EXHIBIT 99.3
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AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amended and Restated Loan and Security Agreement (the "Agreement")
is entered into at Cincinnati, Ohio, by and between The Huntington National Bank
(hereinafter referred to as the "Bank"), and Superior Pharmaceutical Company, an
Ohio corporation (hereinafter referred to as the "Company"), as of the 18th day
of June, 1997.
WHEREAS, on May 9, 1994, the Bank and the Company executed and entered
into a certain Loan and Security Agreement (the "Original Loan Agreement")
pursuant to the terms of which the Bank extended to the Company credit in the
amount of $6,000,000.00;
WHEREAS, subsequent to the execution of the Original Agreement, the
Bank and the Company entered into the following agreements modifying or amending
the Original Agreement: (i) A first Amendment to Loan and Security Agreement
dated as of January 19, 1995; (ii) a certain letter agreement dated as of May 4,
1995; (iii) a certain letter agreement dated as of July 31, 1995; (iv) a certain
letter agreement dated as of January 25, 1996; (v) a certain Loan Extension
and/or Modification Agreement dated as of April 22, 1996; (vi) a certain
Amendment to Loan Agreement dated as of August 30, 1996; and (vii) a certain
Amendment to Loan Agreement dated as of November 11, 1996 (referred to
collectively with the Original Loan Agreement as the "Prior Loan Agreements");
WHEREAS, on February 19, 1997, the Bank increased the revolving credit
available to the Company pursuant to, and the Company executed and delivered to
the Bank, a Revolving Note in the amount of $2,000,000.00 (referred to
collectively with the Prior Loan Agreements as the "Prior Agreements"); and
WHEREAS, the parties hereto desire to amend and restate in their
entirety the relationship and obligations previously evidenced by the Prior
Agreements, to merge all the terms, conditions and provisions set forth in the
Prior Agreements into this Agreement, and to make certain additional
modifications therein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and certain other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree that
the relationship and obligations previously evidenced by the Prior Agreements
are hereby merged into, and amended and restated in their entirety by, this
Agreement, which shall hereafter govern and control said relationship and
obligations without reference to the Prior Agreements. The execution of this
Agreement shall not be deemed a termination of the relationship between the
parties hereto or the full payment or performance of the obligations previously
existing between the parties and evidenced by the Prior Agreements, but shall be
deemed an amendment and restatement thereof. To the extent that any collateral
security interests were created and perfected in connection with the Prior
Agreements and the obligations evidenced thereby, such collateral security
interests shall remain in full force and effect, and the priority thereof shall
remain unchanged. The parties hereto hereby agree as follows:
SECTION 1. THE LOAN.
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1.1 Amount of Loan. Subject to the terms and conditions of this
Agreement, the Bank will lend to the Company up to the sum of Nine Million
Dollars ($9,000,000.00) (hereinafter referred to as the "Loan"). The Loan shall
take the form of a revolving credit and, subject to the provisions of Section
1.2 of this Agreement, the outstanding principal balance may be increased and
decreased an unlimited number of times. Subject to annual review and renewal by
the Bank (which renewal shall be at the Bank's sole discretion), the Company's
right to obtain advances pursuant to this revolving credit shall terminate on
April 5, 1998.
1.2 Borrowing Base for Loan.
(a) Borrowing Base. The principal balance of the Loan outstanding at
any one time shall not exceed an amount equal to the sum of (i) 80% of the
Company's Eligible Accounts Receiv able, as hereinafter defined, plus (ii) 60%
of the Company's Eligible Inventory, as hereinafter
defined, up to a maximum of $5,500,000.00 attributable to the Company's Eligible
Inventory (which sum of the said percentages is hereinafter sometimes referred
to as the "Borrowing Base").
(b) Eligible Accounts Receivable. The term "Eligible Account
Receivable" or "Eligible Account" means an account receivable owing to the
Company from a party (the "Account Debtor") which met all of the following
requirements at the time it came into existence and which continues to meet the
same until it is collected in full:
(i) The account is not more than 90 days past the date of its
invoice;
(ii) The account arose from the performance of services or an
outright and lawful sale of goods and related services by the
Company, all such goods having been lawfully shipped to the
Account Debtor, and the Company has possession of, and will
deliver to the Bank if requested hereunder, copies of all
invoices, shipping documents and delivery receipts evidencing
such shipment;
(iii) The amount of the account does not include any sales or
other taxes;
(iv) The account did not arise from a consumer transaction,
which shall be defined for purposes of this Agreement as the
providing of goods or services for purposes that are primarily
personal, family or household;
(v) The account is not subject to any prior assignment, claim,
lien or security interest, and the Company will not make any
further assignment thereof or create any further security
interest therein nor permit the Company's rights therein to be
reached by attachment, levy, garnishment or other judicial
process;
(vi) The account is not subject to any set-off, credit,
allowance, adjustment or discount (excepting only any
applicable discount for prompt payment), and the Account
Debtor has not objected as to his liability or the amount of
his liability thereon and has not returned or claimed the
right to return any of the goods from the sale out of which
the account arose;
(vii) The account did not arise from a transaction with a
person, corporation or entity affiliated with the Company;
(viii) The account arose in the ordinary course of the
Company's business and no notice of bankruptcy, insolvency or
financial distress or embarrassment of the Account Debtor has
been received by the Company;
(ix) The Bank has not notified the Company that the account or
the Account Debtor is unsatisfactory (although the Bank
reserves the right to do so in its sole discretion at any
time); and
(x) The account is not evidenced by chattel paper, nor by any
promissory note, payment instrument or written agreement
(other than invoices, shipping documents and delivery
receipts).
In the event that more than 50% of the Company's Eligible Accounts Receivable
shall at any one time become more than 90 days past due, none of the Company's
accounts receivable shall there after be Eligible Accounts Receivable, until
such time, if any, as the Bank may, in its sole discretion, determine that the
Company's percentage of past due accounts has been satisfactorily reduced or
eliminated. In the event that more than 50% of the accounts receivable
outstanding from any one Account Debtor shall at any one time become more than
90 days past due, none of the accounts receivable outstanding from that Account
Debtor shall thereafter be included in calculating the Company's Eligible
Accounts Receivable, until such time, if any, as the Bank may, in its sole
discretion determine otherwise.
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(c) Eligible Inventory. The term "Eligible Inventory" means that
inventory (as defined in Section 11.1 of this Agreement) of the Company, which
the Bank, in its sole credit judgment, deems to be Eligible Inventory, based
upon such credit and collateral considerations as the Bank may deem appropriate.
For purposes of determining the Borrowing Base, Eligible Inventory shall be
valued at the lesser of cost or fair market value. Unless the Bank shall in its
sole discretion determine otherwise, cost shall be calculated on a FIFO basis.
(d) Draws by the Company. No draws on the Loan shall be permitted
unless the Company shall have provided to the Bank a certificate, in a form
satisfactory to the Bank, which shall include a report on:
(i) the total balance due on all of the Company's accounts
receivable and the total balance due on all Eligible Accounts
Receivable;
(ii) the total value of the Company's Eligible Inventory; and
(iii) the amount of the advance sought by the Company.
In addition, no draws on the Loan shall be permitted unless the Company shall be
in compliance with all of the terms of this Agreement and with all other
agreements with the Bank.
SECTION 2. INTEREST RATE.
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The Company agrees to pay to the Bank monthly interest on the unpaid
balance of the Loan pursuant to the terms of a certain Promissory Note of even
date herewith (the "Note").
SECTION 3. EVIDENCE OF THE LOAN AND TERMS OF PAYMENT.
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The Loan shall be evidenced by the Note or by one or more notes
subsequently executed in substitution therefor. Repayment of the Loan shall be
made in accordance with the terms of the note or notes then outstanding pursuant
to this Agreement.
SECTION 4. USE OF PROCEEDS AND PREPAYMENT.
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The proceeds of the Loan shall be used by the Company solely for
general corporate working capital. The Company, if not then in default
hereunder, may have the right to prepay at any time and from time to time before
maturity amounts due to the Bank, but only pursuant to the provisions of this
Agreement, the Note or any note or notes executed pursuant hereto. The Company
acknowledges that, under those specific circumstances identified in the Note,
prepayments of the Loan may be prohibited.
SECTION 5. SECURITY.
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As security for the Loan, the Company has granted the Bank a first and
continuing security interest in all of the Company's accounts, inventory,
equipment, documents, instruments, general intangibles, chattel paper, and all
other tangible and intangible personal property and fixtures of every kind and
description (including pharmaceutical distribution rights), whether now owned or
hereafter acquired or created by the Company, as more particularly described in
and governed by Section 11 of this Agreement. As further security for the Loan,
the Company shall deliver the joint and several, absolute, unconditional and
continuing guaranty of payment of the Loan and payment and performance of all
other obligations of the Company (the "Guaranty") in favor of the Bank from
DynaGen, Inc., a Delaware corporation and the parent corporation of the Company
(the "Guarantor").
SECTION 6. WARRANTIES AND REPRESENTATIONS.
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The Company warrants and represents to the Bank:
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6.1 Subsidiaries. The Company has no subsidiaries and will not create
or acquire any subsidiaries without the prior written consent of the Bank.
6.2 Corporate Organization and Authority. The Company:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to
carry on its business as now conducted and as presently
proposed to be conducted; and
(c) is not doing business or conducting any activity in any
jurisdiction in which it has not duly qualified and become
authorized to do business.
6.3 Financial Statements. The Company's financial statements for the
fiscal year ended December 31, 1996 and for the four month period ended April
30, 1997, which have been supplied to the Bank, have been prepared in accordance
with generally accepted accounting principles consistently applied and fairly
represent the Company's financial condition as of such date. There has been no
material adverse change in the Company's financial condition since April 30,
1997.
6.4 Full Disclosure. The financial statements referred to in Section
6.3 do not, nor does this Agreement or any written statement furnished by the
Company to the Bank in connection with obtaining the Loan, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading. There is no fact which
the Company has not disclosed to the Bank in writing which materially affects
the properties, business, prospects, profits or condition (financial or
otherwise) of the Company or the ability of the Company to perform this
Agreement.
6.5 Pending Litigation. There are no proceedings pending, or to the
knowledge of the Company threatened, against or affecting the Company in any
court or before any governmental authority or arbitration board or tribunal
which, individually or in the aggregate, involve the possibility of materially
and adversely affecting the properties, business, prospects, profits or
condition (financial or otherwise) of the Company, or the ability of the Company
to perform this Agreement, except as set forth on one or more schedules to this
Agreement.
6.6 Title to Properties. The Company has good and marketable title to
all the property which it purports to own (except as sold or otherwise disposed
of in the ordinary course of business), free from any liens and encumbrances,
except those to which the Bank has previously consented.
6.7 Borrowing is Legal and Authorized.
(a) The Board of Directors of the Company has duly authorized the
execution and delivery of this Agreement and of the notes and documents
contemplated herein, and the note or notes executed in connection with this
Agreement will constitute valid and binding obligations of the Company
enforceable in accordance with their terms.
(b) The execution of this Agreement and related notes and documents and
the compliance by the Company with all the provisions of this Agreement:
(i) are within the corporate powers of the Company; and
(ii) are legal and will not conflict with, result in any breach in
any of the provisions of, constitute a default under, or
result in the creation of any lien or encumbrance upon any
property of the Company under the provisions of, any
agreement, charter instrument, bylaw, or other instrument to
which the Company is a party or by which it may be bound.
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(c) There are no limitations in any indenture, mortgage, deed of trust
or other agreement or instrument to which the Company is now a party or by which
the Company may be bound with respect to the payment of principal or interest on
any indebtedness of the Company, including the Note or notes to be executed in
connection with this Agreement.
6.8 No Defaults. No event has occurred and no condition exists which
would constitute an Event of Default pursuant to this Agreement. The Company is
not in violation in any material respect of any term of any agreement, charter
instrument, bylaw or other instrument to which it is a party or by which it may
be bound.
6.9 Government Consent. Neither the nature of the Company or of its
business or properties, nor any relationship between the Company and any other
entity or person, nor any circumstance in connection with the execution of this
Agreement, is such as to require a consent, approval or authorization of, or
filing, registration or qualification with, any governmental authority on the
part of the Company as a condition to the execution and delivery of this
Agreement and the notes and documents contemplated herein.
6.10 Taxes.
(a) All tax returns required to be filed by the Company in any
jurisdiction have in fact been filed, and all taxes, assessments, fees and other
governmental charges upon the Company, or upon any of its respective properties,
which are due and payable have been paid. The Company does not know of any
proposed additional tax assessment against it.
(b) The provisions for taxes on the books of the Company for its
current fiscal period are adequate.
6.11 Compliance with Law. The Company:
(a) is not in violation of any laws, ordinances, governmental
rules or regulations to which it is subject; and
(b) has not failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership
of its properties or to the conduct of its business,
which violation or failure to obtain might materially and adversely affect the
business, prospects, profits, properties or condition (financial or otherwise)
of the Company.
6.12 Restrictions on Company. The Company is not a party to any
contract or agreement, or subject to any charter or other corporate restriction,
which materially and adversely affects the business of the Company. The Company
is not a party to any contract or agreement which restricts the right or ability
of the Company to incur indebtedness, other than this Agreement. The Company has
not agreed or consented to cause or permit in the future (upon the happening of
a contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a lien or encumbrance.
6.13 Environmental Protection. The Company represents and warrants to
Bank that, to its knowledge after due investigation:
(a) that the property at which it operates (the "Property") is not
being and has not been used for the storage, treatment,
generation, transportation, processing, handling, production
or disposal of any hazardous substance in violation of any
environmental laws;
(b) the Property does not contain any hazardous substance in
violation of any environmental laws;
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(c) there has been no release of any hazardous substance on, at or
from the Property or any property adjacent to or within the
immediate vicinity of the Property, and the Company has not
received any form of notice or inquiry with regard to such a
release or the threat of such a release;
(d) no event has occurred with respect to the Property which, with
the passage of time or the giving of notice, or both, would
constitute a violation of any applicable environmental laws;
(e) there are no agreements or orders or directives of any
federal, state or local governmental agency or authority
relating to the Property which require any work, repair,
construction, containment, clean up, investigations, studies,
removal or other remedial action with respect to the Property;
and
(f) there are no actions, suits, claims or proceedings, pending or
threatened, which seek any remedy that arise out of the
condition, ownership, use, operation, sale, transfer or
conveyance of the Property and (I) a violation or alleged
violation of any applicable environmental laws, (II) the
presence of any hazardous substance or release of any
hazardous substance or the threat of such a release, or (III)
human exposure to any hazardous substance.
SECTION 7. CLOSING CONDITIONS.
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The obligation of the Bank to make the Loan shall be subject to the
following conditions precedent:
7.1 Compliance with this Agreement. By the execution hereof, the
Company certifies that it has performed and complied with all agreements and
conditions contained herein which are required to be performed or complied with
by the Company before or at closing.
7.2 Certified Resolutions. The Bank shall have received a certified
copy of resolutions adopted by the Board of Directors of the Company authorizing
the execution and delivery of this Agreement and the notes and related documents
described herein, in a form satisfactory to the Bank, as well as a certified
copy of resolutions adopted by the Board of Directors of the Guarantor
authorizing the execution and delivery of the Guaranty.
7.3 Warranties and Representations. On the date of each advance
pursuant to the Loan, the warranties and representations set forth in Section 6
hereof shall be true and correct on and as of such date with the same effect as
though such warranties and representations had been made on and as of such date,
except to the extent that such warranties and representations expressly relate
to an earlier date.
SECTION 8. COMPANY BUSINESS COVENANTS.
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The Company covenants that on and after the date of this Agreement, so
long as any of the indebtedness provided for herein remains unpaid:
8.1 Payment of Taxes and Claims. The Company will pay before they
become delinquent:
(a) all taxes, assessments and governmental charges or levies
imposed upon it or its property; and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords, bailees and other like persons which,
if unpaid, might result in the creation of a lien or
encumbrance upon its property,
provided that items of the foregoing description need not be paid while being
contested in good faith and by appropriate proceedings and provided further that
adequate book reserves have been
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established with respect thereto and provided further that the Company's title
to, and its right to use, its property is not materially adversely affected
thereby. In the case of any item of the foregoing description involving in
excess of the amount which the Company's independent public accountants shall
fix as the threshold of materiality for purposes of their audit of the then
current year, the appropriateness of the proceedings shall be supported by an
opinion of the independent counsel responsible for such proceedings and the
adequacy of such reserves shall be supported by the opinion of the independent
accountants.
8.2 Maintenance of Properties and Corporate Existence. The Company
shall:
(a) Property--maintain its property in good condition and make all
renewals, replacements, additions, betterments and
improvements thereto which are deemed necessary by the
Company;
(b) Insurance--maintain, with financially sound and reputable
insurers, insurance with respect to its properties and
business against such casualties and contingencies, of such
types (including but not limited to fire and casualty, public
liability, products liability, larceny, embezzlement or other
criminal misappropriation insurance) and in such amounts as is
customary in the case of corporations of established
reputations engaged in the same or a similar business and
similarly situated;
(c) Financial Records--keep true books, records and accounts in
which full and correct entries will be made of all its
business transactions, and reflect in its financial statements
adequate accruals and appropriations to reserves, all in
accordance with generally accepted accounting principles;
(d) Corporate Existence and Rights--do or cause to be done all
things necessary (i) to preserve and keep in full force and
effect its existence, rights and franchises, and (ii) to
maintain its status as a corporation duly organized and
existing and in good standing under the laws of the state of
its incorporation; and
(e) Compliance with Law--not be in violation of any laws,
ordinances, or governmental rules and regulations to which it
is subject and will not fail to obtain any licenses, permits,
franchises or other governmental authorizations necessary to
the ownership of its properties or to the conduct of its
business, which violation or failure to obtain might
materially and adversely affect the business, prospects,
profits, properties or condition (financial or otherwise) of
the Company.
8.3 Sale of Assets or Merger.
(a) Sale of Assets. The Company will not, without the prior written
consent of the Bank, except in the ordinary course of business, sell, lease,
transfer or otherwise dispose of, any of its assets.
(b) Merger and Consolidation. The Company will not, without the prior
written consent of the Bank, consolidate with or merge into any other entity, or
permit any other entity to consolidate with or merge into it.
8.4 Liens and Encumbrances. The Company will not (i) cause or permit or
(ii) agree or consent to cause or permit in the future (upon the happening of a
contingency or otherwise), any of its property, whether now owned or hereafter
acquired, to be subject to a lien or encumbrance in excess of $100,000.00
without giving the Bank prior written notice thereof; provided, however, that
the following liens do not require prior written notice regardless of amount:
(a) liens securing taxes, assessments or governmental charges or
levies or the claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons
provided the payment thereof is not at the time required by
Section 8.1;
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(b) liens incurred or deposits made in the ordinary course of
business (i) in connection with workmen's compensation,
unemployment insurance, social security and other like laws,
or (ii) to secure the performance of letters of credit, bids,
tenders, sales contracts, leases, statutory obligations,
surety, appeal and performance bonds and other similar
obligations not incurred in connection with the borrowing of
money, the obtaining of advances or the payment of the
deferred purchase price of property;
(c) attachment, judgment and other similar liens arising in
connection with court proceedings, provided the execution or
other enforcement of such liens is effectively stayed and the
claims secured thereby are being actively contested in good
faith and by appropriate proceedings;
(d) reservations, exceptions, encroachments, easements, rights of
way, covenants, conditions, restrictions, leases and other
similar title exceptions or encumbrances affecting real
property, provided they do not in the aggregate materially
detract from the value of said property or materially
interfere with its use in the ordinary conduct of the owning
company's business;
(e) inchoate liens arising under ERISA to secure the contingent
liability of the Company.
8.5 Other Borrowings. The Company will not create or incur any
indebtedness for borrowed money or advances, including through the execution of
capitalized lease agreements, in excess of $100,000.00 without giving the Bank
prior written notice thereof.
8.6 Contingent Liabilities. The Company will not guarantee, indorse or
otherwise become surety for or upon the obligations of others, except by
indorsement of negotiable instruments for deposit or collection in the ordinary
course of business, in excess of $100,000.00 without giving the Bank prior
written notice thereof.
8.7 Operating Lease Rentals. The Company will not enter into operating
leases providing in the aggregate for annual rentals in excess of $100,000.00
without giving the Bank prior written notice thereof.
8.8 Loans and Advances by the Company. The Company shall not make any
loans or advances to any person, corporation or entity if such loans will exceed
an aggregate total outstanding at any one time of $100,000.00 without the prior
written consent of the Bank.
8.9 Distributions by the Company to the Guarantor. The Company shall
not, without the prior written consent of the Bank, make any distributions to
the Guarantor, whether in the form of dividends, subordinated debt payments or
otherwise, other than distributions of sums sufficient to enable the Guarantor
to pay the principal and interest due to the former shareholders of the Company
(the "Shareholders") in connection with the Guarantor's purchase of all of the
capital stock of the Company from the Shareholders; provided, however, that such
permitted payments shall not be made by the Company, or received by the
Guarantor, following the occurrence of, and during the continuation of, an event
default hereunder, and notice to the Guarantor thereof.
8.10 Acquisition of Capital Stock. The Company shall not redeem or
acquire any of its own capital stock except through the use of the net proceeds
from the simultaneous sale of an equivalent amount of its capital stock.
8.11 Investments. The Company shall not purchase for investment
securities of any kind, excepting bonds or other obligations of the United
States or its federal agencies, certificates of deposit issued by commercial
banks or savings associations and commercial paper rated at least A-1 or P-1 and
having a maturity of not more than one year.
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8.12 Sale of Receivables. The Company shall not sell any of its
accounts receivable or notes receivable, with or without recourse, nor shall it
assign or encumber any of its accounts receivable or notes receivable.
8.13 Bank of Account. During the term of this Agreement, the Company
shall maintain its primary depository relationship (including checking and
savings accounts) with the Bank. The Company hereby grants the Bank a security
interest in such accounts and all other properties owned by the Company now or
hereafter in the possession of the Bank as security for payment of the Loan and
all other obligations of the Company to the Bank. The Bank shall continue to
make Cash Management, Bank Card and other services available to the Company.
8.14 Working Capital. The Company shall maintain a working capital of
not less than $2,350,000.00 through the date hereof, and shall maintain a
working capital of not less than $3,750,000.00 thereafter. For the purposes of
this Agreement, "working capital" shall mean the excess of current assets over
current liabilities, both as determined in accordance with generally accepted
accounting principles consistently applied.
8.15 Tangible Net Worth and Subordinated Debt. The Company shall
maintain an aggregate of tangible net worth plus subordinated debt of not less
than $2,750,000.00 through the date hereof, and shall maintain an aggregate of
tangible net worth plus subordinated debt of not less than $4,250,000.00
thereafter.
8.16 Ratio of Total Liabilities to Tangible Net Worth Plus Subordinated
Debt. The Company shall maintain a ratio of total liabilities to the aggregate
of tangible net worth plus subordinated debt of not greater than 3.00-to-1.00
through the date hereof, and shall maintain a ratio of total liabilities to the
aggregate of tangible net worth plus subordinated debt of not greater than
2.30-to-1.00 thereafter.
8.17 Interest Coverage Ratio. The Company shall maintain an interest
coverage ratio (defined as earnings before interest and taxes divided by paid
interest expense) of 2.00-to-1.00.
8.18 ERISA. The Company shall with respect to any employee pension
benefit plan it maintains:
(a) at all times make prompt payment of contributions required to
meet the minimum funding standards set forth in Section 302
through 305 of ERISA with respect to the plan,
(b) promptly, after the filing thereof, furnish to the Bank copies
of each annual report required to be filed pursuant to Section
103 of ERISA in connection with the plan for the plan year,
including any certified financial statements or actuarial
statements required pursuant to said Section 103,
(c) notify the Bank immediately of any fact, including, but not
limited to, any "Reportable Event," as that term is defined in
Section 4043 of ERISA, arising in connection with the plan
which might constitute grounds for termination thereof by the
Pension Benefit Guaranty Corporation or for the appointment by
the appropriate United States District Court of a Trustee to
administer the plan,
(d) notify the Bank of any "Prohibited Transaction" as that term
is defined in Section 406 of ERISA.
The Company will not:
(e) engage in any "Prohibited Transaction," or
(f) terminate any such plan in a manner which could result in the
imposition of a lien on the property of the Company pursuant
to Section 4068 of ERISA.
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8.19 Environmental Protection.
(a) Covenants. The Company covenants and agrees with Bank as
follows:
(i) Company shall keep, and shall cause all operators, tenants,
sub-tenants, licensees and occupants of the Property to keep,
the Property free of all hazardous substances, except for
hazardous substances stored, treated, generated, transported,
processed, handled, produced or disposed of in the normal
operation of the Property in accordance with all Environmental
Laws.
(ii) Company shall comply with, and shall cause all operators,
tenants, sub-tenants, licensees and occupants of the Property
to comply with, all environmental laws.
(iii) Company shall promptly provide the Bank with a copy of all
notifications which Company gives or receives with respect to
any past or present release of any hazardous substance or the
threat of such a release on, at or from the Property or any
property adjacent to or within the immediate vicinity of the
Property.
(iv) Company shall undertake and complete all investigations,
studies, sampling and testing for hazardous substances
required by Bank and, in accordance with all environmental
laws, all removal and other remedial actions necessary to
contain, remove and clean up all hazardous substances that are
determined to be present at the Property in violation of any
environmental laws.
(v) Bank shall have the right, but not the obligation, to cure any
violation by Company of the environmental laws.
(b) Indemnity. Company covenants and agrees, at its sole cost and
expense, to indemnify, defend and save the Bank harmless from and against any
and all damages, losses, liabilities, obligations, penalties, claims,
litigation, demands, defenses, judgments, suits, actions, proceedings, costs,
disbursements and/or expenses (including, without limitation, reasonable
attorneys' and experts' fees and expenses) of any kind or nature whatsoever
which may at any time be imposed upon, incurred by or asserted or awarded
against the Bank arising out of the condition, ownership, use, operation, sale,
transfer or conveyance of the Property and
(i) the storage, treatment, generation, transportation,
processing, handling, production or disposal of any hazardous
substance;
(ii) the presence of any hazardous substance or a release of any
hazardous substance or the threat of such a release;
(iii) human exposure to any hazardous substance;
(iv) a violation of any environmental laws; or
(v) a material misrepresentation or inaccuracy in any
representation or warranty or material breach of or failure to
perform any covenant made by Company herein (collectively, the
"Indemnified Matters").
The liability of Company to the Bank hereunder shall in no way be limited,
abridged, impaired or otherwise affected by (A) the repayment of all sums and
the satisfaction of all obligations of Company under this Agreement or any other
document or agreement executed in connection herewith or referenced herein (the
"Loan Documents"), (B) the foreclosure of any mortgage or other security
interest, or the acceptance of a deed in lieu thereof, (C) any amendment or
modification of the Loan Documents by or for the benefit of Company or any
subsequent owner of the Property, (D) any extensions of time for payment or
performance required by the Loan Documents, (E) the release or discharge of any
Loan Document or of Company, the Guarantor or any other person from the
performance or observance of any of the agreements, covenants, terms or
conditions contained in the Loan Documents whether by the Bank, by operation of
law or
10
otherwise, (F) the invalidity or unenforceability of any of the terms or
provisions of the Loan Documents, (G) any exculpatory provision contained in the
Loan Documents limiting the Bank's recourse to the Property, (H) any applicable
statute of limitations, (I) the sale or assignment of the Loan Documents, (J)
the sale, transfer or conveyance of all or part of the Property, (K) the legal
incapacity of the Company, (L) the release or discharge, in whole or in part, of
the Company in any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding, or (M) any other
circumstances which might otherwise constitute a legal or equitable release or
discharge, in whole or in part, of the Company under the Loan Documents. The
foregoing indemnity shall be in addition to any and all other obligations and
liabilities the Company may have to the Bank at common law.
8.20 No Consignment. The Company shall not include in Eligible
Inventory any items consigned to the Company for sale nor shall the Company
consign its inventory to another for sale.
8.21 Ownership and Management. The Company shall not permit any
material change in its ownership or management, including, but not limited to,
the discharge or resignation of Xxxx X. Xxxxxxxxxxx or Xxxxxx X. Xxxxx.
SECTION 9. INFORMATION AS TO COMPANY.
--------------------------------------
The Company shall deliver the following to the Bank:
(a) within 20 days after the end of each month, financial
statements, including a balance sheet and statements of income
and surplus, certified by the president or chief financial
officer of the Company as fairly representing the Company's
financial condition and results of operations for the period
then ended;
(b) within 20 days after the end of each month, a statement signed
by the president or chief financial officer of the Company
certifying that the Company is in compliance with terms of
this Agreement;
(c) within 20 days after the end of each month, a report signed by
the president or chief financial officer of the Company
setting forth the number and dollar total of accounts
receivable past due for not more than 30 days, the number and
dollar total past due for not more than 60 days, the number
and dollar total past due for not more than 90 days, and the
number and dollar total past due for more than 90 days;
(d) within 120 days of the end of each fiscal year, financial
statements prepared in accordance with generally accepted
accounting principles consistently applied, audited by an
independent public accountant satisfactory to the Bank,
containing a balance sheet and statements of income and
surplus, and fairly representing the Company's financial
condition and results of operations for the period then ended;
(e) within 45 days after the end of each fiscal quarter of the
Guarantor, a copy of the Guarantor's Form 10-Q fairly
representing the Guarantor's financial condition and results
of operations for the period then ended;
(f) within 120 days of the end of each fiscal year of the
Guarantor, financial statements prepared in accordance with
generally accepted accounting principles consistently applied,
audited by an independent public accountant satisfactory to
the Bank, containing a balance sheet and statements of income
and surplus, and fairly representing the Guarantor's financial
condition and results of operations for the period then ended;
(g) immediately upon becoming aware of the existence of any
condition or event which constitutes an Event of Default, a
written notice specifying the nature and
11
period of existence thereof and what action the Company is
taking or proposes to take with respect thereto;
(h) at the request of the Bank, such other information as the Bank
may from time to time reasonably require.
In addition, the Bank's Asset Based Lending Division ("ABLD") shall perform
semi-annual audits of the Company. These audits shall be at no cost or expense
to the Company, but the Company shall provide the ABLD auditors with access to
such books, records and other documentation and information as they shall
reasonably require for the purpose of performing such audits.
SECTION 10. EVENTS OF DEFAULT.
-------------------------------
10.1 Nature of Events. An "Event of Default" shall exist if any of the
following occurs and is continuing:
(a) the Company fails to make any payment on any note executed in
connection with this Agreement on or before the date such
payment is due;
(b) the Company fails to make any payment of interest on any note
executed in connection with this Agreement on or before five
days after the date such payment is due;
(c) the Company fails to perform or observe any covenant contained
in this Agreement, or fails to comply with any other provision
of this Agreement, and such failure continues for more than 30
days after such failure shall first become known to any
officer of the Company;
(d) any warranty, representation or other statement by or on
behalf of the Company contained in this Agreement, or in any
instrument furnished in compliance with or in reference to
this Agreement, or relating to the Guarantor, is false or
misleading in any material respect;
(e) the Company defaults on any obligation to the Bank, or on any
other obligation to its shareholders or trade creditors, and
such results in a material, negative impact on the Company's
condition (financial or otherwise);
(f) the Company becomes insolvent or bankrupt, or makes an
assignment for the benefit of creditors, or consents to the
appointment of a trustee, receiver or liquidator;
(g) bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings are instituted by or against the
Company;
(h) the Company or any indorser, surety, or guarantor of the Loan
is dissolved or dies;
(i) a final judgment or judgments, from which no further right of
appeal exists, for the payment of money aggregating in excess
of $100,000.00 is or are outstanding against the Company and
any one of such judgments has been outstanding for more than
180 days from the date of its entry and has not been
discharged in full or stayed;
(j) the property furnished as security declines in value, and the
Company does not immediately, upon demand from the Bank,
furnish to the Bank additional security of like value;
12
(k) the Guarantor fails to contribute a minimum of $1,500,000.00
to the Company in the form of subordinated debt, an equity
purchase or a capital contribution by the date hereof;
(l) the Guarantor has not achieved a tangible net worth, exclusive
of the effect thereon of the $4,250,000.00 tangible net worth
of the Company, of $3,000,000.00 by the execution of this
Agreement, or fails to achieve a tangible net worth, exclusive
of the effect thereon of the $4,250,000.00 tangible net worth
of the Company, of $4,000,000.00 within 120 days following the
execution hereof and to thereafter maintain such level of
tangible net worth during the existence of this Agreement; or
(m) an event of default occurs and continues past any applicable
cure period in any obligation owed by Guarantor and secured by
Guarantor's or the Company's assets or capital stock.
10.2 Default Remedies.
(a) Acceleration. If an Event of Default exists, the Bank may
immediately exercise any right, power or remedy permitted to the Bank by law,
and shall have, in particular, without limiting the generality of the foregoing,
the right to declare the entire principal and all interest accrued on all notes
then outstanding pursuant to this Agreement to be forthwith due and payable,
without any presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Company.
(b) Nonwaiver. No course of dealing on the part of the Bank nor any
delay or failure on the part of the Bank to exercise any right shall operate as
a waiver of such right or otherwise prejudice the Bank's rights, powers and
remedies.
SECTION 11. SECURITY AGREEMENT
-------------------------------
11.1 Grant of Security Interest. The Company hereby grants, pledges and
assigns to the Bank a security interest in the following property, whether the
Company's interest therein as owner, co-owner, lessee, consignee, secured party
or otherwise be now owned or existing, or hereafter arising or acquired, and
wherever located, together with all substitutions, replacements, additions and
accessions therefor or thereto, all replacement and repair parts therefor, all
documents including, but not limited to, negotiable documents, documents of
title, warehouse receipts, storage receipts, dock receipts, dock warrants,
express bills, freight bills, airbills, bills of lading and other documents
relating thereto, all products thereof and all cash and non-cash proceeds
thereof including, but not limited to, notes, drafts, checks, instruments,
insurance proceeds, indemnity proceeds, warranty and guaranty proceeds and
proceeds arising in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the following property by any
governmental body, authority, bureau or agency (or any person acting under color
of governmental authority):
(a) All of the Company's machinery, equipment, tools, furniture,
furnishings and fixtures including, but not limited to, all
manufacturing, fabricating, processing, transporting and
packaging equipment, power systems, heating, cooling and
ventilating systems, lighting and communications systems,
electric, gas and water distribution systems, food service
systems, fire prevention, alarm and security systems, laundry
systems and computing and data processing systems (hereinafter
sometimes called the "Equipment");
(b) All of the Company's inventory including, but not limited to,
all goods, merchandise and other personal property furnished
under any contract of service or intended for sale or lease,
all parts, supplies, raw materials, work in process, finished
goods, materials used or consumed in the Company's business,
repossessed and returned goods (hereinafter sometimes called
the "Inventory");
13
(c) All of the Company's accounts, accounts receivable, contract
rights, guaranties of accounts, chattel paper, income tax
refunds, instruments, negotiable documents, notes, drafts,
acceptances and other forms of obligations and receivables
arising from or in connection with the operation of the
Company's business including, but not limited to, those
arising from or in connection with the Company's sale, lease
or other disposition of Inventory (hereinafter sometimes
called the "Receiv xxxxx"), and all books, records, ledger
cards, computer programs and other documents or property at
any time evidencing or relating to the Receivables; and
(d) All of the Company's general intangibles, trade names,
trademarks, trade secrets, goodwill, patents, patent
applications, copyrights, deposit accounts, licenses,
franchises and distribution rights (all of the foregoing
hereinafter sometimes called the "Collateral").
The security interest hereby granted is to secure the prompt and full
payment and complete performance of all Obligations of the Company to the Bank.
The word "Obligations" is used in its most comprehensive sense and includes,
without limitation, all indebtedness, debts and liabilities (including
principal, interest, late charges, collection costs, attorneys' fees and the
like) of the Company to the Bank, whether now existing or hereafter arising,
either created by the Company alone or together with another or others, primary
or secondary, secured or unsecured, absolute or contingent, liquidated or
unliquidated, direct or indirect, whether evidenced by note, draft, application
for letter of credit or otherwise, and any and all renewals of or substitutes
therefor. The word "Obligations" shall include, BUT NOT BE LIMITED TO, all
indebtedness owed by the Company to the Bank in connection with the Loan.
It is the Company's express intention that this Agreement and the
continuing security interest granted hereby, in addition to covering all present
Obligations of the Company to the Bank, shall extend to all future Obligations
of the Company to the Bank, whether or not such Obligations are reduced or
entirely extinguished and thereafter increased or reincurred, whether or not
such Obligations are related to the indebtedness identified above by class, type
or kind and whether or not such Obligations are specifically contemplated by the
Company and the Bank as of the date hereof. The absence of any reference to this
Agreement in any documents, instru ments or agreements evidencing or relating to
any Obligation secured hereby shall not limit or be construed to limit the scope
or applicability of this Agreement.
11.2 General Covenants as to the Collateral. The Company represents,
warrants and covenants as follows:
(a) Except for such claims and interest, if any, to which the Bank
has consented in advance and the security interest granted
hereby (i) the Company is, or as to Collateral arising or to
be acquired after the date hereof, shall be, the sole owner of
the Collateral free from any and all liens, security
interests, encumbrances, claims and interests; and (ii) no
security agreement, financing statement, equivalent security
or lien instrument or continuation statement covering any of
the Collateral is on file or of record in any public office.
(b) Except as otherwise provided in this Agreement, the Company
shall not create, permit or suffer to exist, and shall take
such action as is necessary to remove, any claim to or
interest in or lien or encumbrance upon the Collateral, and
shall defend the right, title and interest of the Bank in and
to the Collateral against all claims and demands of all
persons and entities at any time claiming the same or any
interest therein.
(c) The Company's principal place of business and chief executive
office is located at the address set forth in Section 12.1 of
this Agreement; the Company has no other place of business;
and, unless the Bank consents in writing to a change in the
location of the Equipment, Inventory or the Company's records
concerning the
14
Receivables prior to such a change in location, the Equipment,
Inventory and the Company's records concerning the Receivables
shall be kept at either of these locations.
(d) At least thirty (30) days prior to the occurrence of any of
the following events, the Company shall deliver to the loan
officer who is handling the Company's Obligations on behalf of
the Bank written notice of such impending events: (i) a change
in the Company's principal place of business or chief
executive office; (ii) the opening or closing of any place of
business; or (iii) a change in the Company's name, identity or
corporate structure.
(e) Subject to any limitation stated therein or in connection
therewith, all information furnished by the Company concerning
the Collateral or otherwise in connection with the
Obligations, is or shall be at the time the same is furnished,
accurate, correct and complete in all material respects.
(f) The Collateral is and shall (i) remain personal property and,
without the prior written consent of the Bank, which consent
may be withheld pending the Bank's receipt of such documents
or instruments as may be reasonably requested by the Bank, not
be affixed to real estate in such manner as to become a
fixture or realty, and (ii) be used primarily for business
purposes.
11.3 Application of Proceeds from the Collection of Receivables. All
amounts received by the Bank representing payment of Receivables may be applied
by the Bank to the payment of the Obligations in such order of preference as the
Bank may determine, or the Bank may, at its option, impound all or any portion
of such amounts and retain said amounts as security for the payment of the
Obligations, with the right on the part of the Company, upon approval by the
Bank, to obtain the release of all or part of such impounded amounts. The Bank
may, however, at any time, apply all or any part of such impounded amounts as
aforesaid. The Company also authorizes the Bank at any time, without notice, to
appropriate and apply any balances, credits, deposits, accounts or money of the
Company in the Bank's possession, custody or control to the payment of any of
the Obligations.
If any of the Company's Receivables arise out of contracts with or
orders from the United States or any State or any department, agency or
instrumentality thereof, the Company shall immediately notify the Bank thereof
in writing and shall execute any instrument and take any steps required by the
Bank in order that all money due and to become due under such contract or order
shall be assigned to the Bank and due notice thereof given to the appropriate
governmental agency.
The Company agrees to execute, deliver, file and record all such
notices, affidavits, assignments, financing statements and other instruments as
shall in the judgment of the Bank be necessary or desirable to evidence,
validate and perfect the security interest of the Bank in the Receivables. The
Bank shall have the right to notify any person or entities owing any Receivables
and to demand and receive payment, but the Bank shall have no duty so to do.
Upon request of the Bank at any time, the Company shall notify such account
debtors and shall indicate on all invoices to such account debtors that the
accounts are payable to the Bank.
11.4 Insurance. The Company shall have and maintain insurance at all
times with respect to all Equipment and Inventory (i) insuring against risks of
fire (including so-called extended coverage), explosion, theft, sprinkler
leakage and such other casualties as the Bank may designate, and (ii) insuring
against liability for personal injury and property damage relating to the
Equipment and Inventory, containing such terms, in such form, for such periods
and written by such companies as may be satisfactory to the Bank, such insurance
to be payable to the Bank and the Company as their interests may appear. All
policies of insurance shall provide for twenty (20) days written minimum
cancellation notice to the Bank and, at request of the Bank, shall be delivered
to and held by it. The Bank may act as attorney for the Company in obtaining,
adjusting, settling and canceling such insurance and indorsing any drafts. In
the event of failure to provide insurance as herein provided, the Bank may, at
its option, provide such
15
insurance and the Company shall pay to the Bank, upon demand, the cost thereof.
Should the Company fail to pay said sum to the Bank upon demand, interest shall
accrue thereon, from the date of demand until paid in full, at the highest rate
set forth in any document or instrument evidencing any of the Obligations.
11.5 Inspection. The Company shall at all times keep accurate and
complete records of the Receivables and the Company shall, at all reasonable
times and from time to time, allow the Bank, by or through any of its officers,
agents, attorneys or accountants, to examine, inspect and make extracts from the
Company's books and records and to arrange for verification of the Receivables
directly with account debtors or by other methods to examine and inspect the
Collateral wherever located. The Company shall perform, do, make, execute and
deliver all such additional and further act, things, deeds, assurances and
instruments as the Bank may require to more completely vest in and assure to the
Bank its rights hereunder and in or to the Collateral.
11.6 Preservation and Disposition of Collateral.
(a) Except for such claims and interests as are otherwise permitted
under this Agreement, the Company shall keep the Collateral free from any and
all liens, security interests, encumbrances, claims and interests. The Company
shall advise the Bank promptly, in writing and in reasonable detail, (i) of any
material encumbrance upon or claim asserted against any of the Collateral; (ii)
of any material change in the composition of the Collateral; and (iii) of the
occurrence of any other event that would have a material effect upon the
aggregate value of the Collateral or upon the security interest of the Bank.
(b) The Company shall not sell or otherwise dispose of the Collateral;
provided, however, that until default, the Company may use the Inventory in any
lawful manner not inconsistent with this agreement or with the terms or
conditions of any policy of insurance thereon and may also sell or otherwise
dispose of the Inventory in the ordinary course of the Company's business. A
sale in the ordinary course of business shall not include a transfer in partial
or total satisfaction of a debt.
(c) The Company shall keep the Collateral in good condition and shall
not misuse, abuse, secrete, waste or destroy and of the same.
(d) The Company shall not use the Collateral in violation of any
statute, ordinance, regulation, rule, decree or order.
(e) The Company shall pay promptly when due all taxes, assessments,
charges or levies upon the Collateral or in respect to the income or profits
therefrom, except that no such charge need be paid if (i) the validity thereof
is being contested in good faith by appropriate proceedings; (ii) such
proceedings do not involve any danger of sale, forfeiture or loss of any
Collateral or any interest therein; and (iii) such charge is adequately reserved
against in accordance with generally accepted accounting principles.
(f) At its option, the Bank may discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on the Collateral
and may pay for the maintenance and preservation of the Inventory. The Company
agrees to reimburse the Bank upon demand for any payment made or any expense
incurred (including reasonable attorneys' fees) by the Bank pursuant to the
foregoing authorization. Should the Company fail to pay said sum to the Bank
upon demand, interest shall accrue thereon, from the date of demand until paid
in full, at the highest rate set forth in any document or instrument evidencing
any of the Obligations.
(g) Upon the Bank's request at any time or times, the Company shall
assign and deliver to the Bank any Collateral and shall furnish to the Bank
additional collateral of value and character satisfactory to Bank as security
for the Obligations.
11.7 Extensions and Compromises. With respect to any Collateral held by
the Bank as security of the Obligations, the Company assents to all extensions
or postponements of the time of payment thereof or any other indulgence in
connection therewith, to each substitution,
16
exchange or release of Collateral, to the addition or release of any party
primarily or secondarily liable, to the acceptance of partial payments thereon
and to the settlement, compromise or adjustment thereof, all in such manner and
at such time or times as the Bank may deem advisable. The Bank shall have no
duty as to the collection or protection of Collateral or any income therefrom,
nor as to the preservation of rights against prior parties, nor as to the
preservation of any right pertaining thereto, beyond the safe custody of
Collateral in the possession of the Bank.
11.8 Financing Statements. At the request of the Bank, the Company
shall join with the Bank in executing one or more financing statements in a form
satisfactory to the Bank and shall pay the cost of filing the same in all public
offices wherever filing is deemed by the Bank to be necessary or desirable. A
carbon, photographic or other reproduction of this agreement or of a financing
statement shall be sufficient as a financing statement.
11.9 Bank's Appointment as Attorney-in-Fact. The Company hereby
irrevocably constitutes and appoints the Bank and any officer or agent thereof,
with full power of substitution, as the Company's true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Company and in the name of the Company or in the Bank's own name,
from time to time in the Bank's discretion, for the purpose of carrying out the
terms of this agreement, to take any and all documents and instruments that may
be necessary or desirable to accomplish the purposes of this agreement and,
without limiting the generality of the foregoing, hereby grants to the Bank the
power and right, on behalf of the Company, without notice to or assent by the
Company:
(a) To execute, file and record all such financing statements,
certificates of title and other certificates of registration
and operation and similar documents and instruments including,
but not limited to, those relating to aircraft or marine
vessels, as the Bank may deem necessary or desirable to
protect, perfect and validate the Bank's security interest.
(b) Upon the occurrence and continuance of any event of default
under Section 10 hereof, (i) to sign and indorse any invoices,
freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with accounts and
other documents relating to the Collateral; (ii) to commence
and prosecute any suits, actions or proceeding at law in
equity in any court of competent jurisdiction to collect the
Collateral or any part thereof and to enforce any other right
in respect of any Collateral; (iii) to defend any suit, action
or proceeding brought against the Company with respect to any
Collateral; (iv) to settle, compromise or adjust any suit,
action or proceeding described above and, in connection
therewith, to give such discharges or releases as the Bank may
deem appropriate; and (v) generally, to sell, transfer,
pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though
the Bank were the absolute owner thereof for all purposes, and
to do, at the Bank's option and the Company's expense, at any
time or from time to time, all acts and things which the Bank
deems necessary to protect, preserve or realize upon the
Collateral and the Bank's security interest therein, in order
to effect the intent of this agreement, all as fully and
effectively as the Company might do.
The Company hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
The powers conferred upon the Bank hereunder are solely to protect its
interests in the Collateral and shall not impose and duty upon the Bank to
exercise any such powers. The Bank shall be accountable only for amounts that
the Bank actually receives as a result of the exercise of such powers and
neither the Bank nor any of its officers, directors, employees or agents shall
be responsible to the Company for any act of failure to act, except for the
Bank's own gross negligence or willful misconduct.
17
11.10 Default. If any event of default in the payments or performance
of any of the Obligations secured by this agreement or the performance of any
covenant contained herein shall occur and be continuing; or if any warranty,
representations or statement made or furnished to the Bank by the Company proves
to have been false in any material respect when made or furnished:
(a) the Bank may, at its option and without notice, declare the
unpaid balance of any or all of the Obligations immediately
due and payable and this agreement and any or all of the
Obligations in default.
(b) All payments received by the Company under or in connection
with any of the Collateral shall be held by the Company in
trust for the Bank, shall be segregated from other funds of
the Company and shall forthwith upon receipt by the Company be
turned over to the Bank in the same form as received by the
Company (duly indorsed by the Company to the Bank, if
required). Any and all such payments so received by the Bank
(whether from the Company or otherwise) may, in the sole
discretion of the Bank, be held by the Bank as collateral
security for, and/or then or at any time thereafter be applied
in whole or in part by the Bank against, all or any part of
the Obligations in such order as the Bank may elect. Any
balance of such payments held by the Bank and remaining after
payment in full of all the Obligations shall be paid over to
the Company or to whomsoever may be lawfully entitled to
receive the same. Nothing set forth in this subparagraph (b)
shall authorize or be construed to authorize the Company to
sell or otherwise dispose of any Collateral except as provided
in Section 11.6 hereof.
(c) The Bank shall have the rights and remedies of a secured party
under this agreement, under any other instrument or agreement
securing, evidencing or relating to the Obligations and under
the law of the State of Ohio. Without limiting the generality
of the foregoing, the Bank shall have the right to take
possession of the Collateral and for that purpose the Bank may
enter upon, with or without breaking into, any premises on
which the Collateral or books and records relating to the
Collateral or any part thereof may be situated and remove the
same therefrom. The Company expressly agrees that the Bank,
without demand of performance or other demand, advertisement
or notice of any kind (except the notices specified below of
time and place of public sale or disposition or time after
which a private sale or disposition is to occur) to or upon
the Company or any other person or entity (all and each of
which demands, advertisements and/or notices are hereby
expressly waived), may forthwith collect, receive, appropriate
and realize upon the Collateral, or any part thereof, and/or
may forthwith sell, lease, assign, give option or options to
purchase or sell or otherwise dispose of and deliver the
Collateral (or contract to do so), or any part thereof, in one
or more parcels at public or private sales or sales, at any of
the Bank's offices or elsewhere at such prices as the Bank may
deem best, for cash or credit or for future delivery without
assumption of any credit risk. The Bank shall have the right
upon any such public sale or sales, and, to the extent
permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free
of any right or equity of redemption in the Company. The
Company further agrees, at the Bank's request, to assemble the
Collateral and to make it available to the Bank at such places
as the Bank may reasonably select, whether at the Company's
premises or elsewhere. The Company further agrees to allow the
Bank to use or occupy the Company's premises without charge,
for the purpose of effecting the Bank's remedies in respect of
the Collateral. The Bank shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of
every kind incurred in connection therewith or incidental to
the care of safekeeping of any or all of the Collateral or in
any way relating to the rights of the Bank hereunder,
including reasonable attorneys' fees and legal expenses, to
the payment in whole or in part of the Obligations, in such
order as the Bank may
18
elect, and only after so paying over such net proceeds and
after the payment by the Bank of any other amount required by
any provision of law, including Ohio Revised Code Section
1309.47(A)(3), need the Bank account for the surplus, if any,
to the Company. To the extent permitted by applicable law, the
Company waives all claims, damages and demands against the
Bank arising out of the repossession, retention, sale or
disposition of the Collateral. The Company agrees that the
Bank need not give more than five (5) days notice (which
notification shall be deemed given when mailed, postage
prepaid, addressed to the Company at the Company's address set
forth in Section 12.1 of this Agreement, or when telecopied or
telegraphed to that address or when telephoned or otherwise
communicated orally to the Company or any agent of the Company
at that address) of the time and place of any public sale or
of the time after which a private sale may take place and that
such notice is reasonable notification of such matters. The
Company shall remain liable for any deficiency if the proceeds
of any sale or disposition of the Collateral are insufficient
to pay all amounts to which the Bank is entitled. The Company
shall also be liable for the costs of collecting any of the
Obligations or otherwise enforcing the terms thereof or of
this agreement including reasonable attorneys' fees.
11.11 General. Any provision of this security 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. The Bank shall not be
deemed to have waived any of its rights hereunder or under any other agreement,
instrument or paper signed by the Company unless such waiver be in writing and
signed by the Bank. No delay or omission on the part of the Bank in exercising
any right shall operate as a waiver of such right or any other right. All of the
Bank's rights and remedies, whether evidenced hereby or by any other agreement,
instrument or paper, shall be cumulative and may be exercised singularly or
concurrently.
SECTION 12. MISCELLANEOUS.
--------------------------
12.1 Notices.
(a) All communications under this Agreement or under the notes executed
pursuant hereto shall be in writing and may be mailed by registered, certified
or first class mail, postage prepaid, transmitted via facsimile or delivered by
a recognized overnight courier service,
(1) if to the Bank, at the following address, or at such other
address as may have been furnished in writing to the Company
by the Bank:
The Huntington National Bank
000 Xxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxx 00000
ATTN: Xxxx Xxxxxx
(2) if to the Company, at the following address, or at such other
address as may have been furnished in writing to the Bank by
the Company:
Superior Pharmaceutical Company
0000 Xxxxxx Xxxxxx Xx.
Xxxxxxxxxx, Xxxx 00000
ATTN: Xxxx Xxxxxxxxxxx
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with a copy to:
DynaGen, Inc.
00 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
ATTN: President
(b) Any notice so addressed and mailed by registered, certified or
first class mail, transmitted by facsimile or delivered by such overnight
courier service, shall be deemed to be given when so mailed, transmitted or
delivered.
12.2 Reproduction of Documents. This Agreement and all documents
relating hereto including, without limitation, (a) consents, waivers and
modification which may hereafter be executed, (b) documents received by the Bank
at the closing or otherwise, and (c) financial statements, certificates and
other information previously or hereafter furnished to the Bank, may be
reproduced by the Bank by any photographic, photostatic, microfilm, micro-card,
miniature photographic or other similar process and the Bank may destroy any
original document so reproduced. The Company agrees and stipulates that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Bank in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall be likewise be admissible in evidence.
12.3 Survival. All warranties, representations, and covenants made by
the Company herein or on any certificate or other instrument delivered by it or
on its behalf under this Agreement shall be considered to have been relied upon
by the Bank and shall survive the closing of the Loan regardless of any
investigation made by the Bank on its behalf. All statements in any such
certificate or other instrument shall constitute warranties and representations
by the Company.
12.4 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the heirs, successors and assigns of each of the parties.
12.5 Amendment and Waiver. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of the Company and the Bank.
12.6 Duplicate Originals. Two or more duplicate originals of this
Agreement may be signed by the parties, each of which shall be an original but
all of which together shall constitute one and the same instrument.
12.7 Termination. This Agreement may be terminated by either party by
written notice to the other party that no further advances are to be made
hereunder and upon the Company thereafter paying in full all outstanding
advances made pursuant to this Agreement, all accrued interest and all other
obligations and indebtedness of the Company to the Bank arising hereunder or in
connection herewith.
12.8 Governing Law and Venue. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio. Any action commenced
for the enforcement of any provision contained in, or otherwise in connection
with, this Agreement, shall be commenced in a court of competent jurisdiction in
Cincinnati, Ohio, and the parties hereto irrevocably submit to the jurisdiction
of such court and waive the right to dispute such venue.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
The Huntington National Bank
By: [ILLEGIBLE]
--------------------------------
Its: Vice President
-------------------------------
Superior Pharmaceutical Company
By: /s/ Xxxxxx Xxxxx
--------------------------------
Its: CEO/PRESIDENT
-------------------------------
By: /s/ Xxxx X. Xxxxxxxxxxx
--------------------------------
Its: Chairman, Vice President
-------------------------------
CONSENT, ACKNOWLEDGMENT AND
AGREEMENT OF GUARANTOR
The Guarantor hereby consents to the terms and conditions set forth in
the foregoing Agreement, and further agrees to comply with and abide by the
provisions contained in Subsections 8.9, 8.21 and Paragraphs (k) and (l) of
Subsection 10.1.
GUARANTOR:
DYNAGEN, INC.
By: /s/ Xxxxxxxxx X. Xxxxxxx
--------------------------------
Its: Executive Vice President
-------------------------------
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