Exhibit 10.28
REIMBURSEMENT AND SECURITY AGREEMENT
REIMBURSEMENT AND SECURITY AGREEMENT, dated as of February 5, 1999 (this
"Agreement"), is by and between Option Care, Inc., a Delaware corporation (the
"Company"), and the Xxxx X. Xxxxxx Trust dtd. 9/20/89 (the "Trust").
WITNESSETH:
WHEREAS, the Company had entered into a Loan and Security Agreement dated
as of February 5, 1999 (the "Loan Agreement" or the "Senior Loan") with the
BankAmerica Business Credit, Inc. (the "Lender") pursuant to which Loan
Agreement the Lender has agreed to lend to the Company and to the other
"Borrowers" parties thereto up to $25,000,000 to fund working capital needs,
certain permitted acquisitions and general business purposes; and
WHEREAS, as additional security for the payment of the Loan, the Company
has requested the Trust to provide an irrevocable letter of credit in favor of
the Lender in the form of Exhibit A hereto (such letter of credit and any
succeeding letter of credit as described in Section 7.04 hereof being herein
called the "Letter of Credit,") in an amount not exceeding $7,000,000 to secure
payment of the Obligations as defined in the Loan Agreement; and
WHEREAS, as security for all indebtedness and obligations of the Company
to the Trust under this Agreement and the other Operative Documents (as defined
herein), the Company will execute and deliver, or cause to be executed and
delivered, to the Trust the Security Documents (as defined herein), and
WHEREAS, the Trust has agreed to provide the Letter of Credit on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the Company and the
Trust hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01 CERTAIN DEFINED TERMS. In addition to terms elsewhere
defined herein, the following terms shall have the following respective
meanings:
"ADMINISTRATIVE FEE" shall mean the fee payable in accordance with
Section 2.02(b).
"BASE RATE" shall mean the per annum rate announced by the Letter of
Credit Bank from time to time as its "prime rate" or "base rate" (it being
acknowledged that such announced rate may not necessarily be the lowest rate
charged by the Letter of Credit Bank to any of its customers) which Base Rate
shall change simultaneously with any change in such announced rate.
"BUSINESS DAY" shall mean a day other than a Saturday, Sunday or other
day on which the Letter of Credit Bank is not open to the public for carrying on
substantially all of its banking functions in Chicago, Illinois.
"CAPITAL LEASE" of any person shall mean any lease which, in accordance
with Generally Accepted Accounting Principles, is or should be capitalized on
the books of such person.
"CLOSING DATE" shall mean the date of this Agreement which shall be the
same date as the Loan Agreement is dated.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations thereunder.
"COMPANY COLLATERAL" shall have the meaning described in Section 2.09
hereof.
"CONTINGENT LIABILITIES" of any person shall mean, as of any date, all
obligations of such person or of others for which such person is contingently
liable, as obliger, guarantor, surety, accommodation party, partner or in any
other capacity, or in respect of which obligations such person assures a
creditor against loss or agrees to take any action to prevent any such loss
(other than endorsements of negotiable instruments for collection in the
ordinary course of business), including without limitation all reimbursement
obligations of such person in respect of any letters of credit, surety bonds or
similar obligations (including, without limitation, bankers acceptances) and all
obligations of such person to advance funds to, or to purchase assets, property
or services from, any other person in order to maintain the financial condition
of such other person.
"CONVERSION PERIOD" shall have the meaning described in Section 2.04(a).
"CONVERSION PRICE" shall have the meaning described in Section 2.04(a).
"CONVERTIBLE NOTE" shall mean a note in the form of the Convertible Note
attached hereto as Exhibit B.
"DEFAULT" shall mean any event or condition which might become an Event
of Default with notice or lapse of time or both.
"DOLLARS" and "$" shall mean the lawful money of the United States of
America.
"ENVIRONMENTAL LAWS" as of any date shall mean all provisions of law,
statute, ordinances, rules, regulations, judgments, writs, injunctions, decrees,
orders, awards and standards promulgated by the government of the United States
of America or any foreign government or by any state, province, municipality or
other political subdivision thereof or therein or by any court, agency,
instrumentality, regulatory authority or commission of any of the
foregoing concerning the protection of, or regulating the discharge of
substances into, the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations thereunder.
"ERISA AFFILIATE" shall mean, with respect to any person, any trade or
business (whether or not incorporated) which, together with such person or any
Subsidiary of such person, would be treated as a single employer under Section
414 of the Code.
"EVENT OF DEFAULT" shall mean any of the events or conditions described
in Section 6.01.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" shall mean generally accepted
accounting principles applied on a basis consistent with that reflected in the
financial statements referred to in Section 4.01(g) hereof.
"HAZARDOUS MATERIALS" includes, without limitation, any flammable
explosives, radioactive materials, hazardous materials, hazardous wastes,
hazardous or toxic substances or related materials defined in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Sections 9601, ET SEQ.), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Sections 1801, ET SEQ.), the Resource Conservation and
Recovery Act, as amended (42 U.S.C. Sections 6901, ET SEQ.), and in the
regulations adopted and publications promulgated pursuant thereto, or any other
federal, state or local government law, ordinance, rule or regulation.
"INDEBTEDNESS" of any person shall mean, as of any date, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person as lessee under any Capital Lease, (c) all obligations which are secured
by any Lien existing on any asset or property of such person whether or not the
obligation secured thereby shall have been assumed by such person (to the extent
of such Lien if such obligation is not assumed), (d) all obligations of such
person for the unpaid purchase price for goods, property or services acquired by
such person, except for trade accounts payable arising in the ordinary course of
business that are not past due, (e) all obligations of such person to purchase
goods, property or services where payment therefor is required regardless of
whether delivery of such goods or property or the performance of such services
is ever made or tendered (generally referred to as "take or pay contracts"), (f)
all liabilities of such person in respect of Unfunded Benefit Liabilities under
any Plan of such person or of any ERISA Affiliate, (g) all obligations of such
person in respect of any interest rate or currency swap, rate cap or other
similar transaction (valued in an amount equal to the highest termination
payment, if any, that would be payable by such person upon termination for any
reason on the date of determination), and (h) all obligations of others similar
in character to those described in clauses (a) through (g) of this definition
for which such person is contingently liable,
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as obliger, guarantor, surety, accommodation party, partner or in any other
capacity, or in respect of which obligations such person assures a creditor
against loss or agrees to take any action to prevent any such loss (other than
endorsements of negotiable instruments for collection in the ordinary course of
business), including without limitation all reimbursement obligations of such
person in respect of letters of credit, surety bonds or similar obligations and
all obligations of such person to advance funds to, or to purchase assets,
property or services from, any other person in order to maintain the financial
condition of such other person.
"LETTER OF CREDIT BANK" shall mean The Northern Trust Company, as issuer
of the Letter of Credit, or any other bank which shall hereafter issue a
Substitute Letter of Credit.
"LIEN" shall mean any pledge, assignment, hypothecation, mortgage,
security interest, deposit arrangement, option, conditional sale or title
retaining contract, sale and leaseback transaction, financing statement filing,
lessor's or lessee's interest under any lease, subordination of any claim or
right, or any other type of lien, charge, encumbrance, preferential arrangement
or other claim or right.
"LOAN" shall have the meaning described in Section 2.04(a).
"MONITORING FEE" shall mean the fee payable in accordance with Section
2.02(c).
"MULTIEMPLOYER PLAN" shall mean any "multiemployer plan" as defined in
Section 4001(a) (3) of ERISA or Section 414(f) of the Code.
"OPERATIVE DOCUMENTS" shall mean the Loan Agreement, the Letter of
Credit, this Agreement, the Convertible Note, the Security Documents, the
Subordination Agreement and any other agreement or instrument relating thereto.
"OVERDUE RATE" shall mean a rate per annum equal to the sum of 300 basis
points (3%) per annum plus the Base Rate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED LIENS" shall mean Liens permitted by Section 5.02(b) hereof.
"PERSON" or "PERSON" shall include an individual, a corporation, an
association, a partnership, a trust or estate, a joint stock company, an
unincorporated organization, a joint venture, a limited liability company, a
trade or business (whether or not incorporated), a government (foreign or
domestic) and any agency or political subdivision thereof, or any other entity.
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"PLAN" shall mean, with respect to any person, any pension plan
(including a Multiemployer Plan) subject to Title IV of ERISA or to the minimum
funding standards of Section 412 of the Code which has been established or
maintained by such person, any subsidiary of such person or any ERISA Affiliate,
or by any other person if such person or any ERISA Affiliate could have
liability with respect to such pension plan.
"PROHIBITED TRANSACTION" shall mean any transaction involving any Plan
which is proscribed by Section 406 of ERISA (and not exempt under Section 408 of
ERISA) or Section 4975 of the Code.
"REPORTABLE EVENT" shall mean a reportable event as described in Section
4043(b) of ERISA including those events as to which the thirty (30) day notice
period is waived under Part 2615 of the regulations promulgated by the PBGC
under ERISA.
"SECURITY DOCUMENTS" shall mean this Agreement (to the extent it grants a
security interest), and all other related agreements and documents, including
financing statements and similar documents, in each case including any
amendments, supplements, replacements or modifications thereof delivered
pursuant to this Agreement or otherwise entered into by any person to secure the
obligations of the Company under this Agreement.
"SUBORDINATED DEBT" of any person shall mean, as of any date, that
Indebtedness of such person which is expressly subordinate and junior in right
and priority of payment to all Indebtedness owing to another person in manner
and by agreement satisfactory in form and substance to the holder of the senior
debt.
"SUBORDINATION AGREEMENT" shall mean the Subordination Agreement dated
the date hereof, by and among the Company, the Trust and the Lender, as the same
shall be amended, extended, modified or supplemented from time to time.
"SUBSIDIARY" of any person shall mean any other person (whether now
existing or hereafter organized or acquired) in which (other than directors
qualifying shares required by law) at least a majority of the securities or
other ownership interests of each class having ordinary voting power or
analogous right (other than securities or other ownership interests which have
such power or right only by reason of the happening of a contingency), at the
time as of which any determination is being made, are owned, beneficially and of
record, by such person or by one or more of the other Subsidiaries of such
person or by any combination thereof. Unless otherwise specified, reference to
"Subsidiary" shall mean a Subsidiary of the Company.
"SUBSTITUTE LETTER OF CREDIT" shall mean any letter of credit which shall
be issued in substitution of the Letter of Credit.
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"TERMINATION DATE" shall have the meaning described in Section 2.01(a)
hereof.
"UCC" shall have the meaning described in Section 2.09 hereof.
"UNFUNDED BENEFIT LIABILITIES" shall mean, with respect to any Plan as of
any date, the amount of the unfunded benefit liabilities determined in
accordance with Section 4001(a)(18) of ERISA.
SECTION 1.02 OTHER DEFINITIONS: RULES OF CONSTRUCTION. As used herein,
the terms "Company", "Trust" and "Agreement" shall have the respective meanings
ascribed thereto in the introductory paragraph of this Agreement and the terms
"Lender", "Loan Agreement", "Senior Loan", and "Letter of Credit" shall have the
meanings ascribed thereto in the prefacing recitals of this Agreement. Such
terms, together with the other terms defined in Section 1.01 hereof and
elsewhere herein shall include both the singular and the plural forms thereof
and shall be construed accordingly. All financial terms used herein shall be
made or construed in accordance with Generally Accepted Accounting Principles
existing on the date hereof unless such principles are inconsistent with the
express requirements of this Agreement. Use of the terms "herein", "hereof", and
"hereunder" shall be deemed references to this Agreement in its entirety and not
to the Section or clause in which such term appears. References to "Sections"
and "subsections" shall be to Sections and subsections, respectively, of this
Agreement unless otherwise specifically provided.
ARTICLE II.
AMOUNT AND TERMS OF THE LETTER OF CREDIT
SECTION 2.01 THE LETTER OF CREDIT. The Trust agrees, on the terms and
subject to the conditions hereinafter set forth, to cause the Letter of Credit
to be issued for the benefit of the Lender in an amount not to exceed $7,000,000
and expiring on or before January 31, 2000 unless extended by the Trust pursuant
to the provisions of Section 7.04 hereof (the "Termination Date"). Delivery of
the Letter of Credit will be conditioned upon satisfaction of the conditions
precedent set forth in Section 3.01 hereof.
SECTION 2.02 LETTER OF CREDIT FEES. In consideration for the Trust's
delivery of the Letter of Credit, the Company agrees to make the following
payments to the Trust:
(a) Upon delivery of the Letter of Credit the Company shall reimburse the
Trust for its reasonable legal fees incurred in connection with the transactions
herein described; and
(b) To the extent permitted by the Subordination Agreement upon delivery
of the
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Letter of Credit and thereafter , on the first day of each month, beginning with
the first month following delivery of the Letter of Credit, the Company shall
pay the Trust an administrative fee of $13,500 per month (the "Administrative
Fee"); provided, however, that in the event that the amount of the Letter of
Credit shall be reduced in accordance with the provisions of Section 7.5(b) of
the Loan Agreement, the Administrative Fee otherwise payable to the Trust for
the month following such reduction and thereafter shall be proportionately
reduced to reflect the lower amount represented by the Letter of Credit.
(c) Upon delivery of the Letter of Credit and thereafter on the first day
of each month, beginning with the first month following delivery of the Letter
of Credit, the Company shall pay to X.X. Financial Enterprises, Inc., a
monitoring fee of $4,000 per month (the "Monitoring Fee").
SECTION 2.03 REIMBURSEMENT. Unless the Company shall have obtained a Loan
from the Trust pursuant to Section 2.04, the Company hereby agrees to pay to the
Trust (i) on any date on which the Trust shall be required to reimburse the
Letter of Credit Bank for a draft presented under the Letter of Credit, a sum
equal to the amount so paid by the Trust plus any and all reasonable
out-of-pocket expenses which the Trust may pay or incur relative to the Letter
of Credit, (ii) forthwith upon demand by the Trust, any and all expenses
incurred by the Trust in enforcing or protecting any rights under this Agreement
or any of the other Operative Documents, including without limitation reasonable
attorneys' fees relating to such enforcement or protection, and (iii) forthwith
upon demand by the Trust, interest on any and all amounts remaining unpaid by
the Company under this Agreement at any time from the date any such amount
becomes payable until payment in full, at the Overdue Rate.
SECTION 2.04 MAKING OF LOANS (a) The Company may, at its option, or any
date on which the Company shall be required to reimburse the Trust for a draw on
the Letter of Credit, and provided that no Event of Default shall have occurred
and be continuing, elect to not reimburse the Trust and instead the Company
shall be deemed, without further action on its part, to have obtained a loan or
loans (collectively the "Loan") for the amount of the reimbursement in
accordance with and subject to the terms and conditions set forth in this
Section 2.04.
(b) Each Loan shall be evidenced by the Convertible Note to be executed
by the Company and delivered to the Trust on the Closing Date. The Convertible
Note shall be dated as of the Closing Date. The Trust shall, and is hereby
authorized by the Company, to endorse on the schedule forming a part of the
Convertible Note appropriate notations evidencing the date, amount and maturity
of each Loan and the date and amount of each payment of principal on each Loan
received from the Company.
(c) The Loan shall mature on the earlier of (i) the date that the Trust
shall elect to convert the full outstanding principal of the Convertible Note in
accordance with Section 2.05 or
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(ii) January 31, 2000 ("Maturity"). Unless the Convertible Note shall have been
fully converted in accordance with Section 2.05, all principal shall be due and
payable in a single balloon payment on January 31, 2000 or such earlier date as
shall be consented to by the Trust; provided, however, that no principal on the
Loan shall be paid without the written consent of the Lender so long as the
Subordination Agreement is in effect.
(d) The principal amount of any Loan from time to time outstanding and
unpaid shall bear interest calculated at 200 basis points (2%) over the "Base
Rate" of interest. The effective date of any change in said Base Rate shall for
purposes hereof be the date the rate is changed by the Lender and such rate
shall be adjusted each January 1, April 1, July 1 and October 1 during which
time any part of the Loan is outstanding.
(e) Interest on the balance of the Loan outstanding from time to time
shall be payable simultaneous with the payment of principal provided for in the
Convertible Note or, upon conversion of the Convertible Note in accordance with
Section 2.05 hereof, all interest due and owing on the portion of the
Convertible Note so converted shall be paid on or prior to the date of
conversion. Interest shall be calculated on the basis of a year of 365 or 366
days, as the case may be, for the actual number of days elapsed. All payments
received by the Trust from the Company shall first be applied to accrued
interest, if any, and unpaid expenses and then to principal. Any amount of
principal or interest in the Convertible Note which is not paid when due,
whether at stated maturity, by acceleration or otherwise shall bear interest
payable on demand at the Overdue Rate.
(f) With the consent of the Trust, the Company may prepay the entire
outstanding principal and interest of the Loan, without any prepayment penalty
whatsoever; provided, however, (i) the Company shall have first given the Trust
fifteen (15) days prior written notice of the Company's intent to make such
prepayment, (ii) the Trust shall give its written consent to such prepayment,
which consent may be withheld by Trust for any reason, (iii) the Trust shall
not, prior to the date set for prepayment, have elected, or announced its
intention to convert, all or a portion of the Loan into shares of stock of the
Company pursuant to Section 2.05 hereof, and (iv) the Company shall concurrently
with the prepayment of the Loan pay all interest then accrued and unpaid on the
Loan; provided that no such prepayment may occur without the written consent of
the Lender so long as the Subordination Agreement is in effect.
SECTION 2.05 RIGHT TO CONVERT; CONVERSION PRICE.
(a) Subject to and upon compliance with the provisions hereof, the holder
of the Convertible Note shall have the right, at such holder's option, at any
time up to and including January 31, 2000 or until the Convertible Note shall
have been paid in full (the "Conversion Period"), to convert all or any portion
of the unpaid amount of such Convertible Note into Common Stock of the Company
at a price per share equal to the average closing price per share
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of the Common Stock during the five days preceding the date of the Company's
election to obtain a Loan (in the event that more than one Loan has been
obtained the price for each Loan shall be computed separately) ("Conversion
Price"). The number of shares of the Common Stock of the Company into which any
Convertible Note shall be convertible shall be subject to adjustment pursuant to
the further provisions of this Section 2.05.
In order to convert the Convertible Note, the holder thereof shall
surrender the Convertible Note to the Company at its principal office at 000
Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxxxxx (or such other office or
agency of the Company as the Company may designate by notice in writing to the
holder of the Convertible Note), accompanied by a written statement designating
the principal amount of such Convertible Note and the Conversion Price
applicable to the portion of the Loan so converted. If the Convertible Note is
converted in part only, the Company shall, upon such conversion, execute and
deliver to the holder thereof, at the expense of the Company, a new Convertible
Note in principal amount equal to the unconverted portion of such Convertible
Note.
(b) Within a reasonable time, not exceeding fifteen (15) days after the
receipt of the written statement referred to in subsection 2.05(a) and surrender
of the Convertible Note as aforesaid, the Company shall issue and deliver to the
holder thereof (hereinafter in this subsection, the term "holder" shall include
the nominee of any such holder), registered in the name of such holder, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such Convertible Note (or specified portion
thereof). To the extent permitted by law, such conversion shall be deemed to
have been effected and the Conversion Price and the number of shares of Common
Stock issuable in connection with such conversion shall be determined as of the
close of business on the date on which such written statement shall have been
received by the Company and the Convertible Note shall have been surrendered as
aforesaid, and at such time the rights of the holder of the Convertible Note as
to the converted portion of the principal of the Convertible Note shall cease,
and the person or persons in whose name or names any certificate or certificates
for shares of Conversion Stock shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the shares represented
thereby. The Company will, at the time of such conversion, in whole or in part,
upon request of the holder of the Convertible Note, acknowledge in writing its
continuing obligation to such holder in respect of any rights (including,
without limitation, any right of registration of the shares of Common Stock
issued upon such conversion) to which such holder shall continue to be entitled
under this Agreement (including issuance of a new Convertible Note for any
non-converted portion of the Note) after such conversion; provided, that the
failure of such holder to make any such requests shall not affect the continuing
obligation of the Company to such holder in respect of such rights.
(c) No payment or adjustments shall be made upon any conversion on
account of any
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cash dividends on the Common Stock issued upon such conversion.
The Company shall pay all interest on the Convertible Note surrendered for
conversion, accrued to the date upon which the above-mentioned written statement
shall have been received by the Company.
(d) In case the Company shall at any time subdivide or combine the
outstanding shares of Common Stock, the Conversion Price shall forthwith be
proportionately decreased in the case of a subdivision and increased in the case
of a combination. Similarly, in case the Company shall pay a dividend in, or
make a distribution of, shares of Common Stock or of shares of the Company's
capital stock convertible with Common Stock, the Conversion Price shall
forthwith be proportionately decreased as of the record date for such divided or
distributions. Further, in the case of any reclassification or change of
outstanding shares of Common Stock, in the case of any consolidation or merger
of the Company with or into another corporation or in the case of any sale or
conveyance to another corporation of the property of the Company as an entity or
substantially as an entity, then, as a condition of such reclassification,
change, consolidation, merger, sale or conveyance, the Company, or such
successor or purchasing corporation, as the case may be, shall make lawful and
adequate provisions whereby the holder of the Convertible Note shall thereafter
have the right to receive on conversion of the Convertible Note the kind and
amount of securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock issuable upon exercise of the Convertible Note immediately prior to
such reclassification, change, consolidation, merger, sale or conveyance. In the
event that further adjustments to the Conversion Price are warranted and are not
addressed above, the parties will negotiate in good faith to resolve such
differences and, in the absence of agreement will submit resolution of any such
matters to binding arbitration before the Chicago chapter of the American
Arbitration Association.
SECTION 2.06 PAYMENTS AND COMPUTATIONS. The Company shall make each
payment hereunder in lawful money of the United States of America to the Trust
at its address referred to in Section 7.02 hereof in immediately available
funds. All computations of interest, commissions and fees hereunder shall be
made by the Trust on the basis of a year of 365 or 366 days, as the case may be,
for the actual number of days elapsed.
SECTION 2.07 PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Business Day,
such payment may be made on the next succeeding Business Day, and such extension
of time shall in such case be included in the computation of such payment.
SECTION 2.08 OBLIGATIONS ABSOLUTE. The obligations of the Company under
this Agreement shall be absolute, unconditional and irrevocable and shall remain
in full force and
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effect until this Agreement and the Letter of Credit are terminated with no
outstanding reimbursement obligations or other amounts owing hereunder or under
the Convertible Note or the entire principal of, premium, if any, and interest
on the Senior Loan shall have been paid, or a sufficient amount of the Loan
shall have been paid so as to cause the Lender to release the Letter of Credit
and thereafter until all of the obligations of the Company to the Trust
hereunder and under the Operative Documents, including, but not limited to the
Convertible Note, shall have been satisfied, and such obligations of the Company
shall not be affected, modified or impaired upon the happening of any event,
including, without limitation, any of the following, whether or not with notice
to, or the consent of, the Company:
(a) Any lack of validity or enforceability of any of the Operative
Documents;
(b) Any amendment, modification, waiver, consent, or any substitution,
exchange or release of or failure to perfect any interest in collateral or
security, with respect to any of the Operative Documents;
(c) The existence of any claim, setoff, defense or other right which the
Company may have at any time against the Lender, any beneficiary or any
transferee of the Letter of Credit (or any persons or entities for whom the
Lender, any such beneficiary or any such transferee may be acting), the Letter
of Credit Bank, the Trust or any other person or entity, whether in connection
with this Agreement, any of the Operative Documents, the transactions
contemplated herein or therein or any unrelated transactions;
(d) Any draft or other statement or document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever;
(e) Payment by the Letter of Credit Bank under the Letter of Credit
against presentation of a draft or certificate which does not comply with the
terms of the Letter of Credit, including failure of any documents to bear any
reference or adequate reference to the Letter of Credit; provided, however, that
in any such event, upon payment in full of the Trust, the Company shall be
subrogated to the Trust's rights against the Letter of Credit Bank;
(f) Any failure, omission, delay or lack on the part of the Trust or any
party to any of the Operative Documents in enforcing, asserting or exercising
any right, power or remedy conferred upon the Trust or any such party under this
Agreement or any of the Operative Documents, or any other acts or omissions on
the part of the Trust or any such party;
(g) The voluntary or involuntary liquidation, dissolution, sale or other
disposition of all or substantially all the assets of the Company, the
receivership, insolvency, bankruptcy,
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assignment for the benefit of creditors, reorganization, arrangement,
composition with creditors or readjustment or other similar proceedings
affecting the Company or any of the assets of either of them, or any allegation
or contest of the validity of this Agreement or any of the Operative Documents,
in any such proceeding;
(h) Any other event or action that would, in the absence of this clause,
result in the release or discharge by operation of law of the Company from the
performance or observance of any obligation, covenant or agreement contained in
this Agreement; or
(i) No setoff, counterclaim, reduction or diminution of any obligation,
or any defense of any kind or nature which the Company has or may have against
the Lenders shall be available hereunder to the Company against the Trust.
SECTION 2.09 SECURITY AND COLLATERAL. Subject to the provisions of the
Subordination Agreement regarding subordination of the Trust's security interest
to the interest of the Lender, the Company, to secure all indebtedness and
obligations of the Company to the Trust under this Agreement and under the other
Operative Documents, hereby assigns to the Trust and grants to the Trust a
security interest in and to the following, and each item thereof, whether now
owned or now due, or in which the Company has an interest, or in which the
Company obtains an interest, or which the Company hereafter acquired, or which
becomes due, and all products, proceeds, substitutions, and accessions of or to
any of the following (all of which, together with any other property of the
Company in which the Trust now or may in the future be granted a security
interest hereunder or under or in any other Operative Document, being referred
to herein as the "Company Collateral"; all capitalized terms used in this
description of the Company Collateral which are not otherwise defined herein
have the meaning ascribed to such terms in the Uniform Commercial Code as
presently in effect in the State of Illinois ("UCC"): Accounts and Accounts
Receivable; Inventory; General Intangibles; Equipment; Goods; Fixtures; Contract
Rights; Chattel Paper; Instruments; Documents of Title; Documents; policies and
certificates of insurance; Securities; Investment Property; Securities
Entitlements; Security Accounts; deposits, deposit accounts; impressed accounts;
compensating balances; money; cash; insurance proceeds, refunds, and premium
rebates; warranty claims; tax refunds and rebates; all means and vehicles of
investment or hedging, including, without limitation, options, warrants, and
futures contracts; records; customer lists; telephone numbers; goodwill; causes
of action; judgments; payments under any settlement or other agreement; literary
rights; rights to performance; royalties; license and/or franchise fees;
licenses; franchises, license agreements, including all rights of Company to
enforce same; permits; certificates of convenience and necessity, and similar
rights granted by any governmental authority; patents, patent applications,
patents pending, and other intellectual property; development ideas and
concepts; proprietary processes; blueprints, drawings, designs, diagrams, plans,
reports, and charts; catalogs; manuals; technical data; computer records,
computer software, rights of access to computer record service bureaus, service
bureau computer contracts, and computer data; tapes, discs, semi-conductor chips
and printouts; trade secrets,
12
copyrights, trade names, trademarks, service marks, and all goodwill relating
thereto; applications for registration of the foregoing; all other general
intangible property in the nature of intellectual property; all liens,
guaranties, rights, remedies, and privileges pertaining to any of the foregoing.
SECTION 2.10 CONFIRMATION OF SECURITY DOCUMENTS. To secure all
indebtedness and obligations of the Company to the Trust under this Agreement,
the Convertible Note and the other Operative Documents, the Company hereby
represents, warrants and agrees as follows:
(a) The Company previously executed and delivered or shall execute and
deliver pursuant hereto the Security Documents.
(b) The Company hereby further confirms its agreement that the Security
Documents secure or guarantee all indebtedness, obligations and liabilities of
the Company to the Trust, including, without limitation, all the indebtedness,
obligations and liabilities of the Company to the Trust pursuant to this
Agreement.
(c) The Company confirms and agrees that all references in the Security
Documents to the terms "Liabilities", "Obligations", "Secured Obligations" or
terms of like import shall include, without limitation, all indebtedness,
obligations and liabilities of the Company to the Trust pursuant to this
Agreement and the Convertible Note.
(d) The Company hereby represents and warrants that the representations
and warranties contained in the Security Documents executed and delivered by it
are true and correct on and as of the date of this Agreement with the same force
and effect as if made on such date.
(e) The Security Documents are ratified and confirmed and shall remain in
full force and effect, and the Company hereby acknowledges that it has no
defense, offset or counterclaim with respect thereto.
ARTICLE III.
CONDITIONS OF ISSUANCE
SECTION 3.01 CONDITIONS PRECEDENT TO ISSUANCE OF THE LETTER OF CREDIT.
The obligation of the Trust to deliver the Letter of Credit is subject to the
satisfaction of the following conditions precedent:
(a) DOCUMENTS. On or before the date of delivery of the Letter of Credit,
the Trust shall have received the following documents, each in form and
substance satisfactory to the
13
Trust:
(i) ORGANIZATIONAL DOCUMENTS. A copy of the articles of
organization of the Company, certified to a current date by the Delaware
Secretary of State, together with current Certificates of Good Standing of the
Company in Delaware and Illinois issued by the Secretary of State of each of
those respective states, all certified as true and correct on the Closing Date
by an authorized member of the Company.
(ii) BY-LAWS AND CORPORATE AUTHORIZATIONS. Copies of the By-laws
of the Company and corporate resolutions of the Company approving this Agreement
and the Operative Documents to which the Company is a party and the consummation
by the Company of the transactions contemplated hereby and thereby, and copies
of all other documents evidencing necessary action of the Company with respect
to this Agreement, all certified as true and correct on the Closing Date by the
Company's secretary.
(iii) INCUMBENCY CERTIFICATE. A certificate of incumbency of the
Company containing, and attesting to the genuineness of, the signatures of those
officers of the Company authorized to act on behalf of the Company in connection
with the Operative Documents to which it is a party and the consummation by the
Company of the transactions contemplated thereby, certified as true and correct
as of the Closing Date by a duly authorized officer of the Company.
(iv) CONSENTS, APPROVALS, ETC. Copies of all consents and
approvals necessary for the Company to enter into this Agreement, the Loan
Agreement, the Convertible Note, the Operative Documents to which the Company is
a party and the transactions contemplated herein and therein, together with a
certificate of an authorized officer of the Company dated such date of issuance
stating that such approvals are true and correct copies thereof and are in full
force and effect at such date, or if none are required a certificate to that
effect executed by an authorized officer of the Company.
(v) SECURITY DOCUMENTS. The Security Documents, duly executed on
behalf of the Company and any other requisite person, as the case may be,
granting to the Trust the collateral and security intended to be provided
pursuant hereto, together with all closing documentation provided for
thereunder, and together with:
(A) RECORDING, FILING, ETC. Evidence of the recordation,
filing and other action (including payments of any applicable taxes or fees) in
such jurisdictions as the Trust may deem necessary or appropriate with respect
to the Security Documents, including the filing of financing statements and
similar documents which the Trust may deem necessary or appropriate to create,
preserve or perfect the liens, security interests and other rights intended to
be granted to the Trust thereunder, together with Uniform Commercial Code record
searches in
14
such offices as the Trust may request;
(B) CASUALTY AND OTHER INSURANCE. Certificates evidencing
liability and property damage insurance with respect to the Company's property
in such amounts, on such terms and covering such risks as are usually carried by
companies engaged in similar businesses, owning similar properties and which are
similarly situated;
(vi) OPERATIVE DOCUMENTS. An executed copy of the Loan Agreement,
the Convertible Note and each of the other Operative Documents.
(vii) COMPANY CLOSING CERTIFICATE. A certificate of an authorized
officer of the Company as to the matters set forth in Sections 3.01(b) and (c)
below.
(viii) OTHER DOCUMENTS. Such other documents, instruments,
approvals or opinions (and, if requested by the Trustee, certified duplicates of
executed copies thereof) as the Trust may reasonably request.
(b) NO MISREPRESENTATION. The representations and warranties of the
Company contained in Article IV of this Agreement are true and correct on and as
of the Closing Date as though made on and as of such date.
(c) NO DEFAULT. No event has occurred and is continuing, or would result
from such issuance, which constitutes a Default or an Event of Default.
(d) PRIOR LOAN. Evidence, satisfactory to the Trust and the Trust's
counsel, of the payment in full of the obligation owed under that certain loan
agreement dated as of December 23, 1996 among the Company and the financial
institution named in such loan agreement for which PNC, National Association
serves as agent (the "Prior Loan") and the release and return to the Trust of
the letter of credit provided by the Trust in support of the Prior Loan.
(e) ISSUANCE FEE. The Trust shall have received the Issuance Fee plus its
reasonable attorneys fees.
(f) INTERCREDITOR AGREEMENT. The Lender shall have executed and delivered
the Intercreditor Agreement to the Trust containing terms and conditions
satisfactory to the Trust, including, but not limited to, provisions that will
permit the Lender to make draws upon the Letter of Credit only after the
occurrence of an Event of Default (as defined in the Loan Agreement) and then
only to the extent that the liquidation by the Lender of the "Collateral" other
than the "Additional Collateral" (as those terms are defined in the Loan
Agreement) results in a shortfall of monies owed by the Company to the Lender
under the Loan Agreement.
(g) COUNSEL APPROVAL. All of the Operative Documents shall be in form and
15
substance reasonably satisfactory to Xxxxx, Xxxxxx, XxxXxx & Xxxxxxxxxx, P.C.,
counsel for the Trust.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Trust as follows:
(a) COMPANY EXISTENCE AND POWER. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified to do business, and is in good standing, in all
additional jurisdictions where such qualification is necessary under applicable
law. The Company has all requisite power to own or lease the properties used in
its business and to carry on its business as now being conducted and as proposed
to be conducted, and to execute and deliver this Agreement and the Operative
Documents to which it is party and to engage in the transactions contemplated by
this Agreement.
(b) COMPANY AUTHORITY. The execution, delivery and performance by the
Company of this Agreement and the Operative Documents to which it is a party do
not contravene any law or any contractual restriction binding on or affecting
it, and do not result in or require the creation of any lien, security interest
or other charge or encumbrance (except as provided in or contemplated by this
Agreement or the Loan Agreement) upon or with respect to any of its properties;
the execution, delivery and performance by the Company of this Agreement and the
Operative Documents to which it is a party have been duly authorized by all
necessary action and do not contravene the Company's articles of organization or
agreement or any contract or undertaking to which the Company is a party or by
which the Company or its property may be bound or affected and will not result
in the imposition of any Lien except for Permitted Liens.
(c) CONSENTS. ETC. All necessary consents, authorizations or approvals
of, or other action by, or notice to or filing with, any governmental or
regulatory authority or any nongovernmental person or entity required to be
obtained or made by the Company in connection with (i) the execution, delivery
and performance by the Company of this Agreement, (ii) the execution and
delivery of the Loan Agreement or the other Operative Documents, or (iii) any of
the other transactions contemplated by this Agreement or the Operative Documents
to be performed as of the date of delivery of the Letter of Credit, have been
obtained or made.
(d) BINDING EFFECT. This Agreement and the Operative Documents to which
the Company is a party are legal, valid and binding obligations of the Company,
enforceable against
16
the Company in accordance with their respective terms, subject to applicable
bankruptcy and insolvency law and general principles of equity.
(e) SUBSIDIARIES. The Company's subsidiaries which are parties to the
Loan Agreement, are each duly organized and validly existing subsidiaries and in
good standing under the laws of the state of their respective incorporation.
(f) LITIGATION. Except as set forth in Schedule 4.01(f) there is no
action, suit or proceeding pending or, to the best of the Company's knowledge,
threatened against or affecting the Company before or by any court, governmental
authority or arbitrator, including, but not limited to, any action, suit or
proceeding, alleging any violation of any federal or state fraud and abuse or
similar statutes, which if adversely decided would result, either individually
or collectively, in any material adverse change in the financial condition of
the Company or in any material adverse effect on the legality or enforceability
of this Agreement or any Operative Document.
(g) FINANCIAL CONDITION. The financial statements of the Company
delivered and to be delivered pursuant to Section 5.01 (d) will fairly present
the financial position of the Company as at the respective dates thereof, and
the results of operations of the Company for the respective periods indicated,
all in accordance with Generally Accepted Accounting Principles consistently
applied, or with appropriate footnotes explaining any variances from Generally
Accepted Accounting Principles (subject, in the case of interim statements, to
year-end audit adjustments). There is no material Contingent Liability of the
Company that will not be reflected in such financial statements or in the notes
thereto.
(h) TAXES. The Company has filed all tax returns (federal, state and
local) required to be filed and has paid all taxes shown thereon to be due,
including interest and penalties, or has established adequate financial reserves
on its books and records for payment thereof. Except as set forth on Schedule
4.01(h), the Company knows of no actual or proposed tax assessment or any basis
therefor, and no extension of time for the assessment of deficiencies in any
federal or state tax has been granted by the Company.
(i) TITLE TO PROPERTIES. The Company has good and marketable title to all
of its property and has a valid and indefeasible ownership interest in all of
such property. All of such properties and assets are free and clear of any Lien
except for Permitted Liens.
(j) ERISA. Except as set forth on Schedule 4.01(j), the Company and its
Plans (if any) are in compliance in all material respects with those provisions
of ERISA and of the Code which are applicable with respect to any Plan. No
Prohibited Transaction and no Reportable Event has occurred with respect to any
such Plan. The Company is not an employer with respect to any Multiemployer
Plan. The Company has met the minimum funding requirements under
17
ERISA and the Code with respect to each of its Plans, if any, and has not
incurred any liability to the PBGC or any Plan. The execution, delivery and
performance of this Agreement and the Operative Documents to which it is a party
do not constitute a Prohibited Transaction. There is no material Unfunded
Benefit Liability, determined in accordance with Section 4001(a) (18) of ERISA,
with respect to any Plan of the Company.
(k) DISCLOSURE. No report or other information furnished in writing by or
on behalf of the Company to the Trust in connection with the negotiation or
administration of this Agreement or other Operative Documents contains any
material misstatement of fact or omits to state any material fact or any fact
necessary to make the statements contained therein not misleading. Neither this
Agreement, the other Operative Documents, nor any other document, certificate,
or report or statement or other information furnished to the Trust by or on
behalf of the Company in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a material
fact in order to make the statements contained herein and therein not
misleading. There is no fact known to the Company which materially and adversely
affects the business, properties, operations or condition, financial or
otherwise, of the Company, which has not been set forth in this Agreement or in
the other documents, certificates, statements, reports and other information
furnished in writing to the Trust by or on behalf of the Company in connection
with the transactions contemplated hereby.
(l) ENVIRONMENTAL AND SAFETY MATTERS. The Company is in substantial
compliance with all federal, state and local laws, ordinances and regulations
relating to safety and industrial hygiene or to the environmental condition,
including without limitation all Environmental Laws in jurisdictions in which
the Company owns or operates a facility or site, or arranges or has arranged for
disposal or treatment of Hazardous Materials, accepts or has accepted for
transport any Hazardous Materials, or holds or has held any interest in real
property or otherwise. No demand, claim, notice, suit, suit in equity, action,
administrative action, investigation or inquiry whether brought by any
governmental authority, private person or entity or otherwise, arising under,
relating to or in connection with any Environmental Laws is pending or to its
knowledge threatened against the Company, any real property in which the Company
holds or has held an interest or any past or present operation of the Company.
The Company (a) is not, to the best of its knowledge, the subject of any federal
or state investigation evaluating whether any remedial action is needed to
respond to a release of any toxic substances, radioactive materials, hazardous
wastes or related materials into the environment, (b) has not received any
notice of any toxic substances, radioactive materials, or hazardous waste in, or
upon any of its properties in violation of any Environmental Laws, (c) knows of
no basis for any such investigation, notice or violation, and (d) does not own
or operate, and to its knowledge has not owned or operated, property which
appears on the United States National Priority List or any other governmental
listing which identifies sites for remedial clean-up or investigatory actions.
No release, threatened release or disposal of hazardous waste, solid waste or
other wastes is occurring or has occurred on, under or
18
to any real property (x) in which the Company or any of its Subsidiaries holds
any interest or performs any of its operations, or (y) to the best of the
Company's knowledge, information and belief, during the ownership or control of
any prior owner of any real property in which the Company holds an interest or
performs any of its operations, in either case in violation of any Environmental
Law, which release could reasonably be anticipated to result in liability for
clean up or otherwise in excess of $100,000 or could reasonably be anticipated
to result in a material adverse effect to the Company's business, properties or
financial condition.
(m) INCORPORATION OF REPRESENTATIONS AND WARRANTIES BY REFERENCE. The
Company hereby makes to the Trust the same representations and warranties as set
forth by it in each Operative Document to which it is a party, which
representations and warranties, as well as the related defined terms contained
therein, are hereby incorporated herein by reference for the benefit of the
Trust with the same effect as if each and every such representation and warranty
and defined term were set forth herein in its entirety and were made as of the
date hereof.
ARTICLE V.
COVENANTS OF THE COMPANY
SECTION 5.01 AFFIRMATIVE COVENANTS. So long as the Trust may be obligated
to provide the Letter of Credit, or a drawing is available under the Letter of
Credit, or any payment or other obligation is due or owing to the Trust under
this Agreement, the Convertible Note or any other Operative Document, the
Company will, unless the Trust shall otherwise consent in writing:
(a) PRESERVATION OF COMPANY EXISTENCE. ETC. Do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its legal
existence and its qualification in good standing in each jurisdiction in which
such qualification is necessary under applicable law, and the rights, licenses,
permits (including those required under Environmental Laws), franchises,
patents, copyrights, trademarks and trade names material to the conduct of its
businesses; and defend all of the foregoing against all claims, actions,
demands, suits or proceedings at law or in equity or by or before any
governmental instrumentality or other agency or regulatory authority.
(b) COMPLIANCE WITH LAWS. ETC. Comply in all material respects with all
applicable laws, rules, regulations and orders of any governmental authority,
whether federal, state, local or foreign (including without limitation, ERISA,
the Code and Environmental Laws) in effect from time to time, non-compliance
with which could materially and adversely affect the financial condition or
operations of the Company (such compliance to include, without limitation,
paying before the same become delinquent all taxes, assessments and governmental
charges imposed upon the Company or upon its property the non-payment of which
could materially and
19
adversely affect the financial condition or operations of the Company) except to
the extent that compliance with any of the foregoing is then contested in good
faith and by appropriate legal proceedings and with respect to which adequate
reserves have been established on the books and records of the Company.
(c) MAINTENANCE OF PROPERTIES: INSURANCE. Maintain, preserve and protect
all property that is material to the conduct of the business of the Company and
keep such property in good repair, working order and condition and from time to
time make, or cause to be made all needful and proper repairs, renewals,
additions, improvements and replacements thereto necessary in order that the
business carried on in connection therewith may be properly conducted at all
times in accordance with customary and prudent business practices for similar
businesses; and, in addition to that insurance required under the Operative
Documents, maintain in full force and effect insurance with responsible and
reputable insurance companies or associations in such amounts, on such terms and
covering such risks, including fire and other risks insured against by extended
coverage, as is usually carried by companies engaged in similar businesses and
owning similar properties similarly situated and maintain in full force and
effect public liability insurance, insurance against claims for personal injury
or death or property damage occurring in connection with any of its activities
or any properties owned, occupied or controlled by in such amount as it shall
reasonably deem necessary, and maintain such other insurance as may be required
by law.
(d) REPORTING REQUIREMENTS. Furnish to the Trust the following:
(i) Promptly and in any event within three calendar days after
becoming aware of the occurrence of (A) any Default or Event of Default, (B) the
commencement of any material litigation against, by or affecting the Company,
and any material developments therein, (C) entering into any material contract
or undertaking that is not entered into in the ordinary course of business or
(D) any development in the business or affairs of the Company which has resulted
in or which is likely in the reasonable judgment of the Company to have a
material adverse effect on the business, properties, operation or condition,
financial or otherwise, of the Company or on the legality, validity or
enforceability of this Agreement, the Convertible Note or any of the other
Operative Document, a statement of an authorized representative of the Company
setting forth details of each such Default or Event of Default or such
litigation, material contract or undertaking or development and the action which
the Company has taken and proposes to take with respect thereto;
(ii) As soon as available and in any event within 120 days after
the end of each fiscal year of the Company a copy of the balance sheet of the
Company as of the end of such fiscal year, and the related statements of income,
retained earnings and cash flows of the Company for such fiscal year, all in
reasonable detail and stating in comparative form the figures as of the end of
and for the previous fiscal year, compiled by certified public accountants of
recognized standing, satisfactory to the Trust, together with a certificate of
the President of the
20
Company stating (A) that no Default or Event of Default has occurred, and is
continuing or, if a Default or an Event of Default has occurred is continuing, a
statement setting forth the details thereof and the action which the Company
proposes to take with respect thereto;
(iii) Promptly furnish to the Trust (A) copies of any other
reports or statements that the Company is required to furnish, or voluntarily
furnishes, to the Lender pursuant to the Loan Agreement or any other agreement
by and between the Company and the Lender and (B) such other information
respecting the business, properties, or the condition or operations, financial
or otherwise, of the Company as the Trust may from time to time reasonably
request.
(e) ACCOUNTING. ACCESS TO RECORDS. BOOKS. ETC. Maintain a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in accordance with
Generally Accepted Accounting Principles and to comply with the requirements of
this Agreement and, at any reasonable time and from time to time, but not more
frequently than once in any three month period, (unless an Event of Default has
occurred hereunder, in which case such frequency limitation shall not apply) (i)
permit the Trust or any agents or representatives thereof to examine and make
copies of and abstracts from the records and books of account of, and visit the
properties of, the Company, and to discuss the affairs, finances and accounts of
the Company with its members, employees and independent auditors, and by this
provision the Company does hereby authorize such persons to discuss such
affairs, finances and accounts with the Trust, and (ii) permit the Trust or any
of its agents or representatives to conduct a comprehensive field audit of its
books, records, properties and assets, including without limitation all
collateral subject to the Security Documents. The activities described in this
subsection (e) shall be at the Trust's expense unless an Event of Default shall
have occurred, in which case such activities shall be at the Company's expense,
or if such activities have already been undertaken by or at the request of the
Senior Lender, in which case the Trust shall not undertake such activities
provided it is provided with any and all information generated for or on behalf
of the Senior Lender.
(f) ADDITIONAL SECURITY AND COLLATERAL. Promptly execute and deliver
additional Security Documents, within 30 days after request therefor by the
Trust, sufficient to grant to the Trust liens and security interests in any
after acquired property of the type described in Section 2.09. The Company shall
notify the Trust, within 10 days after the occurrence thereof, of any event or
condition that may require additional action of any nature in order to preserve
the effectiveness and perfected status of the liens and security interests of
the Trust with respect to such property pursuant to the Security Documents.
(g) FURTHER ASSURANCES. Execute and deliver within 30 days after request
therefor by the Trust, all further instruments and documents and take all
further action that may be necessary or desirable, or that the Trust may
reasonably request, in order to give effect to, and to aid in the exercise and
enforcement of the rights and remedies of the Trust under, this Agreement
21
and the other Operative Documents.
SECTION 5.02 NEGATIVE COVENANTS. So long as the Trust may be obligated to
provide the Letter of Credit, or a drawing is available under the Letter of
Credit, or any payment or other obligation is due or owing to the Trust under
this Agreement, the Convertible Note or any of the other Operative Documents,
the Company will not, without the prior written consent of the Trust:
(a) INDEBTEDNESS. Create, incur, assume or in any manner become liable in
respect of, or suffer to exist, any Indebtedness or enter into any lease as
lessee (whether or not a Capital Lease) other than:
(i) The Indebtedness under the Operative Documents and hereunder,
and other Indebtedness to the Lender;
(ii) The Indebtedness described in SCHEDULE 5.02(A) hereto, having
the same terms as those existing on the date of this Agreement, but no extension
or renewal thereof shall be permitted;
(iii) Indebtedness incurred for the purchase, lease or other
acquisition for value of machinery and equipment classified under Generally
Accepted Accounting Principles as a fixed or capital asset, the principal amount
which on a cumulative basis shall not exceed $100,000 in the aggregate in any
fiscal year, with any amount being unused in any fiscal year being unavailable
for this purpose in succeeding fiscal years;
(iv) Unsecured current Indebtedness constituting obligations for
the unpaid purchase price of goods, property or services incurred in the
ordinary course of business (A) to a seller of inventory purchased for sale in
the ordinary course of business of the Company, (B) to a seller of other
property used in the business of the Company, or (C) to a provider of services
to the Company (including that under or pursuant to the construction contract
for the Project); and
(v) Subordinated Debt which is unsecured.
(b) LIENS. Create, incur or suffer to exist any Lien on any of the
assets, rights, revenues or property, real, personal or mixed, tangible or
intangible, whether now owned or hereafter acquired, of the Company, other than
the following Liens which shall constitute "Permitted Liens":
(i) Liens for taxes not delinquent or for taxes being contested in
good faith by appropriate proceedings and as to which adequate financial
reserves have been established on its books and records;
22
(ii) Liens (other than any Lien imposed by ERISA or any
Environmental Law) created and maintained in the ordinary course of business
which would not have a material adverse effect on the business or operations of
the Company and which constitute (A) pledges or deposits under worker's
compensation laws, unemployment insurance laws or similar legislation, (B) good
faith deposits in connection with bids, tenders, contracts or leases to which
the Company is a party for a purpose other than borrowing money or obtaining
credit, (C) Liens imposed by law, such as those of carriers, warehousemen and
mechanics, if payment of the obligation secured thereby is not yet due, (D)
Liens securing taxes, assessments or other governmental charges or levies not
yet subject to penalties for nonpayment, and (E) pledges or deposits to secure
public or statutory obligations of the Company or surety, customs or appeal
bonds to which the Company is a party;
(iii) Liens affecting real property which constitute minor survey
exceptions or defects or irregularities in title, minor encumbrances, easements
or reservations of, or rights of others for, rights of way, sewers, electric
lines, telegraph and telephone lines and other similar purposes, or zoning or
other restrictions as to the use of such real property, PROVIDED that all of the
foregoing, in the aggregate, do not at any time materially detract from the
value of said properties or materially impair their use in the operation of the
businesses of the Company, and PROVIDED. FURTHER, that any such Lien affecting
the property referred to in the Mortgage shall not be permitted unless approved
by the Trust;
(iv) Liens created pursuant to this Agreement, the Loan Agreement,
any Pledge Agreement referred to in the Loan Agreement or the Security Documents
and Liens expressly permitted by the Security Documents;
(v) Liens securing a lease or payment of a portion of the purchase
price of any tangible fixed asset acquired by the Company secured solely by such
tangible fixed asset acquired if the outstanding principal amount of the
Indebtedness secured by such tangible fixed asset does not exceed the purchase
price thereof, no more than one such Lien encumbers such tangible fixed asset
and the aggregate Indebtedness secured by such Lien or Liens does not exceed the
amounts described in Section 5.02(a)(iii) hereof; and
(vi) Each Lien described in SCHEDULE 5.02(B) hereto which Lien may
be suffered to exist upon the same terms as those existing on the date hereof,
but no modification, extension or renewal thereof shall be permitted.
(c) MERGER: ACQUISITIONS: ETC. Purchase or otherwise acquire, whether in
one or a series of transactions, all or a substantial portion of the business
assets, rights, revenues or property, real, personal or mixed, tangible or
intangible, of any person, or all or a substantial portion of the capital stock
of or other ownership interest in any other person; nor merge or
23
consolidate or amalgamate with any other person or take any other action having
a similar effect, nor enter into any joint venture or similar arrangement with
any other person; nor create any Subsidiaries.
(d) DISPOSITION OF ASSETS. ETC. Sell, lease, license, transfer, assign or
otherwise dispose of all or a substantial portion of its business, assets,
rights, revenues or property, real, personal or mixed, tangible or intangible,
whether in one or a series of transactions, other than as may be expressly
permitted under the Security Documents.
(e) NATURE OF BUSINESS. Engage in any other businesses other than those
in which it is engaged or businesses which are substantially related to the
businesses in which it is engaged on the date of this Agreement.
(f) INVESTMENTS, LOANS AND ADVANCES. Purchase or otherwise acquire any
capital stock of or other ownership interest in, or debt securities of or other
evidences of Indebtedness of any other person; nor make any loan or advance of
any of its funds or property or make any other extension of credit to, or make
any investment or acquire any interest whatsoever in, any other person; nor
create, incur, assume or in any manner become liable for any Contingent
Liability; other than (i) Contingent Liabilities in favor of the Trust or the
Lender, (ii) extensions of trade credit made in the ordinary course of business
on customary credit terms and commission, travel and similar advances made to
officers and employees in the ordinary course of business, (iii) commercial
paper of any United States issuer having the highest rating then given by
Xxxxx'x Investors Service, Inc., or Standard and Poor's Corporation, direct
obligations of and obligations fully guaranteed by the United States of America
or any agency or instrumentality thereof, or certificates of deposit of any
commercial bank which is a member of the Federal Reserve System and which has
capital, surplus and undivided profit (as shown on its most recently published
statement of condition) aggregating not less than $100,000,000, PROVIDED.
HOWEVER, that each of the foregoing investments has a maturity date not later
than 180 days after the acquisition thereof by the Company; and (iv) investments
permitted under the Operative Documents.
(g) INCONSISTENT AGREEMENTS. Enter into any agreement containing any
provision which would be violated or breached by this Agreement or any of the
transactions contemplated hereby or by performance by the Company of its
obligations in connection therewith.
(h) SUBORDINATED DEBT. Make any payment in violation of the terms
applicable to any Subordinated Debt.
ARTICLE VI.
EVENTS OF DEFAULT
24
SECTION 6.01 EVENTS OF DEFAULT. The occurrence of any of the following
events shall be an Event of Default hereunder unless waived by the Trust
pursuant to Section 7.01 hereof:
(a) NONPAYMENT. The Company shall fail to pay when due any amount payable
pursuant to Section 2.03 or 2.04 hereof; or
(b) MISREPRESENTATION. Any representation or warranty made by the Company
in connection with this Agreement or any of the Operative Documents shall prove
to have been incorrect in any material respect when made; or
(c) CERTAIN COVENANTS. The Company shall fail to perform or observe any
term, covenant or agreement contained in Section 5.01(a), 5.01(d)(i) or 5.02
hereof; or
(d) OTHER DEFAULTS. The Company shall fail to perform or observe any
other term, covenant or agreement contained in this Agreement, and such failure
shall remain unremedied for 30 calendar days after written notice thereof shall
have been given to the Company by the Trust; or
(e) CROSS DEFAULT. The Company shall fail to pay any part of the
principal of, the premium, if any, or the interest on, or any other payment of
money due under the Loan Agreement or any of its other Indebtedness having a
principal balance, individually or in the aggregate, in excess of $100,000
(other than Indebtedness hereunder) beyond any period of grace provided with
respect thereto, or if the Company fails to perform or observe any other
agreement, term or condition contained in any document evidencing or securing
such Indebtedness or in any agreement or instrument under which any such
Indebtedness was issued or created, beyond any period of grace, if any, if the
effect of such default is either to cause or to permit the holder or holders
thereof (or a trustee on its or their behalf) to cause the Indebtedness to
become due prior to its stated maturity unless such default has been waived
pursuant to the terms of such other agreement; or
(f) OPERATIVE DOCUMENTS. A default (not caused by the failure of the
Trust to perform its payment obligations under the Letter of Credit) under any
of the Operative Documents shall have occurred and be continuing without being
cured or waived pursuant thereto; or
(g) JUDGMENTS. One or more judgments or orders for the payment of money
in an aggregate amount in excess of $100,000 shall be rendered against the
Company, or any other judgment or order (whether or not for the payment of
money) shall be rendered against the Company which causes a material adverse
change in the business, properties, operations or condition, financial or
otherwise, of the Company or which has a material adverse effect on the
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legality, validity or enforceability of this Agreement or the Security
Documents, and either (i) such judgment or order shall have remained unsatisfied
and the Company shall not have taken action necessary to stay enforcement
thereof by reason of pending appeal or otherwise, prior to the expiration of the
applicable period of limitations for taking such action or, if such action shall
have been taken, a final order denying such stay shall have been rendered,. or
(ii) enforcement proceedings shall have been commenced by any creditor upon any
such judgment or order; or
(h) INSOLVENCY. ETC. The Company shall be dissolved or liquidated (or any
judgment, order or decree therefor shall be entered), or shall generally not pay
its debts as they become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of
creditors, or shall institute, or there shall be instituted against the Company
any proceeding or case seeking to adjudicate it a bankrupt or insolvent or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief or protection of debtors or
seeking the entry of an order for relief, or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its assets, rights, revenues or property, and, if such proceeding is
instituted against the Company and is being contested by the Company in good
faith by appropriate proceedings, such proceeding shall remain undismissed
unstayed for a period of 60 days; or the Company shall take any action
(corporate or other) to authorize or further any of the actions described above
in this subsection; or
(i) SECURITY DOCUMENTS. Any event of default described in any Security
Document shall have occurred and be continuing, or any material provision of any
Security Document shall at any time for any reason cease to be valid and binding
and enforceable against any obliger thereunder, or the validity, binding effect
or enforceability thereof shall be contested by any person, or any obliger shall
deny that it has any or further liability or obligation thereunder, or any
Security Document shall be terminated, invalidated or set aside, or be declared
ineffective or inoperative or in any way cease to give or provide to the Trust
the benefits purported to be created thereby.
SECTION 6.02 REMEDIES UPON AN EVENT OF DEFAULT. If any Event of Default
shall have occurred and be continuing, the Trust may (i) if the Letter of Credit
shall not have been provided, terminate its commitment to provide the Letter of
Credit, (ii) if the Letter of Credit shall have been provided, give notice to
the Company declaring any and all amounts drawn on the Letter of Credit or due
and owing under the Convertible Note, plus interest accrued thereon, to be
immediately due and payable, (iii) in any event, exercise such other rights and
remedies as are available to the Trust under this Agreement, any of the
Operative Documents, any of the Security Documents, or applicable law.
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ARTICLE VII.
MISCELLANEOUS
SECTION 7.01 AMENDMENTS. ETC. This Agreement may be amended from time to
time by the written agreement of all parties hereto. No amendment or waiver of
any provision of this Agreement nor consent to any departure by the Company
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Trust, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 7.02 ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing and mailed by first class mail,
return receipt requested, by overnight delivery with a nationally recognized
carrier or personally delivered as follows:
If to the Company:
Option Care, Inc.
000 Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Trust:
Xxxx X. Xxxxxx Trust
c/o EJ Financial Enterprises
000 X. Xxxxxxxx, Xxxxx 000
Xxxx Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
or such other address as either party may provide in writing to the other.
SECTION 7.03 COSTS, EXPENSES AND TAXES. The Company agrees to pay on
demand all reasonable costs and expenses in connection with the preparation,
execution, delivery, filing, recording and administration of this Agreement and
any other documents which may be delivered in connection with this Agreement,
including, without limitation, the reasonable fees
27
and out-of-pocket expenses of Xxxxx, Xxxxxx, MacKay & Xxxxxxxxxx, P.C., counsel
to the Trust, with respect thereto and with respect to advising the Trust as to
its rights and responsibilities under this Agreement and all reasonable costs
and expenses (including counsel fees and expenses) in connection with (i) the
enforcement of this Agreement, the Security Documents or the other Operative
Documents, and all other documents and instruments which may be delivered in
connection with this Agreement, the Security Documents or the other Operative
Documents, or (ii) any action or proceeding relating to a court order,
injunction or other process or decree restraining or seeking to restrain the
Letter of Credit Bank from paying any amount under the Letter of Credit, or
(iii) any extension of the Letter of Credit or amendment to this Agreement. In
addition, the Company agrees to pay any and all stamp and other taxes and fees
payable or determined to be payable in connection with the execution, delivery,
filing and recording of this Agreement, the Security Documents, the other
Operative Documents and such other documents and agrees to save the Trust
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees.
SECTION 7.04 EXTENSION OF THE LETTER OF CREDIT. At the request of the
Company, but in the absolute, complete and sole discretion of the Trust, and
then only with the consent of the Letter of Credit Bank, the expiry date of the
Letter of Credit may be extended from time to time and each time for a minimum
period of one month. The Company's request for an extension of the Letter of
Credit must be received by the Trust no earlier than thirty (30) days prior to
the scheduled expiry date nor later than sixty (60) days prior to the scheduled
expiry date of the Letter of Credit or any extension thereof. The Trust will
endeavor, promptly after receipt of such request from the Company, to determine
whether the Letter of Credit Bank will extend the Letter of Credit, the period
of the extension, and the terms and conditions applicable to such extension,
including without limitation the Letter of Credit Bank's fees and commissions
applicable thereto. The extension shall be effective upon acceptance by the
Trust of such terms and conditions as the Letter of Credit Bank shall propose,
subject to the further acceptance thereof by the Lender, and delivery by the
Letter of Credit Bank to the Trust of an extension certificate as provided by
the Letter of Credit. Notwithstanding the foregoing, no such agreement for
extension shall in any way limit or otherwise affect the remedies of the Trust
upon an Event of Default set forth in Section 6.02 hereof or available to the
Trust under any of the other Operative Documents or Security Documents.
SECTION 7.05 INTEREST RATE LIMITATION. Notwithstanding any provisions of
this Agreement or any Operative Document, in no event shall the amount of
interest paid or agreed to be paid by the Company exceed an amount computed at
the highest rate of interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this Agreement or any
Operative Document at the time performance of such provision shall be due, shall
involve exceeding the interest rate limitation validly prescribed by law which a
court of competent jurisdiction may deem applicable hereto, then, IPSO FACTO,
the obligations to be
28
fulfilled shall be reduced to an amount computed at the highest rate of interest
permissible under applicable law, and if for any reason whatsoever the Trust
shall ever receive as interest an amount which would be deemed unlawful under
such applicable law such interest shall be automatically applied to the payment
of principal of the amounts outstanding hereunder (whether or not then due and
payable) and not to the payment of interest, or shall be refunded to the Company
if such principal and all other obligations of the Company to the Trust have
been paid in full.
SECTION 7.06 BINDING EFFECT: ASSIGNMENT. This Agreement shall become
effective when it shall have been executed and delivered by the Company and the
Trust and thereafter shall be binding upon and inure to the benefit of the
Company and the Trust and their respective successors and assigns, except that
(i) the Company shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Trust, which will not
be unreasonably withheld, delayed or conditioned, and (ii) the Trust shall not
have the right to assign its rights hereunder without the prior written consent
of the Company, which will not be unreasonably withheld, delayed or conditioned
provided, however, that no consent of the Company shall be required for an
assignment of all or any part of, or any interest (divided or undivided) in, the
Trust's rights and benefits under this Agreement by the Trust to an entity
controlling, controlled by or under common control with Xx. Xxxx X. Xxxxxx, or
to any person who is related by blood, marriage or adoption to Xx. Xxxx X.
Xxxxxx, it being acknowledged that to the extent of any such assignment, such
assignee shall have the same rights and benefits against the Company hereunder
as it would have had if such assignee were the Trust providing the Letter of
Credit hereunder.
SECTION 7.07 SEVERABILITY. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 7.08 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Illinois without giving
effect to choice of law principles of such State.
SECTION 7.09 HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
SECTION 7.10 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which, when so executed and delivered, shall be deemed
to be an original, but all such counterparts taken together shall constitute but
one and the same Agreement.
29
SECTION 7.11 WAIVER OF JURY TRIAL. THE TRUST AND THE COMPANY, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER OF THEM MAY HAVE TO A TRIAL
BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF EITHER OF THEM. NEITHER THE TRUST NOR THE COMPANY SHALL
SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A
JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE
OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN
MODIFIED IN ANY RESPECT OR RELINQUISHED BY EITHER THE TRUST OR THE COMPANY
EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY BOTH OF THEM.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective representatives "hereunto duly
authorized as of the date first above written.
OPTION CARE, INC., a Delaware corporation
By:________________________________________
Its:_______________________________________
XXXX X. XXXXXX TRUST, dtd. 9/20/89
By:________________________________________
Xxxx X. Xxxxxx, Trustee
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