. LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this "Agreement"), dated as of June 25,
1996, is entered into by and between Carolina Contact Lens, Inc., a North
Carolina corporation (the "Company"), and Fidelity Funding of California, Inc.,
a California corporation ("Fidelity"). In consideration of the mutual covenants
and agreements contained herein, the Company and Fidelity hereby agree as
follows:
Section 1. Definitions and Construction.
1.1 When used herein, the following terms shall have the following
meanings:
"Account" means the right of the Company to payment for goods sold or
leased or for services rendered which is not evidenced by an instrument or
chattel paper, whether or not earned by performance.
"Account Debtor" means the Person obligated to make payment on an Account.
"Advance" has the meaning given to it in Section 2.1.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, or is controlled by or under common control
with, such Person.
"Affiliate Advance" means any "Advance" made to the other Affiliate Company
pursuant to Section 2.1 of the other Affiliate Agreement.
"Affiliate Agreements" means this Agreement and the Loan and Security
Agreement dated of even date herewith between Xxxxxxxxx Opthalmic Manufacturing
Corporation and Fidelity.
"Affiliated Account" means an "Account" as defined in the other Affiliate
Agreement.
"Affiliated Companies" means the Company and Xxxxxxxxx Opthalmic
Manufacturing Corporation.
"Borrowing Base" means an amount determined by Fidelity from time to time
in its sole discretion, equal to 65% of the face amount of Eligible Accounts.
"Borrowing Base Certificate" means a certificate in the form attached
hereto as Exhibit A, duly executed by an authorized officer of the Company.
"Cash Collateral" has the meaning given to it in Section 7.
"Commitment" means $2,000,000.
"Concentration Limit" means, as of any date, an amount equal to 20% of the
face amount of Accounts and Affiliated Accounts outstanding on such date.
"Contract Rate" means a rate of interest equal to the lesser of (a) the
Prime Rate in effect from time to time plus 1.50% per annum and (b) the maximum
rate permitted by applicable law. The Contract Rate shall be automatically
increased or decreased, as the case may be, without notice to the Company from
time to time as of the effective date of each change in the Prime Rate.
"Current Assets" means, as of any date, only those assets of the Company
that may, in the ordinary course of business, be converted into cash within a
period of one year from such date, but excluding (a) amounts due from employees,
officers, shareholders or directors of the Company, (b) prepaid expenses for
services or for supplies that are not purchased for resale, and (c) amounts due
from Affiliates of the Company.
"Current Liabilities" means, as of any date, all obligations of the Company
that are due within one year from such date.
"Debt" means, with respect to any Person, all indebtedness, obligations and
liabilities of such Person, including without limitation: (a) all liabilities
which would be reflected on a balance sheet of such Person prepared in
accordance with GAAP, (b) all obligations of such Person in respect of any
guaranty of any Debt of another Person, or (c) all obligations, indebtedness and
liabilities secured by any lien on or security interest in any property or
assets of such Person.
"Eligible Accounts" means, at the time of determination thereof, all
Accounts other than (i) any Account which is payable more than 30 days from
invoice date (unless the Account Debtor is America's Best Contacts, in which
case, any such Account which is payable more than 60 days from invoice date),
(ii) any Account which has been outstanding for more than 90 days from invoice
date, (iii) any Account as to which Fidelity does not have a valid and
perfected, first priority security interest, (iv) to the extent that the
outstanding Accounts owed by any single Account Debtor exceeds the
Concentration Limit, any Account owed by such Account Debtor, (v) any Account
that is owed by an Account Debtor that is an Affiliate of the Company or an
officer or employee of the Company, (vi) any Account that arises out of a sale
made or services performed outside of the United States or that is owed by an
Account Debtor located outside the United States, (vii) any Account that is owed
by a creditor or supplier of the Company or with respect to which any defense,
counterclaim or right of set off has been asserted, (viii) any Account owed by
an Account Debtor if more than 25% (in dollar amount) of such Account Debtor's
Accounts are 90 or more days past due, (ix) any Account that is owed by the
United States or any department, agency or instrumentality thereof, unless the
right to payment under such Account is assigned to Fidelity as Collateral in
full compliance with the Assignment of Claims Act of 1940, as amended (31 U.S.C.
3727), and (x) any Account that has not been approved by Fidelity, in its sole
and absolute discretion, for inclusion in the Borrowing Base.
"Environmental Laws" means any and all federal, state and local and foreign
statutes, laws, regulations, rules, orders, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants or industrial, toxic or hazardous
substances into the environment, or otherwise relating to the manufacture,
processing, treatment, transport or handling of pollutants or industrial, toxic
or hazardous substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Plan" means any pension benefit plan subject to Title IV of
ERISA maintained by the Company or any Affiliate thereof with respect to which
the Company has a fixed or contingent liability.
"Event of Default" has the meaning given it in Section 9.
"GAAP" means generally accepted accounting principles and practices as
promulgated by the American Institute of Certified Public Accountants, applied
on basis consistent with past practices.
"Indemnified Claims" means any and all claims, demands, actions, causes of
action, judgments, liabilities, damages and consequential damages, penalties,
fines, costs, fees, expenses and disbursements (including, without limitation,
fees and expenses of attorneys and other professional consultants and experts in
connection with any investigation or defense) of every kind, known or unknown,
existing or hereafter arising, foreseeable or unforeseeable, which may be
imposed upon, threatened or asserted against or incurred or paid by any
Indemnified Person at any time and from time to time, because of, resulting
from, in connection with or arising out of any transaction, act, omission, event
or circumstance in any way connected with the Collateral or the Transaction
Documents (including but not limited to enforcement of Fidelity's rights
thereunder or the defense of Fidelity's actions thereunder), excluding with
respect to any Indemnified Persons, any of the foregoing resulting from such
Indemnified Person's gross negligence or willful misconduct.
"Indemnified Persons" means Fidelity and its officers, directors,
shareholders, employees, attorneys, representatives and Affiliates.
"Intangible Assets" means such of the Company's assets as are treated as
intangible pursuant to GAAP, including without limitation: (a)obligations owing
by officers, directors, shareholders, employees, subsidiaries, Affiliates, or
any Person in which any officer, director, shareholder, employee, subsidiary, or
Affiliate owns any interest and (b) any asset which is intangible or lacks
intrinsic or marketable value or collectibility, including but not limited to,
goodwill, noncompetition agreements, patents, copyrights, trademarks,
franchises, organization or research and development costs.
"Inventory" means all goods, now owned or hereafter acquired by the
Company, wherever located, that are held for sale or lease or are to be
furnished under any contract of service (including, but not limited to raw
materials, work in process, finished goods and materials used or consumed in the
manufacture or production therof, goods in which the Company has an interest in
mass or a joint or other interest or rights of any kind, and goods which have
been returned to or repossessed or stopped in transit by the Company).
"Late Payment Rate" means a per annum rate of interest equal to the lesser
of (a) the Contract Rate plus four percent and (b) the maximum rate permitted by
applicable law.
"Obligations" means all indebtedness, obligations and liabilities of the
Company to Fidelity arising under the Transaction Documents, all other
indebtedness, obligations and liabilities of the Company to Fidelity, whether
presently existing or hereafter arising, direct or indirect, primary or
secondary, joint or several, fixed or contingent, and whether originally payable
to Fidelity or to a third party and subsequently acquired by Fidelity, and all
indebtedness and obligations of American Consolidated Laboratories, Inc. to
Fidelity under the Warrant, dated as of the date hereof, issued by American
Consolidated Laboratories, Inc. to Fidelity for the purchase of 150,000 shares
of the Common Stock of American Consolidated Laboratories, Inc.
"Person" means any individual, corporation, joint venture, partnership,
trust, unincorporated organization or governmental entity or agency.
"Prime Rate" means the rate per annum published from time to time by THE
WALL STREET JOURNAL as the base rate for corporate loans at large commercial
banks (or, if more than one such rate is published, the higher or highest of the
rates so published). If such rate is no longer published by THE WALL STREET
JOURNAL, then Fidelity shall, in its sole discretion substitute the base or
prime rate for corporate loans at a large commercial bank for the base rate
published in THE WALL STREET JOURNAL. Such rate may not necessarily be the
lowest or best rate actually charged to any customer of such commercial bank.
"Remittance Address" means such address as Fidelity shall direct the
Company from time to time in writing in accordance with the terms hereof.
"Shareholders Equity" means, as of any date, the shareholders' equity of
the Company as of such date determined in accordance with GAAP.
"Tangible Net Worth" means, as of any date, the amount obtained by
subtracting the Company's Intangible Assets as of such date from the Company's
Shareholders' Equity as of such date.
"Term" has the meaning given to it in Section 11.4.
"Termination Event" means (a) the occurrence with respect to any ERISA Plan
of (i) a reportable event described in Sections 4043(b)(5) of ERISA or (ii) any
other reportable event described in Section 4043(b) of ERISA other than a
reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA or (b) the withdrawal of the Company or any Affiliate
of the Company from any ERISA Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) any
event or condition which might constitute
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grounds under Section 4042 of ERISA for termination of, or the appointment of
a trustee to administer, any ERISA Plan.
"Transaction Documents" means this Agreement and all other documents and
instruments executed and delivered in connection therewith.
"UCC" means the Uniform Commercial Code as in effect in the applicable
jurisdiction.
"Working Capital" means, as of any date, the excess of Current Assets over
Current Liabilities as of such date.
1.2 Terms defined in the UCC and used but not defined herein shall have the
meanings ascribed to them in the UCC.
1.3 References herein to a particular agreement, instrument or document
also shall be deemed to refer to and include all renewals, extensions and
modifications of such agreement, instrument or document. All addenda, exhibits
and schedules attached to this Agreement are a part hereof for all purposes.
Words in the singular form shall be construed to include the plural and vice
versa, unless the context otherwise requires.
1.4 All interest accruing hereunder shall be calculated on the basis of
actual days elapsed (including the first but excluding the last day) plus five
business days and a year of 360 days. Unless otherwise expressly provided herein
or unless Fidelity otherwise consents, all financial statements and reports
furnished to Fidelity hereunder shall be prepared, and all financial
computations and determinations pursuant hereto shall be made, in accordance
with GAAP. All payments received by Fidelity after its internally established
time for closing business on any business day shall be applied as of the next
succeeding business day. Any payment which is due on a day which is not a
business day shall instead be deemed to be due on the next succeeding business
day, and interest thereon shall accrue and be payable at the then applicable
rate during the time of such extension. Fidelity's records in respect of loans
advanced, accrued interest, payments received and applied and other matters in
respect of calculation of the amount of the Obligations shall be deemed
conclusive absent demonstration of error. All statements of account rendered by
Fidelity to the Company relating to principal, accrued interest or costs owing
by the Company under this Agreement shall be presumed to be correct and accurate
unless, within 30 days after receipt thereof, the Company shall notify Fidelity
in writing of any claimed error therein.
Section 2. Advances.
2.1 Subject to the terms of this Agreement, including, without limitation,
Section 3, Fidelity shall make advances to the Company (each an "Advance and
collectively the "Advances") from time to time during the Term; provided,
however, that the aggregate principal amount of Advances outstanding at any time
shall not exceed the lesser of the (i) Borrowing Base determined by Fidelity
from time to time and (ii) the difference obtained by subtracting the aggregate
principal balance of all Affiliate Advances then outstanding from the
Commitment. Each Advance must be greater than or equal to $5,000 or must equal
the unadvanced portion of the Borrowing Base. The Company hereby agrees to repay
to Fidelity all Advances made to the Company hereunder, together with interest
thereon, in the manner provided herein. The principal owing hereunder in respect
of the Advances at any given time shall equal the aggregate amount of Advances
made hereunder minus all principal payments thereon received by Fidelity
hereunder. Subject to the terms and conditions hereof, the Company may borrow,
repay and reborrow under this Agreement.
2.2 Each request by the Company to Fidelity for an Advance hereunder must
be in writing or promptly confirmed in writing. Each such written request or
confirmation shall be accompanied by a "Borrowing Base Certificate" in the form
attached hereto as Exhibit "A," together with the sales journal for each Account
included in such Borrowing Base Certificate and such other information with
respect thereto as Fidelity shall request in its sole and absolute discretion.
2.3 Promptly after receiving each Borrowing Base Certificate, Fidelity
shall, based upon such Borrowing Base Certificate and such other information
available to Fidelity, redetermine the Borrowing Base, which redetermination
shall take effect immediately and remain in effect until the next such
redetermination. If all conditions precedent to any Advance requested have been
met, Fidelity will on the date requested make such Advance available to the
Company by wire transfer to the account designated in writing by the Company. In
the event Fidelity does not receive an appropriately completed Borrowing Base
Certificate, Fidelity shall have no obligation to redetermine the Borrowing Base
or make any additional Advances hereunder.
2.4 If the aggregate unpaid principal balance of the Advances exceeds the
Borrowing Base at any time, the Company shall, upon receipt of notice thereof
from Fidelity, immediately repay the principal of the Advances in an amount at
least equal to such excess. Any principal repaid pursuant to this Section 2.4
shall be in addition to, and not in lieu of, all payments otherwise required to
be paid under the Transaction Documents.
2.5 The aggregate unpaid principal balance of the Advances plus all accrued
but unpaid interest thereon shall be payable by the Company to Fidelity on
demand, or if no demand is made, on the last day of the Term.
2.6 The aggregate unpaid principal balance of all Advances shall bear
interest at the Contract Rate in effect from time to time. Except as provided in
Section 2.5, all accrued but unpaid interest thereon shall be due and payable by
the Company to Fidelity on the last day of each calendar month.
2.7 The Affiliated Companies shall, pursuant to this Agreement and the
other Affiliate Agreement, pay to Fidelity an aggregate initial commitment fee
in the amount of 1.5% of the Commitment, payable on each anniversary of the date
hereof during the Term. The Company hereby authorizes Fidelity, at its sole
discretion, to deduct the commitment fee from any Advance hereunder.
2.8 As consideration for Fidelity's commitment to make Advances hereunder
and Affiliate Advances under the other Affiliate Agreement, the Affiliated
Companies shall, pursuant to this Agreement and the other Affiliate Agreement,
pay to Fidelity an aggregate minimum usage fee (in this section called the
"Minimum Usage
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Fee") of not less than $8,400 for each calendar month (or fraction thereof,
on a prorated basis) during the Term for interest and fees payable pursuant
to Sections 2.6 and 2.9 hereof and Sections 2.6 and 2.9 of the other Affiliate
Agreement. In the event that the income earned by Fidelity during any calendar
month (or fraction thereof on a prorated basis) pursuant to Sections 2.6 and
2.9 hereof and Sections 2.6 and 2.9 of the other Affiliate Agreement is less
than the Minimum Usage Fee, the Affiliated Companies shall, pursuant to this
Agreement and the other Affiliate Agreement, pay to Fidelity the difference
between the amount so earned by Fidelity and the Minimum Usage Fee, regardless
of Fidelity's prior compensation. The Minimum Usage Fee for each calendar
month shall be due and payable on the first day of the next calendar month.
2.9 The Affiliated Companies shall, pursuant to this Agreement and the
other Affiliate Agreement, pay to Fidelity an aggregate collateral monitoring
fee in the amount of $3,500 for each calendar month. The collateral monitoring
fee for each calendar month shall be due and payable on the first day of the
next calendar month.
2.10 In addition to, and not in lieu of, any termination fee required by
Section 11.4, the Affiliated Companies shall pay to Fidelity a liquidation fee
(in this section called the "Liquidation Fee") in the amount of five percent of
the face amount of each Eligible Account included in the Borrowing Base that is
outstanding at any time during the Liquidation Period (as defined below). The
Liquidation Fee shall be payable on the earlier to occur of (i) the date on
which Fidelity collects the applicable Eligible Account and (ii) the ninetieth
day after the invoice date of the applicable Eligible Account. For purposes of
this section, the term "Liquidation Period" means a period beginning on the
earliest of (i) the date of commencement against or by any of the Affiliated
Companies of any voluntary or involuntary case under the federal Bankruptcy
Code, (ii) the date of any general assignment by any of the Affiliated Companies
for the benefit of its creditors; (iii) the date of any appointment or taking
possession by a receiver, liquidator, assignee, custodian or similar official of
all or a substantial part of any of the Affiliated Companies' assets, or (iv)
the date of the cessation of business of any of the Affiliated Companies, and
ending on the date on which Fidelity has actually received all fees, costs,
expenses and other amounts owing to it hereunder.
2.11 Contemporaneously with the execution and delivery hereof, the
Affiliated Companies shall, pursuant to this Agreement and the other Affiliate
Agreement, pay to Fidelity an aggregate fee of $7,500 to cover the costs of the
negotiation, preparation, execution and delivery of the Transaction Documents,
including the fees, if any, of outside legal counsel. In addition, the
Affiliated Companies shall pay or reimburse Fidelity upon demand for all other
costs and expenses incurred by Fidelity in connection with its due diligence
review of the Affiliated Companies and the closing of the transaction
contemplated hereby, all documentary stamp taxes and intangible Documents and
all reasonable attorney's fees, court costs and other expenses incurred by
Fidelity (whether or not litigation is commenced or judgment issued, and if
litigation is commenced whether at trial or any appellate level) in connection
with the enforcement by Fidelity of this Agreement or any other Transaction
Document, the protection or enforcement of Fidelity's interest in the
Collateral, the collection by Fidelity of the Collateral, or the representation
of Fidelity in connection with any bankruptcy case or insolvency proceeding
involving the Company, the Collateral, any Affiliated Company or any Account
Debtor, including, without limitation, any representation involving relief from
a stay motion, a cash collateral dispute, an assumption or rejection motion or a
dispute concerning any proposed disclosure statement and plan proposed in any
such proceeding.
2.12 Fidelity shall be entitled to collect upon demand its normal and
customary charges for the following routine services provided or obtained in the
course of performing its functions with respect to the Collateral: appraisals,
lock box charges, long-distance telephone charges, postage, credit reports, wire
transfers, check copying charges, overnight mail delivery, UCC, judgment,
litigation and tax lien searches and filings.
2.13 All interest, fees and other amounts due to Fidelity pursuant to this
Section 2 shall be payable on demand, and may, in Fidelity's sole discretion, be
deducted from Advances or paid from the Cash Collateral. All past due amounts
owed hereunder, including but not limited to, past due interest, fees and other
amounts, that are not paid when due shall bear interest from the date due until
paid at the Late Payment Rate.
2.14 Should any interest or other charges paid hereunder result in the
computation or earning of interest in excess of the maximum rate or amount of
interest permitted by applicable law, such excess interest and charges shall be
and hereby are waived by Fidelity, and the amount of such excess interest and
charges shall be automatically credited against, and be deemed to have been
payments in reduction of, the principal then due hereunder, and any portion of
such excess which exceeds the principal then due hereunder shall be paid by
Fidelity to the Company.
SECTION 3. CONDITIONS PRECEDENT TO ADVANCES.
3.1 Fidelity shall not be obligated to make any Advance hereunder
(including the first) until it shall have received the following documents, duly
executed in form and substance satisfactory to Fidelity and its counsel:
(a) continuing unconditional and absolute guarantees by American
Consolidated Laboratories, Inc., Xxxxxxxxx Opthalmic Manufacturing
Corporation, S-O Nebraska, Inc. and Wolcon Laboratories, Inc. of all
Obligations, and a security agreement (the "Security Agreement")
executed by S-O Nebraska, Inc. pursuant to which S-O Nebraska, Inc.
pledges substantially all of its assets to Fidelity to secure the
payment of the Obligations;
(b) a certificate executed by the President and the Secretary of the
Company certifying (i) the names and signatures of the officers of the
Company authorized to execute Transaction Documents, (ii) the
resolutions duly adopted by the Board of Directors of the Company
authorizing the execution of this Agreement and the other Transaction
Documents, and (iii) correctness and completeness of the copy of the
bylaws of the Company attached thereto;
(c) a certificate executed by the President and the Chief Financial Officer
of the Company certifying the satisfaction of the conditions set forth
in Section 3.2:
4
(d) certificates regarding the due formation, valid existence and good
standing of the Company in the state of its organization issued by the
appropriate governmental authorities in such jurisdiction;
(e) releases executed by Bausch & Lomb and Polymer Technology releasing all
liens and security interests of Bausch & Lomb and Polymer Technology in
the Collateral;
(f) landlord's lien waivers subordinating the security interest of Xxxxx
Xxxx X'Xxxx and 1996 Pavilion Associates, L.P. in the Collateral to the
security interest therein of Fideltiy granted herein;
(g) an intercreditor agreement with Xxxxxx-Xxxxxxxxx Capital Focus L.P.
pursuant to which Xxxxxx-Xxxxxxxxx Capital Focus L.P. subordinates its
right to receive payment of the Debt owed by American Consolidated
Laboratories, Inc. to it to the payment and performance by American
Consolidated Laboratories, Inc. of its obligations to Fidelity under
the general continuing guaranty referred to in Section 3.1(a) (the
"Guaranty"), and an intercreditor agreement with Xxxxxx-Xxxxxxxxx
Capital Focus L.P., pursuant to which Xxxxxx-Xxxxxxxxx Capital Focus
L.P. subordinates its right to receive payment of the Debt owed by the
Company to it to the payment and performance by the Company of the
Obligations;
(h) an intercreditor agreement with American Consolidated Laboratories,
Inc., pursuant to which American Consolidated Laboratories, Inc.
subordinates its right to receive payment of the Debt owed by the
Company to it to the payment of the Obligations;
(i) a favorable opinion of Schifino Xxxxxxxxx, counsel for the Company,
covering such matters as Fidelity may request in its sole discretion;
(j) endorsements naming Fidelity as an additional insured or loss payee, as
appropriate, on all liability insurance and all property insurance
policies of the Company;
(k) a warrant (the "Warrant") executed by American Consolidated
Laboratories, Inc. initially for the purchase of 150,000 shares of the
common stock of American Consolidated Laboratories, Inc.; and
(l) an assignment executed by American Consolidated Laboratories assigning
and conveying to the Company all Accounts of American Consolidated
Laboratories, Inc.
3.2 Furthermore, Fidelity shall not be obligated to make any Advance
hereunder (including the first), unless: (i) all representations and warranties
made by the Company in the Transaction Documents are true on and as of the date
of such Advance as if such representations and warranties had been made as of
the date of such Advance, (ii) the Company has performed and complied with all
agreements and conditions required in the Transaction Documents to be performed
or complied with by it on or prior to the date of such Advance, (iii) no Event
of Default or any event or circumstance that, with the passage of time, the
giving of notice or both, would become an Event of Default shall have occurred,
(iv) such Advance shall not be prohibited by any law or any regulation or any
order of any court or governmental agency or authority, (v) the Company shall
have not repudiated or made any anticipatory breach of any of its obligations
under any Transaction Document, and (vi) Fidelity shall have approved such
Advance in its sole discretion.
SECTION 4. THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to Fidelity on the date hereof, and shall be deemed to
represent and warrant to Fidelity on each date on which an Advance is made to
the Company hereunder; that:
4.1 The Company is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, with all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement and the other Transaction Documents to which it is a party
and to conduct its business as presently conducted. The Company is duly
qualified and authorized to do business as a foreign corporation and is in good
standing in all states in which such qualification and good standing are
necessary or desirable for the conduct by the Company of its business or the
performance by the Company of its obligations hereunder. The execution, delivery
and performance by the Company of this Agreement and the other Transaction
Documents to which it is a party do not and will not constitute (a) a violation
of any applicable law or the Company's articles or certificate of incorporation
or bylaws or (b) a material breach of any other document, agreement or
instrument to which the Company is a party or by which the Company is bound.
This Agreement and the other Transaction Documents to which the Company is a
party have been duly authorized, executed and delivered by the Company, and are
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their terms. No consent of, approval by, registration
or filing with or authorization from any governmental authority or agency is
required in connection with the execution, delivery or performance by the
Company of this Agreement or the other Transaction Documents to which it is a
party.
4.2 None of the Eligible Accounts or any other Collateral is subject to any
lien, encumbrance, security interest or other claim of any kind or nature. The
Company has not transferred, sold, pledged or given a security interest in any
of its Accounts, Inventory, machinery or equipment to anyone other than
Fidelity. There are no financing statements on file in any public office
governing any property of the Company of any kind, real or personal, in which
the Company is named in or has signed as the debtor, except the financing
statement or statements filed or to be filed in respect of this Agreement or
those statements on file that were disclosed in writing by the Company to
Fidelity prior to the execution and delivery of this Agreement.
4.3 The Company is the sole owner and holder of, and has good and
marketable title to, all Collateral.
4.4 The amount of each Eligible Account is due and owing to the Company and
represents an accurate statement of a bona fide sale, delivery and acceptance of
Inventory or performance of service by the Company to or for an Account Debtor.
The terms for payment of the Eligible Accounts are 30 days from date of invoice
and the payment of the Eligible Accounts is not contingent upon the fulfillment
by the Company of any
5
further performance of any nature whatsoever. Except for set-offs,
allowances, dicounts, deductions and counterclaims arising in the ordinary
course of business that are accurately reflected in all Borrowing Base
Certificates delivered after they arise, there are no set-offs, allowances,
discounts, deductions, counterclaims against the Eligible Accounts or any claims
by Account Debtors, of any kind whatsoever, valid or invalid, that have been or
may be asserted as a basis for refusing to pay an Eligible Account, in whole or
in part, either at the time it is accepted by Fidelity for inclusion in the
Borrowing Base or prior to the date it is to be paid. To the best of the
Company's knowledge, each Account Debtor's business is solvent. The Company has
served or caused to be served any and all preliminary notices required by law to
perfect or enforce any mechanic's lien or stop notice or bonded stop notice for
the Eligible Accounts and the information contained in those notices is true and
correct to the best of the Company's knowledge.
4.5 The address set forth below the Company's signature hereon is, and for
at least the last six months has been, the Company's mailing address, its chief
executive office, its principal place of business, the office where all of the
books and records concerning the Eligible Accounts are maintained and the
location of all Collateral. The Company does not transact business, and has not
transacted business during the past five years, under any trade, fictitious or
assumed name other than those set forth under the Company's signature hereon.
During the past five years, the Company has not been a party to a merger or
consolidation and has not acquired all or substantially all of the assets of any
Person other than the acquisition of substantially all of the assets of Philcon
Laboratories, Inc. in May of 1995.
4.6 The Company has filed all tax reports and returns required to be filed
by it and has paid all federal, state and local taxes and governmental charges
imposed upon the Company, other than taxes which are not yet due and payable,
and other than those contested in good faith and for which adequate reserves
have been established in accordance with GAAP.
4.7 The Company is in compliance with ERISA, and is not required to
contribute to any "multiemployer plan" as defined in Section 4001 of ERISA. The
Company has conducted its business in material compliance with all applicable
laws, including but not limited to, applicable Environmental Laws, and maintains
and is in compliance with all licenses and permits required under any such laws
to conduct its business and perform its obligations hereunder. The Company does
not have any known material contingent liability under any Environmental Law.
4.8 The application made by the Company to Fidelity in connection with this
Agreement and the statements made therein and in any materials furnished in
connection therewith are true and correct as of the date hereof. All financial
statements furnished by the Company to Fidelity in connection with such
application were prepared in accordance with GAAP, except to the extent provided
in the notes to such financial statements, and fairly present the financial
condition and results of operations of the Company as of the dates and for the
periods indicated therein.
4.9 There is no fact which the Company has not disclosed to Fidelity in
writing which could materially adversely affect the properties, business or
financial condition of the Company, or any of the Collateral, or which it is
necessary to disclose in order to keep the foregoing representations and
warranties from being misleading.
SECTION 5. COVENANTS OF THE COMPANY. From the date hereof and until the
payment and performance is full of all of the Obligations, the Company covenants
with Fidelity that:
5.1 The Company shall preserve and maintain its corporate existence, good
standing and authority to transact business in all jurisdiction where necessary
for the proper conduct of its business, and shall maintain all of its
properties, rights, privileges and franchises necessary or desirable in the
normal conduct of its business.
5.2 The Company shall permit Fidelity and its representatives, including
any appraisers, auditors and accountants selected by Fidelity, to inspect any of
the Collateral at any time during normal business hours. In addition, Fidelity
shall have the right, from time to time, to audit the Company's books and
records upon reasonable notice to the Company. The Company shall pay all costs
associated with any such audits at the rate of $700 per day per auditor plus
reasonable out-of-pocket expenses.
5.3 The Company shall maintain its books and records in accordance with
GAAP. The Company shall furnish Fidelity, upon request, such information and
statements as Fidelity shall request from time to time regarding the Company's
business affairs, financial condition and results of its operations. Without
limiting the generality of the foregoing, the Company shall provide Fidelity, on
or prior to the last day of each month, unaudited consolidated and consolidating
financial statements with respect to the prior month and, within 90 days after
the end of each of the Company's fiscal years, audited annual consolidated and
consolidating financial statements and such certificates relating to the
foregoing as Fidelity may request including, without limitation, a monthly
certificate from the president and chief financial officer of the Company
stating whether any Events of Default have occurred and stating in detail the
nature thereof. The Company shall provide Fidelity a Borrowing Base Certificate,
appropriately completed and with all attachments, at any time that Fidelity
shall request and on or before the last day of any calendar week in which the
Company does not request an Advance. In addition, the Company shall furnish to
Fidelity upon request a current listing of all open and unpaid accounts payable
and accounts receivable, names, addresses and contact persons for Account
Debtors, and such other items of information that Fidelity may deem necessary or
appropriate from time to time. The Company immediately shall notify Fidelity in
writing upon becoming aware of the existence of any condition or circumstance
that constitutes an Event of Default or that would, with the giving of notice,
the passage of time or both, constitute an Event of Default. Any such written
notice shall specify the nature of such condition or circumstance, the period of
the existence thereof and the action that the Company proposes to take with
respect thereto.
5.4 The Company promptly shall notify Fidelity of any attachment or any
other legal process levied against the Company and any action, suit, proceeding
or other similar claim initiated against the Company.
5.5 The Company shall keep and maintain adequate insurance by insurers
acceptable to Fidelity with respect to its business and all Collateral. Such
insurance shall cover loss, damages and liability of amounts not less than
reasonably requested by Fidelity and shall include, at a minimum, insurance for
workers compensation, general liability, fire, casualty, theft and all risk. The
Company shall cause Fidelity to be an additional insured and
6
loss payee under all policies of insurance covering any of the Collateral, to
the extent of Fidelity's interest. The Company shall deliver copies of each
insurance policy to Fidelity upon request.
5.6 The Company shall file all tax reports and returns required to be filed
by it in the manner and at the times required by applicable law, and shall pay
all federal, state and local taxes and charges imposed upon the Company when
due; provided, that the Company will not be required to pay any such tax or
charge which is being contested in good faith and by proper proceedings if it
has maintained adequate reserves with respect thereto in accordance with GAAP.
5.7 The Company shall comply with ERISA and shall not become required to
contribute to any "multiemployee plan" as defined in Section 4001 of ERISA. The
Company shall conduct its business in material compliance with all applicable
laws, and shall maintain and comply with all licenses and permits required under
any such laws to conduct its business and perform its obligations hereunder.
Without limiting the generality of the foregoing, the Company shall comply in
all material respects with all Environmental Laws now or hereafter applicable to
the Company and shall obtain, at or prior to the time required by applicable
Environmental Laws, all environmental, health and safety permits, licenses and
other authorizations necessary for its operations. The Company promptly shall
furnish to Fidelity all written notices of violation, complaints, penalty
assessments, suits or other proceedings received by the Company with respect to
any alleged violation of or non-compliance with any Environmental Laws.
5.8 The Affiliated Companies shall together at all times maintain finished
goods Inventory on hand having a value of at least $700,000 until August 31,
1996 and at least $750,000 after August 31, 1996, in either case, valued at the
lower of cost or market.
5.9 The Company shall not grant, create or allow to exist any security
interest, lien or other encumbrance on any of the Collateral other (a) than the
lien and security interest granted to Fidelity herein; (b) inchoate liens for
taxes, assessments or governmental charges or levies not yet due or liens for
taxes, assessments or governmental charges or levies being contested in good
faith and by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP; (c) liens arising from precautionary UCC
financing statements filed regarding operating leases; (d) liens arising from
judgments, decrees or attachments in circumstances not constituting an Event of
Default under Section 9(f) or (j); and (e) liens (whether arising from UCC
financing statements, security agreements, mortgages, etc.) in existence on the
date hereof granted to Xxxxxx-Xxxxxxxxx Capital Focus, L.P.,
("Xxxxxx-Xxxxxxxxx"), which liens have been subordinated to the liens granted to
Fidelity herein pursuant to the Subordination Agreement, dated as of the date
hereof, among Xxxxxx-Xxxxxxxxx, Fidelity and the Company, and the Company shall
not execute any financing statement (other than as provided herein) in favor of
any Person other than Fidelity. The Company shall not change its mailing
address, chief executive office, principal place of business or place where such
records are maintained, open any new place of business, close any existing place
of business or change the location of any of the Collateral or transact business
under any trade, fictitious or assumed name other than those set forth under the
Company's signature hereon without providing at least 30 days' prior written
notice thereof to Fidelity.
5.10 The Company shall not accept any returns or grant any allowance or
credit (other than those returns, allowances and credits accepted or granted in
the ordinary course of the Company's business) to any Account Debtor without
notice to and the prior written approval of Fidelity. The Company shall provide
to Fidelity for each Account Debtor on Eligible Accounts a weekly report, in
form and substance satisfactory to Fidelity, itemizing all such returns and
allowances made during the previous week with respect to such Eligible Accounts.
5.11 The Company shall not incur, directly or indirectly, any Debt for
money borrowed, other than in favor of Fidelity or in the normal and ordinary
course of the Company's business.
5.12 The Company shall not use any of the funds paid to the Company
hereunder directly or indirectly for personal, family, household or agricultural
purposes.
5.13 The Company shall not directly or indirectly become liable in
connection with the Debt of any Person, whether by guarantee, surety,
endorsement (other than endorsement of negotiable instruments for collection in
the ordinary course of business), agreement to purchase or repurchase, agreement
to make investments, agreement to provide funds or maintain working capital, or
any agreement to assure a creditor against loss, other than in favor of
Fidelity.
5.14 Without the prior written consent of Fidelity (which consent shall not
be unreasonably withheld), the Company shall not discontinue, or make any
material change in, its business as currently established, or enter any new or
different line of business not directly related to the Company's existing line
of business.
5.15 The Company shall not declare, pay or issue any dividends or other
distributions in respect of its capital stock or distribute, reserve, secure, or
otherwise make or commit distributions on account of its capital stock, or make
any payment on account of the purchase, redemption or other acquisition or
retirement of any shares of its capital stock.
5.16 The Company shall not make any loans or advances to or for the benefit
of any officer, director or shareholder of the Company except advances for
routine expense allowances in the ordinary course of business. The Company shall
not make any loans or advances to or for the benefit of any Affiliate of the
Company. The Company shall not make any payment on any obligation owing to any
officer, director, shareholder or Affiliate of the Company.
5.17 Without the prior written consent of Fidelity (which consent shall not
be unreasonably withheld), the Company shall not purchase or otherwise acquire
assets from any Person outside the ordinary course of business of the Company.
5.18 The Company shall not invest in or otherwise purchase or acquire the
securities of any Person.
7
5.19 The Company shall not sell or dispose of any of its assets other than
the sale of Inventory in the ordinary course of business, and the Company shall
not dissolve or liquidate or become a party to any merger or consolidation with
any Person.
5.20 The Company immediately shall terminate its practice of billing
Account Debtors under the name "American Consolidated Laboratories, Inc." for
Inventory sold by the Company.
SECTION 6. COLLATERAL. In order to secure the payment of all Obligations
and all other indebtedness and obligations of the other Affiliated Company to
Fidelity, whether arising under the other Affiliate Agreement or otherwise, the
Company hereby grants to Fidelity a security interest in and lien upon all of
the Company's right, title and interest in and to (a) all Accounts, contract
rights and general intangibles, receivables and claims whether now or hereafter
arising, all guaranties and security therefor and all of the Company's right
title and interest in the goods purchased and represented thereby including all
of the Company's rights in and to returned goods and rights of stoppage in
transit, replevin and reclamation as unpaid vendor; (b) all Inventory and all
accessions thereto and products thereof and documents therefor; (c) all
equipment and machinery, wherever located and whether now or hereafter existing,
and all parts thereof, accessions thereto, and replacements therefor and all
documents and general intangibles covering or relating thereto; (d) all books
and records pertaining to the foregoing, including but not limited to computer
programs, data, certificates, records, circulation lists, subscriber lists,
advertiser lists, supplier lists, customer lists, customer and supplier
contracts, sales orders, and purchasing records; and (e) all proceeds of the
foregoing (collectively, the "Collateral"). The Company agrees to comply with
all appropriate laws in order and to take all actions necessary or desirable in
Fidelity's judgment to perfect Fidelity's security interest in and to the
Collateral, to execute any financing statement or additional documents as
Fidelity may request and to deliver to Fidelity a list of all locations of its
Inventory, equipment and machinery and landlord and or mortgagee lien waivers
with respect to each site where Inventory, equipment or machinery is located and
which is either leased by the Company or has been mortgaged by the Company, upon
request by Fidelity.
SECTION 7. COLLECTION. Each invoice representing an Account shall state on
its face that amounts payable thereunder are payable only at the Remittance
Address. Fidelity shall have the right at any time, either before or after the
occurrence of an Event of Default and without notice to the Company, to notify
any or all Account Debtors on the Collateral of the assignment of the Collateral
to Fidelity and to direct such Account Debtors to make payment of all amounts
due or to become due to the Company directly to Fidelity, and to the extent
permitted by law, to enforce collection of any Collateral and to adjust, settle
or compromise the amount or payment thereof. So long as no Event of Default or
event that, with the passage of time, the giving of notice or both, would become
an Event of Default has occurred and is continuing, all collections of
Collateral received by Fidelity shall be applied by Fidelity to the payment of
the Obligations of the Company to Fidelity whether or not then due and any
remaining funds shall be delivered to the Company. Upon the occurrence of an
Event of Default or an event that, with the passage of time, the giving of
notice or both, would become an Event of Default, any such remaining funds may
be held by Fidelity as cash collateral ("Cash Collateral") until all Obligations
have been paid in full and Fidelity has no further obligation to advance funds
to the Company. All amounts and proceeds (including instruments and writings)
received by the Company in respect of the Collateral shall be received in trust
for the benefit of Fidelity hereunder, shall be segregated from other funds of
the Company and shall be promptly paid over to Fidelity in the same form as
received (with any necessary endorsement) to be applied in the same manner as
payments received directly by Fidelity.
SECTION 8. POWER OF ATTORNEY. The Company grants to Fidelity an irrevocable
power of attorney coupled with an interest authorizing and permitting Fidelity,
at its option, with or without notice to the Company, to do any or all of the
following: (a) endorse the name of the Company on any checks or other evidences
of payment whatsoever that may come into the possession of Fidelity regarding
Collateral, including checks received by Fidelity pursuant to Section 7 hereof;
(b) receive, open and forward any mail addressed to the Company and put
Fidelity's address on any statements mailed to Account Debtors; (C) pay, settle,
compromise, prosecute or defend any action, claim, conditional waiver and
release, or proceeding relating to Collateral; (d) upon the occurrence of an
Event of Default, notify, in the name of the Company, the U.S. Post Office to
change the address for delivery of mail addressed to the Company to such address
as Fidelity may designate (provided that Fidelity shall turn over to the Company
all such mail not relating to Collateral); (e) verify, sign, acknowledge,
record, file for recording, serve as required by law, any claim of mechanic's
lien, stop notice or bonded stop notice in the sole and absolute discretion of
Fidelity relating to any Collateral; (f) insert all recording or service
information in any mechanic's lien or assignment of rights under stop
notice/bonded stop notice which the Company has signed in connection with this
Agreement, recorded or served to enforce payment of the Collateral; (g) execute
and file on behalf of the Company any financing statement, amendment thereto or
continuation thereof (i) deemed necessary or appropriate by Fidelity to protect
Fidelity's interest in and to the Collateral or (ii) required or permitted under
any provision of this Agreement; and (h) do all other things necessary and
proper in order to carry out this Agreement. The authority granted to Fidelity
herein is irrevocable until this Agreement is terminated and all amounts due to
Fidelity hereunder have been paid in full.
SECTION 9. DEFAULT. An event of default ("Event of Default") shall be
deemed to have occurred hereunder, Fidelity shall have no further obligation to
make any further Advances and may immediately exercise its rights and remedies
with respect to the Collateral under this Agreement, the Uniform Commercial Code
and applicable law, upon the happening of one or more of the following:
(a) The Company shall fail to pay on demand or otherwise as and when due
any amount owed by the Company to Fidelity, whether hereunder or otherwise.
(b) The Company shall breach any covenant or agreement made herein or in
any other Transaction Document and the same shall not be cured to Fidelity's
satisfaction within ten days after such covenant or agreement is breached.
(c) Any warranty or representation made herein or in any other Transaction
Document shall be untrue when made or any report, certificate, schedule,
financial statement, profit and loss statement or other statement furnished by
the Company, or by any other person on behalf of the Company, to Fidelity is not
true and correct when furnished.
8
(d) There shall be commenced by or against the Company or any guarantor of
the Obligations any voluntary or involuntary case under the federal Bankruptcy
Code, or the Company or any guarantor of the Obligations shall make an
assignment for the benefit of its creditors, or of a receiver or custodian shall
be appointed for the Company or any guarantor of the Obligations for a
substantial portion of its assets.
(e) The Company shall become insolvent in that its debts are greater than
the fair value of its assets, or the Company is generally not paying its debts
as they become due.
(f) Any involuntary lien, garnishment, attachment or the like shall be
issued against or shall attach to the Collateral and the same is not released
within ten days.
(g) An event or circumstance shall have occurred which Fidelity believes
has or may result in a material adverse change in the Company's financial
condition, business or operations.
(h ) The Company shall have a federal or state tax lien filed against any
of its properties, or shall fail to pay any federal or state tax when due, or
shall fail to file any federal or state tax form or report within 30 days after
the date due.
(i) Either (i) any "accumulated funding deficiency" (as defined in Section
412(a) of the Internal Revenue Code of 1986, as amended) in excess of $25,000
exists with respect to any ERISA Plan, or (ii) any Termination Event occurs with
respect to any ERISA Plan and the then current value of such ERISA Plan's
benefit liabilities exceeds the then current value of such ERISA Plan's assets
available for the payment of such benefit liabilities by more than $25,000.
(j) The Company shall suffer the entry against it a final judgment for the
payment of money in excess of $25,000.
(k) Fidelity shall believe that the prospect for payment or performance of
the Obligations has become impaired.
(l) Any guarantor of the Obligations shall repudiate his, her or its
obligations in respect of such guaranty.
(m) American Consolidated Laboratories, Inc., shall cease to own at least
100% of the outstanding capital stock of the company.
(n) An Event of Default shall occur under the other Affiliate Agreement.
(o) American Consolidated Laboratories, Inc. shall breach any covenant or
agreement made in the Warrant or the Guaranty, and the same shall not be cured
to Fidelity's satisfaction within ten days after such covenant or agreement is
breached.
(p) An event of default shall have occurred under the Security Agreement.
Upon the occurrence of an Event of Default described in subsections (d) or (c)
of this section, all of the Obligations owing by the Company to Fidelity under
any of the Transaction Documents shall thereupon be immediately due and payable,
without demand, presentment, notice of demand or of dishonor and nonpayment, or
any other notice or declaration of any kind, all of which are hereby expressly
waived by the Company. During the continuation of any other Event of Default,
Fidelity, at any time and from time to time, may declare any or all of the
Obligations owing by the Company to Fidelity under any of the Transaction
Documents immediately due and payable, all without notice, demand, presentment,
notice of demand or of dishonor and nonpayment, or any notice or declaration of
any kind, all of which are hereby expressly waived by the Company. After any
such acceleration (whether automatic or due to declaration by Fidelity), any
obligation of Fidelity to make any further Advances or loans of any kind under
this Agreement or any other agreement with the Company shall terminate.
The enumeration of Events of Default shall not impair the nature of the
Obligations as demand obligations, at all times payable upon demand pursuant
hereto. All Advances hereunder are subject to approval by Fidelity in its sole
discretion, and may be declined in whole or in part, without prior notice to the
Company, whether or not an Event of Default may then be in existence.
SECTION 10. REMEDIES AND APPLICATION OF PROCEEDS.
10.1 In addition to, and without limitation of, the foregoing provisions of
this Agreement, if an Event of Default shall have occurred and be continuing,
Fidelity may from time to time in its discretion, without limitation and without
notice except as expressly herein; (a) exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein, under the other
Transaction Documents or otherwise available to it, all the rights and remedies
of a secured party on default under the UCC (whether or not the UCC applies to
the affected Collateral); (b) require the Company to, and the Company hereby
agrees that it will at its expense, assemble all or part of the Collateral as
directed by Fidelity and make it available to Fidelity at a place to be
designated by Fidelity that is reasonably convenient to both parties; (c) reduce
its claim to judgment or foreclose or otherwise enforce, in whole or in part,
the security interest created hereby by any available judicial procedure; (d)
dispose of, at its office, on the premises or the Company or elsewhere, all or
any part of the Collateral, as a unit or in parcels, by public or private
proceedings; (e) buy the Collateral, or any part thereof, at any public sale, or
at any private sale if the Collateral is of a type customarily sold in a
recognized market or is of a type that is the subject to widely distributed
standard price quotations; (f) apply by appropriate judicial proceedings for
appointment of a receiver for the Collateral, or any part thereof, and the
Company hereby consents to any such appointment; and (g) at its discretion,
retain the Collateral in satisfaction of the Obligations whenever the
circumstances are such that Fidelity is entitled to do so under the UCC or
otherwise. The Company agrees that, to the extent notice of sale shall be
required by law, at least five day's notice to the Company of the time and place
of any public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Fidelity shall not be obligated to make any
sale of Collateral regardless of whether any notice of sale has been
9
given. Fidelity may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
10.2 If any Event of Default shall have occurred and be continuing,
Fidelity may in its discretion apply any Cash Collateral, and any cash proceeds
received by Fidelity in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral, to any or all of the
following in such order as Fidelity may elect: (a) the repayment of all or any
portion of the Obligations or any "Obligations" owed to Fidelity by the other
Affiliate Company under the other Affiliate Agreement; (b) the repayment of
reasonable costs and expenses, including reasonable attorneys' fees and legal
expenses, incurred by Fidelity (whether or not litigation has been commenced or
a judgment has been issued, and if litigation has been commenced, whether at
trial or any appellate level) in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any Collateral, (iii) the exercise
or enforcement of any of the rights of Fidelity hereunder, or (iv) the failure
of the Company to perform or observe any of the provisions hereof, (c) the
payment or other satisfaction of any liens and other encumbrances upon any of
the Collateral; (d) the reimbursement of Fidelity for the amount of any
obligations of the Company paid or discharged by Fidelity, and of any expenses
of Fidelity payable by the Company hereunder or under the other Transaction
Documents, (e) by holding the same as Collateral; (f) the payment of any other
amounts required by applicable law (including, without limitation, Part 5 of
Article 9 of the UCC or any successor or similar applicable statutory
provision); and (g) by delivery to the Company or to whomsoever shall be
lawfully entitled to receive the same or as a court of competent jurisdiction
shall direct.
SECTION 11. MISCELLANEOUS.
11.1 In the event that the Company commits any act or omission that
prevents or unreasonably interferes with (a) Fidelity's exercise of the rights
and privileges arising under the power of attorney granted in Section 8 of this
Agreement or (b) Fidelity's perfection of or levy upon the security interest
granted in the Collateral, including any seizure of any Collateral, the Company
acknowledges that such conduct will cause immediate, severe, incalculable and
irreparable harm and injury, and agrees that such conduct shall constitute
sufficient grounds to entitle Fidelity to an injunction, writ of possession, or
other applicable relief in equity, and to make such application for such relief
in any court of competent jurisdiction, without any prior notice to the Company.
11.2 All rights, remedies and powers granted to Fidelity in this Agreement,
or in any other instrument or agreement given by the Company to Fidelity or
otherwise available to Fidelity in equity or at law, are cumulative and may be
exercised singularly or concurrently with such other rights as Fidelity may
have. These rights may be exercised from time to time as to all or any part of
the Collateral as Fidelity in its discretion may determine. In the event that
Fidelity elects to purchase the Eligible Accounts hereunder, such transaction
shall constitute a purchase of Accounts under the UCC, and the Company shall be
deemed to have sold, assigned, transferred, conveyed and delivered to Fidelity,
as absolute owner, all of the rights, title and interest of the Company in and
to all Eligible Accounts. No waiver by Fidelity of its rights and remedies shall
be effective unless the waiver is in writing and signed by Fidelity. A waiver by
Fidelity of a right or remedy under this Agreement or any other Transaction
Document on one occasion shall not be deemed to be a waiver of such right or
remedy on any subsequent occasion. An Advance by Fidelity during the
continuation of an Event of Default shall not obligate Fidelity to make any
further Advances during the continuation of such Event of Default.
11.3 Any notice or communication with respect to this Agreement or any
other Transaction Document shall be given in writing, sent by (i) personal
delivery, (ii) expedited delivery service with proof of delivery, (iii) United
States mail, postage prepaid, registered or certified mail, or (iv) prepaid
telegram, telex or telecopy, addressed to each party hereto at its address set
forth below its signature hereon or to such other address or to the attention of
such other Person as hereafter shall be designated in writing by the applicable
party sent in accordance herewith. Any such notice or communication shall be
deemed to have been given either at the time of personal delivery or, in the
case of delivery service or mail, as of the date of first attempted delivery at
the address and in the manner provided herein, or in the case of telegram, telex
or telecopy, upon receipt. The Company hereby agrees that Fidelity may publicize
the transaction contemplated by this Agreement in newspapers, trade and similar
publications including, without limitation, the publication of a "tombstone".
11.4 The term of this Agreement shall be for three years from the date
hereof (the "Term") (the original term and any extension thereof are herein
called the "Term") and from year to year thereafter unless either party hereto
gives notice to the other party hereto not more than 90 days or less than 60
days prior to the end of the Term; provided, however, that Fidelity may
terminate this Agreement at any time effective immediately upon the occurrence
of an Event of Default. The Affiliated Companies acknowledge that they shall
have no right to terminate this Agreement or the other Affiliate Agreement prior
to the end of the Term, that termination of the Agreement or the other Affiliate
Agreement at any time prior to the end of the Term would result in the loss by
Fidelity of benefits under this Agreement and the other Affiliate Agreement and
that the damages incurred by Fidelity as a result of such termination would be
difficult and impractical to ascertain. Therefore, in the event this Agreement
or the other Affiliate Agreement is terminated for any reason during the first
year of the Term, the Affiliated Companies shall, pursuant to this Agreement and
the other Affiliate Agreement, pay to Fidelity an early termination fee in the
aggregate amount of three percent of the Commitment; if this Agreement or the
other Affiliate Agreement is terminated for any reason during the second year of
the Term, the Affiliated Companies shall, pursuant to this Agreement and the
other Affiliate Agreement, pay to Fidelity an early termination fee in the
amount of two percent of the Commitment; and if this Agreement or the other
Affiliate Agreement is terminated for any reason thereafter during the Term, the
Affiliated Companies shall, pursuant to this Agreement and the other Affiliate
Agreement, pay to Fidelity an early termination fee in the amount of one percent
of the Commitment, in each case to the maximum extent permitted by applicable
law. Any termination of this Agreement shall not affect Fidelity's security
interest in the Collateral, and this Agreement shall continue to be effective,
until all transactions entered into and obligations incurred hereunder have been
completed and satisfied in full.
11.5 Each and every provision, condition, covenant and representation
contained in this Agreement is, and shall be construed, to be a separate and
independent covenant and agreement. If any term or provision of this Agreement
shall to any extent be invalid or unenforceable, the remainder of the Agreement
shall not be affected thereby.
10
11.6 The Company hereby indemnifies and agrees to hold harmless and
defend all Indemnified Persons from and against any and all Indemnified Claims.
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH INDEMNIFIED CLAIMS
ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR
THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY INDEMNIFIED PERSON. Upon notification and demand, the
Company agrees to provide defense of any Indemnified Claim and to pay all costs
and expenses of counsel selected by any Indemnified Person in respect thereof.
Any Indemnified Person against whom any Indemnified Claim may be asserted
reserves the right to settle or compromise any such Indemnified Claim as such
Indemnified Person may determine in its sole discretion, and the obligations of
such Indemnified Person, if any, pursuant to any such settlement or compromise
shall be deemed included within the Indemnified Claims. Except as specifically
provided in this section, the Company waives all notices from any Indemnified
Person. The provisions of this Section 11.6 shall survive the termination of
this Agreement.
11.7 All grants, covenants and agreements contained in this Agreement shall
bind and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Company may not delegate or
assign any of its duties or obligations under this Agreement without the prior
written consent of Fidelity. FIDELITY RESERVES THE RIGHT TO ASSIGN ITS RIGHTS
AND OBLIGATIONS UNDER THIS AGREEMENT IN WHOLE OR IN PART TO ANY PERSON OR
ENTITY; PROVIDED, HOWEVER, THAT SO LONG AS THE COMPANY IS NOT THE SUBJECT OF ANY
BANKRUPTCY OR INSOLVENCY PROCEEDING OR ANY RECEIVERSHIP, FIDELITY SHALL NOT
ASSIGN ITS RIGHTS OR OBLIGATIONS HEREUNDER TO ANY DIRECT COMPETITOR OF THE
COMPANY. Without limiting the generality of the foregoing, Fidelity may from
time to time grant participants in all or any part of the Obligations to any
Person on such terms and conditions as may be determined by Fidelity in its sole
and absolute discretion, provided that the grant of such participation shall not
relieve Fidelity of its obligations hereunder nor create any additional
obligation of the Company.
11.8 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA WITHOUT REFERENCE TO THE
RULES THEREOF RELATING TO CONFLICTS OF LAW. THE COMPANY HEREBY IRREVOCABLY
SUBMITS ITSELF TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS
LOCATED IN NORTH CAROLINA, AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY
BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT, ANY
BORROWING HEREUNDER OR ANY OTHER RELATIONSHIP BETWEEN FIDELITY AND THE COMPANY
BY ANY MEANS ALLOWED UNDER STATE OR FEDERAL LAW. ANY LEGAL PROCEEDING ARISING
OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT, ANY BORROWING HEREUNDER OR ANY
OTHER RELATIONSHIP BETWEEN FIDELITY AND THE COMPANY SHALL BE BROUGHT AND
LITIGATED EXCLUSIVELY IN ANY ONE OF THE STATE OR FEDERAL COURTS LOCATED IN THE
STATE OF NORTH CAROLINA HAVING JURSIDICTION. THE PARTIES HERETO HEREBY WAIVE AND
AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY SUCH
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS
IMPROPER.
11.9 EACH OF THE COMPANY AND FIDELITY HEREBY (A) IRREVOCABLY WAIVES, TO
THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY OR ASSOCIATED HEREWITH; (B) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES (C) CERTIFIES THAT NO PARTY HERETO
NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN
THIS PARAGRAPH.
11.10 THIS AGREEMENT, THE SECURITY DOCUMENTS DESCRIBED HEREIN AND THE
ACKNOWLEDGEMENT DELIVERED IN CONNECTION HEREWITH SET FORTH THE ENTIRE
UNDERSTANDING AND AGREEMENT OF THE PARTIES HERETO WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. NO
MODIFICATION OR AMENDMENT OF OR SUPPLEMENT TO THIS AGREEMENT OR TO SUCH
ACKNOWLEDGEMENT SHALL BE VALID OR EFFECTIVE UNLESS THE SAME IS IN WRITING AND
SIGNED BY THE PARTY AGAINST WHOM IS IT SOUGHT TO BE ENFORCED.
11
The undersigned have entered into this Agreement as of the date first
written above.
FIDELITY FUNDING OF CALIFORNIA, INC., CAROLINA CONTACT LENS, INC.,
a California corporation a North Carolina corporation
By: Xxxxxxx X. Xxxxxx By: Xxxxxx X. Arena
Name: Xxxxxxx X. Xxxxxx Name: Xxxxxx X. Arena
Title: President Title: Chief Excecutive Officer
Mailing Address: 000 Xxxx Xxxxx Xxxxxx, Xxxxx X 0000 Xxxxx Xxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000 Xxxxxxx, Xxxxx Xxxxxxxx 00000
Street Address: 000 Xxxx Xxxxx Xxxxxx, Xxxxx X 0000 Xxxxx Xxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000 Xxxxxxx, Xxxxx Xxxxxxxx 00000
Other Business Addresses:
000 Xxx Xxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Trade, Fictitious and Assumed
Names used by the Company:
None
12
EXHIBIT A
FORM OF BORROWING BASE CERTIFICATE
CAROLINA CONTACT LENS, INC.
REPORT NUMBER: DATE:
COLLATERAL ACCOUNTS RECEIVABLE
1. Gross Collateral as of last report #__________________
Dated: (line 6 from prior report)
2. ADD Sales Assignment per attached
3. ADD Debit Memos, Other Adj. Per attached
4. LESS Cash Collections (received by FFOC since prior report)
5. LESS Discounts, CMs, Other Adj. Per attached
6. GROSS COLLATERAL THIS REPORT
7. Ineligible A/R
i. Past Due (over 90 days after invoice date)
ii. Credit (over 30 days from invoice date)
iii. Cross Aging 25%
iv. COD Sales
v. Foreign
vi. Interco., Contra Accounts
vii. Unreconciled A/R Overage
viii. Other
8. TOTAL INELIGIBLE PER THIS REPORT (sum of 7i through viii)
9. NET ELIGIBLE COLLATERAL (line 6 minus 8)
10. Advance Rate 65%
11. Collateral Availability (line 9 times 10)
12. Aggregate Availability
Lesser of (i) Collateral Availability and (ii) Commitment
($2,000,000) less Affiliate Advances outstanding
13. LESS Special Reserve
14. NET AVAILABILITY BEFORE LOAN BALANCE (line 12 minus 13)
LOAN
15. Loan Balance per last report (line 21 from prior report)
16. LESS Payments from Collections (same as line 4)
17. BALANCE per FFOC Report prior to new activity
18. LESS Additional Payments (Other than Collections)
19. ADD Loan Adjustments: specify_____ (Interest, Fees, NSF, etc.)
20. ADD Advance Request per this report
21. NEW LOAN BALANCE (not to exceed line 14)
22. EXCESS AVAILABILITY (line 14 minus 21)
The undersigned hereby certifies to Fidelity Funding of California, Inc.
("Fidelity") that:
1. He is the duly elected, qualified and acting of Carolina Contact Lens, Inc.
(the "Company"), is familiar with the facts herein and is duly authorized to
certify such facts and make and deliver this Borrowing Base Certificate for
and on behalf of the Company pursuant to that certain Loan and Security
Agreement (as from time to time supplemented or amended, the "Agreement"),
dated as of June 25, 1996, between the Company and Fidelity.
2. All representations and warranties made by the Company in the Agreement or
any other instrument, document, certificate or other agreement executed in
connection therewith (collectively, the "Transaction Documents") delivered
on or before the date hereof are true on and as of the date hereof as if
such representations and warranties had been made as of the date hereof.
3. No Event of Default or any event that, with the giving of notice, the
passage of time or both, would constitute an Event of Default has occurred
and is existing.
4. The Company has performed and complied with all agreements and conditions
required in the Transaction Documents to be performed or complied with by it
on or prior to the funding of the Advance requested hereby.
5. After Fidelity makes the Advance requested hereby, the aggregate amount of
all outstanding Advances will not exceed the lesser of (i) the Commitment
and (ii) the Borrowing Base.
6. All information contained in this Borrowing Base Certificate is true,
correct and complete.
Capitalized terms used and not otherwise defined herein shall have the meanings
assigned to them in the Agreement.
IN WITNESS WHEREOF, this instrument is executed by the undersigned as
of , 199 .
Carolina Contact Lens, Inc.
By:
Name:
Title:
