BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR
CONSEQUENTIAL DAMAGES.
8.2. Borrower waives all rights to interpose any claims, deductions, setoffs
or counterclaims of any kind, nature or description in any action or proceeding
instituted by Lender with respect to this Agreement, the Obligations, the
Collateral or any matter arising therefrom or relating thereto, except
compulsory counterclaims.
8.3. Borrower hereby irrevocably submits and consents to the non-exclusive
jurisdiction of the State and Federal Courts located in California and any other
State where any Collateral is located with respect to any action or proceeding
arising out of this Agreement, the Obligations, the Collateral or any matter
arising therefrom or relating thereto. In any such action or proceeding,
Borrower waives personal service of the summons and complaint or other process
and papers therein and agrees that the service thereof may be made by first
class mail directed to Borrower at its chief executive office set forth herein
or other address thereof of which Lender has received notice as provided herein,
service to be deemed complete five (5) days after mailing, or as permitted under
the rules of either of said Courts. Any such action or proceeding commenced by
Borrower against Lender will be litigated only in a Federal Court located in the
district, or a State Court in the State and County, in which the office of
Lender designated in Section 10.6 is located and Borrower waive any objection
based on forum non convenes and any objection to venue in connection therewith.
8.4. Lender shall not, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights or remedies unless such
waiver shall be in writing and signed by an authorized officer of Lender. A
waiver by Lender of any right or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right or remedy which Lender would
otherwise have on any future occasion, whether similar in kind or otherwise.
8.5. In consideration of Lender's entering into this Agreement and making the
accommodations provided for herein, Borrower hereby agrees that Lender shall be
entitled to relief from any automatic stay imposed by Section 362 of Title 11 of
the U.S. Code, as amended, or otherwise, on or against the exercise of the
rights and remedies otherwise available to Lender as provided
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herein, or in any documents related hereto, or as otherwise provided by law; in
the event Borrower shall:
8.5.1. file with any bankruptcy court of competent jurisdiction, or be the
subject of, and petition under Title 11 of the U.S. Code, as amended;
8.5.2. be the subject of any order for relief issued under such Title 11 of the
U.S. Code, as amended;
8.5.3. file or be the subject of any petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any present or future federal or state act or law relating to
bankruptcy, insolvency, or other relief for debtors;
8.5.4. have sought or consented to or acquiesced in the appointment of any
trustee, receiver, conservator, or liquidator;
8.5.5. be the subject of any order, judgment, or decree entered by any court
of competent jurisdiction approving a petition filed against such party for any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency, or relief for debtors.
9. TERM OF AGREEMENT: MISCELLANEOUS
9.1. Term. This Agreement shall only become effective upon execution and
delivery by Borrower and Lender and shall continue in full force and effect for
a term set forth in Section 10.9 from the date hereof and shall be deemed
automatically renewed for successive terms as set forth in Section 10.9
thereafter unless terminated as of the end of the initial or any renewal term
(each a "Term") by either party giving the other written notice at least thirty
(30) days' prior to the end of the then current Term.
9.2. Borrower may also terminate this Agreement by giving Lender at least
thirty (30) days prior written notice at any time upon payment in full of all of
the Obligations as provided herein, including the early termination fee provided
below. Lender shall also have the right to terminate this Agreement at any time
upon or after the occurrence of an Event of Default. If Lender terminates this
Agreement upon or after the occurrence of an Event of Default, or if Borrower
shall terminate this Agreement as permitted herein effective prior to the end of
the then-current Term, in addition to all other Obligations, Borrower shall pay
to Lender, upon the effective date of termination, in view of the impracticality
and extreme difficulty of ascertaining actual damages and by mutual agreement of
the parties as to a reasonable calculation of Lender's lost profits, an early
termination fee equal to one percent (1%) of the Maximum Credit if termination
occurs prior to the end of the initial Term or if the Agreement is extended
beyond the Initial Term, one (1%) percent of the Maximum Credit if termination
occurs prior to the end of the then current term.
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9.3. Upon termination of this Agreement by Borrower, as permitted herein, in
addition to payment of all Obligations which are not contingent, Borrower shall
deposit such amount of cash collateral as Lender determines is necessary to
secure Lender from loss, cost, damage or expense, including reasonable
attorneys' fees, in connection with any open Accommodations or remittance items
or other payments provisionally credited to the Obligations and/or to which
Lender has not yet received final and indefeasible payment.
9.4. Except as otherwise provided, all notices, requests and demands hereunder
shall be
9.4.1. made to Lender at its address set forth in Section 10.6 and to Borrower
at its chief executive office set forth in Section 10.7, or to such other
address as either party may designate by written notice to the other in
accordance with this provision, and
9.4.2. Notice shall be deemed to have been given or made: if by hand,
immediately upon delivery; if by telex, telegram or telecopy (fax), immediately
upon receipt; if by overnight delivery service, one day after confirmed
dispatch; and if by first class or certified mail, three (3) days after mailing.
9.5. If any provision of this Agreement is held to be invalid or unenforceable,
such provision shall not affect the Agreement as a whole, but this Agreement
shall be construed as though it did not contain the particular provision held to
be invalid or unenforceable.
9.6. This Agreement and Appendices, if any, contains the entire agreement of
the parties as to the subject matter hereof, all prior commitments, proposals
and negotiations concerning the subject matter hereof being merged herein.
Neither this Agreement nor any provision hereof shall be amended, modified or
discharged orally or by course of conduct, but only by a written agreement
signed by an authorized officer of Lender. This Agreement shall be binding upon
and inure to the benefit of each of the parties hereto and their respective
successors and assigns, except that any obligation of Lender under this
Agreement shall not be assignable nor inure to the successors and assigns of
Borrower.
9.7. No termination of this Agreement shall relieve or discharge Borrower of
its Obligations, grants of Collateral, duties and covenants hereunder or
otherwise until such time as all Obligations to Lender have been indefeasibly
paid and satisfied in full, including, without limitation, the continuation and
survival in full force and effect of all security interests and liens of Lender
in and upon all then-existing and thereafter arising or acquired Collateral and
all warranties and waivers of Borrower.
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9.8 All terms used herein which are defined in the Uniform Commercial Code in
effect in the State of California, shall have the meanings given therein unless
otherwise defined in this Agreement and all references to the singular or plural
herein shall also mean the plural or singular, respectively.
9.9 This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
9.10. This Agreement shall become effective when it is accepted and signed by
an authorized officer of Lender.
10. ADDITIONAL DEFINITIONS AND TERMS
10.1 Credit Line Terms
10.1.1 Maximum Credit: $1,500,000
10.2 Eligibility Parameters
10.2.1 Eligible Accounts Percentage: 80%; not to exceed $1M
outstanding at any time
10.2.2 Maximum days after Invoice Date for Eligible Accounts:
120 days
10.2.3 Minimum Borrowing: N/A
10.2.4 Loan Term: Two (2) years
10.2.5 Credit Days: 5 days
10.2.6 Term Loan: N/A
10.3 Accommodations:
10.3.1 Lender's Charge for Accommodations: N/A
10.4 Fees:
10.4.1 Interest Rate: Prime Rate plus 3% per annum
10.4.2 Administrative Fee Percent: 0.25% per month
10.4.3 Facility Fee: A one-time Commitment Fee, of 1% of the
Maximum Credit payable on closing and an annual Facility
Fee of, One half (1/2%) percent of the Maximum Credit
payable on each anniversary of the Closing
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10.4.4 Accounting Servicing Fee: N/A
10.4.5 Unused Line Fee: N/A
10.4.6 Monthly Minimum Fee: N/A
10.4.7 Administrative Fee: N/A
10.5 Financial Covenants:
10.5.1 Working Capital: N/A
10.5.2 Net Worth: N/A
10.5.3 Capital Expenditures: N/A
10.6 Lender Information:
10.6.1 Lender: ALCO Financial Services, LLC
10.6.2 Lender's Office: Larkspur, CA
10.6.3 Lender's 000 Xxxxxxxx
Xxxxxx Xxxxxxx Xxxxxx, Xxxxx 000
Address:
10.6.4 Lender's Xxxxxx,
Xxxx/Xxxxx/
Xxx Xxxxxxxx, XX 00000
10.6.5 Lender's Office
Telephone: 000-000-0000
10.6.6 Lender's Office
Fax: 000-000-0000
10.6.7 Lender's Bank: First Union Bank
10.6.8 Lender's Bank Acct.
Number: to be assigned by bank
10.6.9 Lender's Bank 300 South Xxxxx
Address: Street
10.6.10 Lender's Bank Charlotte,
City/State/ North Carolina
Zip: 28230-0337
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10.7 Borrower Information:
10.7.1 Borrower: Golden Pharmaceuticals, Inc.
and Quality Care
Pharmaceuticals, Inc.
10.7.2 Borrower's Officer:
10.7.3 Borrower's Chief
Executive Office:
10.7.4 Borrower's Telephone:
10.7.5 Borrower's Fax:
10.7.6 Locations of Eligible
Inventory Collateral:
10.7.8 Borrower's Other Offices and
Locations of Collateral:
10.7.9 Borrower's Trade Names for
Invoicing:
10.8 Lockbox Information (Payment to be made to:)
10.8.1 Lockbox
Name: ALCO Financial Service, LLC
10.8.2 Lockbox
Address: 000 Xxxxx Xxxxx Xxxxxx
10.8.3 Lockbox
City/ Charlotte,
State/ North Carolina
Zip: 28230-0337
10.9
10.9.1 Security Agreement Date:
10.9.2 Agreement Term: Two (2) years
10.9.3 Renewal Term: One (1) year
11.0 Agreed:
11.1
11.1.1 Borrower
11.1.2 By: /s/ XXXX X. XXXXX
---------------------------
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11.1.3 Print Name:
11.1.4 Title:
11.1.5 Date: 4/2/99
11.2 LENDER ACCEPTANCE:
11.2.1 ALCO FINANCIAL SERVICES, LLC.
11.2.2 By: /s/ XXXXX X. XXXXXXX
------------------------------------------
11.2.3 Print Name: Xxxxx X. Xxxxxxx
11.2.4 Title: Senior Vice President
11.2.5 Date: 4/2/99
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EXHIBIT "A-1"
This Exhibit is attached to, made a part thereof as if fully set forth in
Section 3.1 "Interest and Fees" and is incorporated in the attached ALCO
Financial Services, LLC Loan Agreement and Security Agreement dated April 2nd
1999.
3.1 Interest on the Revolving Loans shall be payable by Borrower on the
first day of each month, calculated upon the basis of a three hundred sixty
(360) day year and upon the closing daily balances in the loan account of
Borrower for each day during the immediately preceding month, at the per annum
rate set forth as the Interest Rate in Section 10.1. The Interest Rate shall
increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate as stated in the Wall Street Journal, monthly on
the first day of the month. On and after any Event of Default or termination or
non-renewal hereof, interest on all unpaid matured obligations shall accrue at a
rate equal to four percent (4%) per annum in excess of the Interest Rate
otherwise payable until such time as all Obligations are indefeasibly paid in
full (notwithstanding entry of any judgment against Borrower or the exercise of
any other right or remedy by Lender), and all such interest shall be payable on
demand. In no event shall charges constituting interest exceed the rate
permitted under any applicable law or regulation, and if any provision of this
Agreement is in contravention of any such law or regulation, such provision
shall be deemed amended to conform thereto.
3.2 Borrower shall pay Lender on the first day of each month, an
Administrative Fee calculated by taking the monthly Administrative Fee Charge in
10.4, multiplied by the result of the average closing daily loan balances on the
Loan Account of Borrower for each day on the immediately preceding month.
3.3 Borrower shall pay Lender on the date hereof a one-time Commitment Fee
in the amount set forth in 10.4 hereof which Commitment Fee is fully earned on
the date hereof. Borrower shall, on the anniversary of the date hereof and on a
like date of each year thereafter, during the Term, pay Lender a Facility Fee in
the amount set forth in 10.4 which Facility Fee is earned on the date said
Facility Fee is due and payable to Lender.
3.4 At Lender's option, all principal, interest, fees, costs, expenses and
other charges provided for in this Agreement, or in any other agreement now or
hereafter existing between Lender and Borrower may be charged to any loan
account of Borrower maintained by Lender. Interest, and any other amounts
payable by
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Borrower to Lender based on a per annum rate shall be calculated on the basis of
actual days elapsed over a 360 day year.]
Borrower: Lender: Alco Financial
Services, LLC
By: /s/ XXXX X. XXXXX By: /s/ XXXXX X. XXXXXXX
---------------------------------- ------------------------------------
Title: Chief Operating Officer Title: Senior Vice President
------------------------------ --------------------------------
2
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INVENTORY RIDER
(Revolving Advance)
THIS INVENTORY RIDER (hereinafter referred to as "this Rider") dated as of April
2, 1999 is hereby made a part of and incorporated into that certain ALCO
Financial Services, LLC Loan Agreement and Security Agreement (hereinafter
referred to as the "Agreement"), dated April 2, 1999 between ALCO FINANCIAL
SERVICES, LLC, a California corporation and GOLDEN PHARMACEUTICALS, INC., a
Colorado corporation and QUALITY CARE PHARMACEUTICALS, INC., a California
corporation, (hereinafter, called the "Borrower"). Any capitalized term not
specifically defined in this Rider shall have the meaning ascribed to it in the
Agreement.
1. Inventory Line. At the request of Borrower, made at any time and from time to
time during the term of the Agreement, and so long as no Event of Default has
occurred and Borrower is in full, faithful and timely compliance with each and
all of the covenants, conditions, warranties and representations contained in
the Agreement, this Rider and/or any other agreement between Lender and
Borrower, Lender agrees to make Borrower advances, on a revolving basis
("Inventory Advances"), equal to the following percentages ("Eligible Inventory
Percentage") of Borrower's Eligible Inventory: up to 70% of value (based on cost
and determined on a first-in first-out basis) of Borrower's finished goods
inventory.
In all events, the aggregate amount of the Inventory Advances outstanding at any
time shall not exceed $500,000.
2. Funding. Said Inventory Advances shall be conditioned upon Lender's receipt
of a weekly designation of inventory, or certification of borrowing base, with a
detailed inventory listing attached thereto, in the form customarily used by
Lender and satisfactory to it in it sole and complete discretion.
3. Fees; Payment. Inventory Advances made by Lender to Borrower pursuant to this
Rider shall be added to and deemed part of the Obligations when made. Interest
on the Inventory Advances shall be payable by Borrower on the first day of each
month. Interest shall be calculated on the basis of a 30 day month for actual
days elapsed, on the average daily balances of the Inventory Advances for the
immediately preceding month.
4. Definitions. The term "Eligible Inventory" shall mean all of Borrower's
inventory (a) in which Lender maintains a first priority perfected security
interest and which are otherwise free and clear of all liens, rights, and claims
of others, (b) which is not unmerchantable, spoiled, damaged, or unfit for
further processing, (c) which is held for sale or use in the ordinary and usual
course of the Borrower's business, (d) which is not packaging, shipping, or
advertising materials, and (e) which are
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not on consignment, in transit, or on site at the intended purchaser's premises
or otherwise not physically located on the premises of Borrower. Eligible
Inventory shall be valued at cost on a first-in first-out basis and may be
adjusted by Lender, in Lender's discretion, for age and seasonability or other
factors affecting the value of said inventory.
(b) The "Interest on the Inventory Advances" is Prime Rate as stated in the Wall
Street Journal plus three (3%) percent per annum.
5. Miscellaneous. All of the terms, covenants, warranties, conditions,
agreements and representations of the Agreement are incorporated herein as
though set forth in their entirety and are hereby reaffirmed by Borrower and
Lender as though fully set forth herein. This Rider amends the Agreement. In the
event of any conflict between the provisions of the Agreement and the provisions
of this Rider, the provisions of this Rider shall control.
BORROWER:
QUALITY CARE PHARMACEUTICALS, INC.
----------------------------------------
By: /s/ XXXX X. XXXXX
------------------------------------
Title: Chief Operating Officer
---------------------------------
LENDER:
By: /s/ XXXXX X. XXXXXXX
------------------------------------
Title: Senior Vice President
---------------------------------
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