EXHIBIT 11
LOAN AGREEMENT, dated as of August 5, 1997, between XXXX/Biophile
International Corporation, a Delaware corporation (the "Borrower"), and
Clearwater Fund IV, LLC, a Delaware limited liability company (the "Lender").
WITNESSETH:
WHEREAS, Borrower desires to borrow up to $7,000,000 from Lender to
be used by Borrower in connection with the manufacture and delivery of laser
hair removal systems and for general working capital purposes;
WHEREAS, Borrower has previously borrowed from Lender the principal
amount of One Million Four Hundred Thirty-One Thousand Nine Hundred Thirty-One
and 51/100 Dollars ($1,431,931.51), pursuant to that certain 10% Demand
Promissory Note and Security Agreement, dated July 7, 1997, by and between
Borrower and Lender (the "Demand Note"), a copy of which is attached hereto as
Exhibit A, and the parties now desire to cancel the Demand Note and have the
principal amount thereof as of the date of cancellation together with all
accrued and unpaid interest thereon (the "Demand Note Obligations") be governed
by the terms of this Agreement; and
WHEREAS, Lender is prepared to loan up to $7,000,000 (including an
amount equal to the Demand Note Obligations) to Borrower upon the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular, the plural, and
in the plural, the singular:
"Affiliate" means, with respect to any Person, any other Person
which, directly or indirectly, controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other interests, by contract or otherwise).
"Agreement" means this Loan Agreement, as the same may after its
execution be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.
"Bank Accounts" has the meaning provided in Section 4.20.
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"Bankruptcy Code" means Chapter 11 U.S.C. Section 101 et seq. (as
now or hereinafter in effect or any successor thereto).
"Borrower" has the meaning ascribed to such term in the preamble.
"Borrowing Date" means the Business Day specified in each Borrowing
Notice as the date on which Borrower requests Lender to make funds available
under each Loan.
"Borrowing Rate" has the meaning provided in Section 2.4.
"Business Day" means any day excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close.
"Capital Lease" of any Person means any lease of or other agreement
conveying the right to use any property (whether real, personal or mixed) by
that Person as lessee or other like user which, in conformity with GAAP, is, or
is required to be, accounted for as a capital lease on the balance sheet of that
Person, together with any renewals of such leases (or entry into new leases) on
substantially similar terms.
"Capitalized Lease Obligations" of any Person means all obligations
under Capital Leases of such Person, in each case taken at the amount thereof
accounted for as liabilities in accordance with GAAP.
"Cash" means money, currency or a credit balance in a deposit
account.
"Cash Collateral Agreement" means the Cash Collateral Agreement to
be executed by Xxxxx Xxxxxx Inc., Borrower and Lender substantially in the form
of Exhibit B, as the same may be amended from time to time.
"Cash Equivalents" means (i) securities issued, or directly and
fully guaranteed, or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than three years from the date of acquisition, (ii) marketable direct
obligations issued by any State of the United States of America, or any local
government, or other political subdivision thereof rated (at the time of
acquisition of such security) at least AA by Standard & Poor's Corporation
("S&P") or the equivalent thereof by Xxxxx'x Investors Service, Inc.
("Moody's"), having maturities of not more than one year from the date of
acquisition, (iii) U.S. dollar denominated time deposits, certificates of
deposit and bankers' acceptances of any domestic commercial bank of recognized
standing having capital and surplus in excess of $250,000,000 or any bank
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whose short-term commercial paper rating (at the time of acquisition of such
security) by S&P is at least A-1 or the equivalent thereof or by Xxxxx'x is at
least P-1 or the equivalent thereof (any such bank, an "Approved Bank"), in each
case with maturities of not more than six months from the date of acquisition,
(iv) commercial paper and variable or fixed rate notes issued by any Approved
Bank or by the parent company of any Approved Bank and (v) commercial paper and
variable rate notes issued by, or guaranteed by, any industrial or financial
company with a short-term commercial paper rating (at the time of acquisition of
such security) of at least A-1 or the equivalent thereof by S&P or at least P-1
or the equivalent thereof by Moody's, or guaranteed by any industrial company
with a long-term unsecured debt rating (at the time of acquisition of such
security) of at least AA or the equivalent thereof by S&P or at least the
equivalent thereof by Moody's, and in each case maturing within one year after
the date of acquisition.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated thereunder.
"Collateral" means all of the Collateral as defined in the Security
Documents.
"Contingent Obligations" means, as to any Person, without
duplication, any obligation of such Person guaranteeing or intended to guarantee
any Indebtedness, leases, dividends or other obligations ("primary obligations")
of any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the maximum amount that such Person may be obligated to expend
pursuant to the terms of such Contingent Obligation or, if such Contingent
Obligation is not so limited, the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such
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Person is required to perform thereunder) as determined by such Person in good
faith.
"Default" means any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Demand Note" has the meaning ascribed to such term in the recitals
hereof.
"Dollar(s)" means lawful money of the United States of America.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated thereunder.
Section references to ERISA are to ERISA, as in effect at the date of this
Agreement, and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" means any entity, whether or not incorporated,
which is under common control or would be considered a single employer with
Borrower within the meaning of Section 414(b), (c), (m), (n) or (o) of the Code
and regulations promulgated under those sections or within the meaning of
section 4001(b) of ERISA and regulations promulgated under that section.
"Event of Default" has the meaning ascribed to such term in Section
7.
"Financial Statements" has the meaning ascribe to such term in
Section 4.8.
"GAAP" means generally accepted accounting principles in the United
States of America, as in effect from time to time.
"Governmental Authority" means any federal, state, local or other
governmental or administrative body, instrumentality, department or agency or
any court, tribunal, administrative hearing body, arbitration panel, commission,
or other similar dispute- resolving panel or body or any subdivision thereof.
"Guaranties" means the personal guaranties of the Obligations issued
by Xxxxxx Xxxx, Xx. and Xxxxxx Xxxx in favor of Lender, in the form of Exhibit
C, as each may be amended, supplemented or otherwise modified from time to time.
"Indebtedness" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (iii) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all
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drafts drawn thereunder, (iv) all indebtedness of a second Person secured by any
Lien on any property owned by such first Person, whether or not such
indebtedness has been assumed by such first Person, (v) all Capitalized Lease
Obligations of such Person, (vi) all obligations of such Person to pay a
specified purchase price for goods or services whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, and (viii) all Contingent
Obligations of such Person; provided that Indebtedness shall not include trade
payables, accrued expenses, deferred taxes and accrued income taxes, in each
case arising in the ordinary course of business.
"Intellectual Property" has the meaning ascribed to such term in
Section 4.13.
"Inventory" means Borrower's presently owned and hereafter acquired
goods which are held for sale or lease.
"Knowledge" means with respect to Borrower, what the executive
officers of Borrower actually know or should have known given diligent inquiry.
"Laser Devices" shall mean the CHROMOS 694 lasers currently marketed
by the Company or its Affiliates.
"Lender" has the meaning ascribed to such term in the preamble.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien, claim, hypothecation, assignment for security or charge of any kind
(including any agreement to give any of the foregoing, any conditional sale or
other title retention agreement or any lease in the nature thereof).
"Loan Documents" means this Agreement, the Security Documents and
the Note.
"Loan" and "Loans" has the meaning ascribed to such term in Section
2.1.
"Material Adverse Effect" means, (i) any material adverse effect
with respect to the operations, business, properties, assets, nature of assets,
liabilities (contingent or otherwise), financial condition of Borrower, or (ii)
any fact or circumstance as to which, singly or in the aggregate, there is a
reasonable likelihood of (x) a material adverse change described in clause (i)
with respect to Borrower, or (y) the inability of Borrower to perform in any
material respect its Obligations hereunder or under any of the other Loan
Documents or the inability of Lender to enforce in any material respect their
rights purported to be granted hereunder or under any of the other Loan
Documents or the Obligations (including realizing on the Collateral).
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"Material Agreement" has the meaning ascribed to such term in
Section 4.18 hereof.
"Maturity Date" has the meaning ascribed to such term in Section 2.5
hereof.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA with respect to which Borrower or any of its ERISA
Affiliates is or has been required to contribute.
"Note" has the meaning ascribed to such term in Section 2.1.
"Obligations" means all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to
Lender pursuant to the terms of this Agreement or any other Loan Document.
"Pension Plan" means any employee benefit pension plan as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) that is subject to Title
IV of ERISA and that is or has been maintained by or to which contributions are
or have been made by Borrower or any of its ERISA Affiliates.
"Permanent Financing" means debt financing obtained by the Company
in an amount sufficient to enable Borrower to repay the Obligations in full.
"Permitted Liens" has the meaning provided in Section 6.2.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
or any governmental or political subdivision or any agency, department or
instrumentality thereof.
"Placed in Service" means Laser Devices which, since July 15, 1997,
have been delivered to, are operational at, and are the subject of an effective
license agreement with, a third party physician, clinic or hospital.
"Pledge Agreements" means the Pledge Agreements to be executed
Xxxxxx Xxxx, Xx. and Xxxxxx Xxxx in favor of Lender in the form of Exhibit D, as
the same may be amended from time to time.
"Public Filings" has the meaning ascribe to such term in Section
4.8.
"Required Documentation" means copies, certified as true and
complete by an executive officer of Borrower, of the license agreement and
delivery receipt relating to each Laser Device Placed
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in Service, in each case signed by the recipient of such Laser Devise.
"Security Agreement" means the Security Agreement to be executed by
Borrower in favor of Lender substantially in the form of Exhibit E, as the same
may be amended, supplemented or otherwise modified from time to time.
"Security Documents" means the Security Agreement, the Pledge
Agreements, the Cash Collateral Agreement and the Guaranties, and any other
agreements or instruments utilized to pledge as Collateral for the Obligations
any property or assets of whatever kind or nature.
"Subsidiary" of any Person means and includes (i) any corporation
more than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person, directly or
indirectly through Subsidiaries, and (ii) any partnership, association, joint
venture or other entity in which such Person, directly or indirectly through
Subsidiaries, has more than a 50% equity interest at the time.
"Taxes" has the meaning ascribed to such term in Section 2.11.
"Tranche 1 Loan" shall have the meaning ascribed to such term in
Section 2.1(a).
"Tranche 2 Loan" shall have the meaning ascribed to such term in
Section 2.1(b).
"UCC" means the Uniform Commercial Code as in effect in any
applicable jurisdiction.
SECTION 2. Amount and Terms.
2.1 Tranches. Subject to and upon the terms and conditions set forth
herein, Lender agrees to lend to Borrower the following amounts at the following
times:
(a) an amount equal to the sum of (x) four million Dollars
($4,000,000) minus (y) the amount of the Demand Note Obligations,
immediately upon execution of the Loan Documents (the "Tranche 1 Loan");
and
(b) three million ($3,000,000) Dollars, upon request of Borrower
made in accordance with Section 2.3, at any time before the Maturity Date
after fifty (50) Laser Devices have been Placed in Service (the "Tranche 2
Loan").
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The Tranche 1 Loan and Tranche 2 Loan are each referred to herein
individually as a "Loan" and collectively as the "Loans." Borrower shall use the
proceeds of the Loans to pay for expenses incurred in connection with Placing in
Service Laser Devices and such other expenses of Borrower and its Affiliates as
shall have been approved in advance by Lender. The aggregate principal balance
of the Loans shall be evidenced by a single promissory note (the "Note") made by
Borrower and payable to Lender in the form of Exhibit F hereto. Lender shall
endorse on the schedule attached to the Note (or any continuation thereof) the
date and amount of each Loan and the date and amount of all payments on account
of each Loan. All entries shall be presumed correct, absent manifest error.
Notwithstanding the foregoing, the failure by Lender to make such entries shall
not affect the rights of Lender or the obligations of Borrower hereunder or
thereunder.
2.2 Cancellation of Demand Note. Concurrently with execution and
delivery of the Note and other Loan Documents, Lender shall cancel the Demand
Note and return same to Borrower and the Demand Note shall thereupon be of no
further force and effect. An amount equal to the Demand Note Obligations shall,
upon cancellation of the Demand Note, continue to be outstanding under the
Tranche 1 Loan and be deemed to constitute part thereof, subject to all of the
terms and conditions of this Agreement.
2.3 Borrowing Notice; Borrowings. (a) To request the Tranche 2 Loan,
Borrower shall deliver to Lender written notice of such request, which notice
shall be irrevocable and shall be effective only if received by Lender not later
than 1:00 P.M. Eastern Standard time one Business Day prior to the requested
Borrowing Date. Such notice of borrowing shall state the principal amount to be
borrowed and the date Borrower requests that such Loan be made, and shall be
accompanied by Required Documentation evidencing that the requisite number of
Laser Devices have been Placed in Service.
(b) Lender shall, on the date hereof, deposit the amount of the
Tranche 1 Loan, and following receipt of an acceptable notice of borrowing, on
the applicable Borrowing Date, deposit the amount of the Tranche 2 Loan, by wire
transfer of immediately available funds, to Borrower's account with [Cash
Collateral Account to be identified] or to such other account or Person for the
account of Borrower, as Borrower shall request and Lender shall approve in its
sole and absolute discretion.
2.4 Interest. (a) Borrower shall pay interest on the outstanding
principal amount of each Loan at the rate of fifteen (15%) percent per annum
(the "Borrowing Rate"), in arrears on the first Business Day of each month
commencing with September 1, 1997. Notwithstanding the foregoing, Borrower
shall, on demand, pay interest on each Loan and any portion thereof, and on any
other amount payable by Borrower hereunder (to the extent permitted by law),
which shall not be paid in full when due (whether at stated
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maturity, by acceleration or otherwise) for the period commencing on the due
date thereof until the same are paid in full at a rate equal to the Borrowing
Rate plus two (2%) percent per annum. Interest payable pursuant to this
Agreement shall be calculated on the basis of actual days elapsed over a 365 day
year.
(b) Anything in this Agreement or the Note to the contrary
notwithstanding, the obligation of Borrower to make payments of interest shall
be subject to the limitation that payments of interest shall not be required to
be made to Lender to the extent that Lender's receipt thereof would not be
permissible under the law or laws applicable to Lender limiting rates of
interest which may be charged or collected by Lender. Any such payments of
interest which are not made by Borrower as a result of the limitation referred
to in the preceding sentence shall be made by Borrower to Lender on the earliest
interest payment date or dates on which the receipt thereof would be permissible
under the laws applicable to Lender limiting rates of interest which may be
charged or collected by Lender. Such deferred interest shall not bear interest.
2.5 Repayment and Prepayment of Loans. (a) Subject to mandatory
prepayment of the Loans as provided herein, the outstanding principal amount of
each Loan shall be repaid in full, together with all accrued and unpaid interest
thereon, on January 15, 1998 (the "Maturity Date"). Borrower shall, at any time,
and from time to time, be entitled to prepay any portion of the principal amount
of the Loans, without premium or penalty, provided, that (i) all such
prepayments shall be made together with accrued interest through the date of
prepayment on the principal amount being prepaid and (ii) the Lender shall have
received at least one Business Days' prior written notice of such prepayment
which notice states the proposed date of prepayment and the amount of principal
and interest being prepaid. All principal and interest payable by Borrower
pursuant to this Agreement shall be paid in Dollars to an account specified in
writing by Lender from time to time no later than 1:00 p.m. on the date
specified for payment.
(b) Borrower shall prepay (without premium or penalty), and there
shall immediately become due and payable, the outstanding principal amount of
each Loan and all accrued and unpaid interest thereon (and any fees, costs and
expenses payable pursuant to any of the Loan Documents) concurrently with the
receipt of the proceeds of a Permanent Financing. Borrower shall deliver written
notice of any Permanent Financing to Lender at least one Business Day prior to
the closing thereof.
(c) All payments received by Lender from Borrower shall be applied
first, to pay all fees, costs and expenses of Lender then due and payable under
the Loan Documents, second, to pay accrued and unpaid interest on each Loan and
third, to repay the outstanding principal balance of the Loans.
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(d) All payments by Borrower under this Agreement or under any other
Loan Document shall be made without set-off or counterclaim and in such amounts
as may be necessary in order that all such payments (after deduction or
withholding for or on account of any present or future taxes, levies, imposts,
duties or other charges of whatsoever nature imposed by any government or any
political subdivision or taxing authority thereof, other than any tax on or
measured by the income of Lender pursuant to the income tax laws of the United
States or of any other jurisdiction (collectively, "Taxes")) shall not be less
than the amounts otherwise specified to be paid under this Agreement and/or any
other Loan Document. A certificate as to the calculation of any additional
amounts payable to Lender under this Section 2.5(d) submitted to Borrower by
Lender shall, absent manifest error, be final, conclusive and binding for all
purposes upon all parties hereto. With respect to each deduction or withholding
for or on account of any Taxes, Borrower shall promptly furnish to Lender such
certificates, receipts and other documents as may be required (in the reasonable
judgment of Lender) to establish any tax credit to which Lender may be entitled.
(e) Without prejudice to the provisions of paragraph (d) of this
Section 2.5, if Borrower is required by law to make any payment on account of
Taxes on or in relation to any sum received or receivable under this Agreement
and/or the other Loan Documents by Lender or any liability for Taxes in respect
of any such payment is imposed, levied or assessed against Lender, Borrower will
promptly indemnify Lender against such Tax payment or liability, together with
any interest, penalties and reasonable expenses (including counsel fees and
expenses) payable or incurred in connection therewith, including any tax arising
by virtue of payments under this Section 2.5(e), computed in a manner consistent
with paragraph (d) of this Section 2.5. A certificate by Lender as to the
calculation and amount of such payments shall, absent manifest error, be final,
conclusive and binding upon all parties hereto for all purposes.
2.6 Warrants. As additional consideration hereunder, Borrower shall
issue each of the following common stock purchase warrants to Lender at the
following times:
(a) concurrently with execution hereof, a common stock purchase
warrant in the form attached hereto as Exhibit G;
(b) on the Borrowing Date of the Tranche 2 Loan, a common stock
purchase warrant in the form attached hereto as Exhibit H;
(c) on October 2, 1997, a common stock purchase warrant in the form
attached hereto as Exhibit I, unless the Obligations shall have been paid
in full on or prior to the close of business on October 1, 1997; and
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(d) on December 2, 1997, a common stock purchase warrant in the form
attached hereto as Exhibit J, unless the Obligations shall have been paid
in full on or prior to the close of business on December 1, 1997.
SECTION 3. Conditions Precedent. The obligation of Lender to make
each Loan (unless otherwise specified) is subject to the satisfaction of each of
the following conditions precedent:
3.1 Representations and Warranties. The representations and
warranties of Borrower made in this Agreement and the other Loan Documents, and
each of the representations and warranties of Borrower or any officer of
Borrower contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement, shall be true
and correct when made and on the Borrowing Date of each Loan (unless such
representations and warranties expressly relate to an earlier date).
3.2 Performance; No Default. Borrower shall have performed and
complied with all agreements and conditions contained in the Loan Documents
required to be performed or complied with by it and after giving effect to each
Loan (and the application of the proceeds thereof as contemplated by this
Agreement) no Default or Event of Default shall have occurred and be continuing.
3.3 Officer's Certificate. Lender shall have received certificates
executed by the Chief Executive Officer of Borrower stating that the conditions
set forth in Sections 3.1 and 3.2 have been satisfied.
3.4 Borrowing Notice. Lender shall have received a notice of
borrowing relating to such Loan in accordance with Section 2.3(a).
3.5 Note. As of the Borrowing Date of the Tranche 2 Loan, the Note
shall be in full force and effect and no challenge to the validity or
enforceability thereof shall have been threatened or initiated.
3.6 Security Documents. Each of the Security Documents shall be in
full force and effect and grant, create or perfect the Liens, rights, powers,
priorities, remedies and benefits contemplated therein, no default shall exist
thereunder and no challenge to the validity or enforceability thereof shall have
been threatened or initiated.
3.7 Consents, etc. All material Governmental Authority and third
party approvals and consents, if any, in connection with the transactions
contemplated by the Loan Documents shall have been obtained and remain in
effect, and all applicable waiting periods shall have expired without any action
being taken by any competent authority, and evidence thereof shall be delivered
to Lender.
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There shall not exist any judgment, order, injunction or other restraint issued
or filed with respect to the making of each Loan.
3.8 Legal Matters. All legal matters incident to the making of each
Loan shall be satisfactory to counsel to Lender.
3.9 Corporate Proceedings and Documents. With respect to the Tranche
1 Loan, Lender shall have received a certificate executed by the Secretary of
Borrower, certifying as to evidence of all corporate action taken by Borrower to
authorize the borrowing of each Loan and the execution, delivery and performance
of each of the Loan Documents.
3.10 Opinion of Counsel. Counsel to Borrower shall have delivered
its legal opinion, in form and substance satisfactory to Lender's counsel, on
such matters as shall be requested by Lenders counsel.
3.11 Other Items. Borrower shall provide such other certificates,
approvals, documents, opinions and agreements as Lender shall reasonably
request.
All of the certificates and documents referred to in this Section 3 shall be
satisfactory in form and substance to Lender.
SECTION 4. Representations and Warranties. In order to induce Lender
to enter into this Agreement and make each Loan provided for herein, Borrower
makes the following representations and warranties to Lender, all of which shall
survive the execution and delivery of this Agreement and the making of each
Loan.
4.1 Organizational Status. Borrower (i) is a duly organized and
validly existing corporation under the laws of the State of Delaware and has the
power and authority to own its property and assets and to transact the business
in which it is engaged and presently proposes to engage and (ii) is in good
standing in its jurisdiction of organization and is duly qualified or authorized
to do business and is in good standing in all jurisdictions where it is required
to be so qualified or authorized except where the failure to be so qualified or
authorized would not have a Material Adverse Effect.
4.2 Organizational Power and Authority, Capital, etc. Borrower has
the requisite power and authority to execute, deliver and carry out the terms
and provisions of the Loan Documents and has taken all necessary action to
authorize the execution, delivery and performance of the Loan Documents. This
Agreement constitutes, and each other Loan Document (when executed and delivered
by Borrower) will constitute, the legal, valid and binding obligation of
Borrower enforceable against Borrower in accordance with its terms.
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4.3 No Violation. Neither the execution, delivery and performance by
Borrower of any of the Loan Documents, nor compliance with the terms and
provisions thereof, nor the consummation of the transactions contemplated herein
or therein (i) will contravene any applicable provision of any law, statute,
rule, regulation, order, writ, injunction or decree of any court or Governmental
Authority, (ii) will conflict or be inconsistent with or result in any breach of
any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of Borrower (or
the Liens created by the Security Documents) pursuant to the terms of any
indenture, mortgage, deed of trust, agreement or other instrument to which
Borrower is a party or by which the property or assets are bound or to which
they may be subject, or (iii) will violate any provision of the bylaws or the
certificate of incorporation of Borrower.
4.4 Litigation. Other than as set forth in the Public Filings (as
defined below), there are no actions, judgments, suits or proceedings pending
or, to Borrower's Knowledge, threatened as to which there is a reasonable
possibility of a Material Adverse Effect.
4.5 Use of Proceeds. The use of the proceeds of each Loan will not
violate or be inconsistent with the provisions of Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System.
4.6 Governmental Approvals, etc. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any third party or any Governmental Authority (other than
those orders, consents, approvals, licenses, authorizations or validations which
have previously been obtained and except for filings to perfect security
interests granted pursuant to the Security Documents), is required to authorize
or is required in connection with (i) the execution, delivery and performance of
any Loan Document or the transactions contemplated therein or (ii) the legality,
validity, binding effect or enforceability of any Loan Document.
4.7 Investment Company Act. Borrower is not, and after giving effect
to the transactions contemplated hereby will not be, an "investment company" or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
4.8 Financial Condition; Financial Statements; Projections. The
financial statements (the "Financial Statements") included in Borrower's Annual
Report on Form 10-KSB for the fiscal year ended May 31, 1996 and Borrower's
Quarterly Report on Form 10- QSB for the nine months ended February 28, 1997
(the "Public Filings") have been prepared in accordance with GAAP, applied on a
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consistent basis, during the respective periods, except as therein noted. The
Financial Statements present fairly the financial position of Borrower as of
such dates and the results of operations and changes in cash flows and
shareholders' equity for such periods. Borrower does not have any material
obligation or liability, individually or in the aggregate, of the nature
required to be disclosed in financial statements prepared in accordance with
GAAP that is not disclosed in the Financial Statements. Other than as set forth
on Schedule 4.8, subsequent to February 28, 1997, there has been no change in
the financial position or operations of Borrower which could reasonably be
expected to have a Material Adverse Effect.
4.9 Security Interests. The Security Documents will create, in favor
of Lender, as security for the Obligations purported to be secured thereby, a
valid and enforceable first priority Lien upon all of the Collateral, superior
to and prior to the rights of all third persons and subject to no other Liens
except as provided in Section 6.2. No filings or recordings are required in
order to perfect the security interests created under any Security Document
except for filings or recordings required provided for in each such Security
Document.
4.10 Tax Returns and Payments. Borrower has filed all tax returns
required to be filed by it. Borrower has paid all federal, state, local and
foreign income taxes (including, without limitation, franchise taxes based upon
income) which have become due. Borrower knows of no proposed tax assessment
against it that could reasonably be expected to have a Material Adverse Effect.
4.11 ERISA. (a) Borrower and each of its ERISA Affiliates, if any,
are in compliance in all material respects with all applicable provisions of
ERISA and the regulations and published interpretations thereunder with respect
to all employee benefit plans. Neither Borrower nor any of its ERISA Affiliates,
if any, maintains, contributes to or is obligated to contribute to, or during
the last five years has maintained, contributed to or was obligated to
contribute to, any Pension Plan or Multiemployer Plan.
(b) The execution, performance and delivery of the Loan Documents by
any party thereto will not involve any prohibited transaction within the meaning
of Section 406 of ERISA or Section 4975 of the Code for which an exemption
therefrom is not available.
4.12 Subsidiaries. Other than as set forth on Schedule 4.12,
Borrower has no Subsidiaries and is not a partner in any partnership.
4.13 Patents, Copyrights, Trademarks, etc. Schedule 4.13 sets forth
all patents, copyrights, trademarks and service marks owned, possessed or
licensed by Borrower. Borrower owns or possesses adequate licenses or other
rights to use all patents, patent applications, trademarks, trademark
applications, service
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marks, service xxxx applications, trade names, copyrights, trade secrets and
know-how (collectively, the "Intellectual Property"), that are necessary for the
operation of its business. No claim is pending, or to Borrower's Knowledge
threatened, to the effect that Borrower infringes upon or conflicts with the
asserted rights of any other person under any Intellectual Property, which, if
adversely determined, would have a Material Adverse Effect. Except as disclosed
in the Public Filings, no claim is pending, or to Borrower's Knowledge
threatened, to the effect that any such Intellectual Property owned or licensed
by Borrower or which Borrower otherwise has the right to use is invalid or
unenforceable by Borrower, which, if adversely determined, would have a Material
Adverse Effect.
4.14 Compliance With Laws, etc. Borrower is in compliance with all
material laws and regulations of all Governmental Authorities, the violation of
which would have a Material Adverse Effect.
4.15 Properties. Borrower does not own any Real Property. Borrower
owns or has valid leasehold interests in all of its properties and assets, free
and clear of all Liens except for Permitted Liens. Borrower holds all material
licenses, permits, leases, certificates of occupancy or operation and similar
certificates and clearances of municipal and other authorities necessary to own
and operate its properties.
4.16 Collective Bargaining Agreements. There are not currently any
collective bargaining or similar agreements applicable to Borrower.
4.17 Indebtedness Outstanding. Schedule 4.17 sets forth all
Indebtedness of Borrower for borrowed money as of the date hereof.
4.18 Liens. There are no Liens affecting any of Borrower's assets or
properties, including the Collateral, other than Permitted Liens.
4.19 Agreements. Borrower has performed all obligations required to
be performed by it under each material agreement to which it is a party or by
which it or its assets or properties may be bound (the "Material Agreements")
and no event of default has occurred thereunder which would entitle the other
party thereto to terminate such Material Agreement or accelerate Borrower's
obligations thereunder, and no event has occurred which, with the lapse of time
or the giving of notice or both, would constitute an event of default by
Borrower thereunder, or to the Knowledge of Borrower, by any other party to any
Material Agreement.
4.20 Bank Accounts. Schedule 4.20 attached hereto lists each bank
account maintained by Borrower and its Subsidiaries (the "Bank Accounts").
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4.21 Full Disclosure. No representation or warranty contained herein
or any exhibit hereto nor any other certificate, statement or opinion, made or
furnished in writing to Lender by or on behalf of Borrower in connection with
this Agreement or the transactions contemplated herein, contains (in each case,
as of its date) any untrue statement of a material fact, or omits to state a
material fact necessary in order to make the statements contained therein or
herein not misleading.
4.22 SEC Filings. Borrower's Public Filings do not contain any
untrue statement of a material fact, or omit to state a material fact necessary
in order to make the statements contained therein or herein not misleading.
SECTION 5. Affirmative Covenants. Borrower covenants and agrees that
until payment in full of the Obligations:
5.1 Information Covenants. Borrower will furnish or cause to be
furnished to Lender:
(a) As soon as available after the close of each monthly accounting
period, the balance sheet of Borrower as at the end of such monthly period
and the related statements of operations, of shareholders' equity and of
cash flows for such monthly period and for the elapsed portion of the
fiscal year ended with the last day of such monthly period, each such
statement to be certified by an appropriate officer of Borrower, which
certificate shall state that such statements present fairly the balance
sheet and related income, equity interests and cash flows of Borrower as
of the dates and for the periods indicated, in conformity with GAAP
applied on a basis consistent with prior years (except for such changes
with which the independent certified accountants concur) and in each case
setting forth comparative figures for the fiscal year budget, subject to
normal year-end audit adjustments.
(b) As soon as available, a budget of Borrower in reasonable detail
for each month of its fiscal year, as customarily prepared by management
for its internal use, setting forth, with appropriate discussion, the
principal assumptions upon which such budgets are based. Together with
each delivery of financial statements pursuant to Section 5.1(a), a
comparison of the current year to date financial results against the
budgets required to be submitted pursuant to this Section 5.1(b) shall be
presented.
(c) At the time of the delivery of the financial statements provided
for in Section 5.1(a), a certificate of an appropriate officer of each of
Borrower to the effect that no Default or Event of Default exists, or, if
any Default or Event of Default does exist, specifying the nature and
extent thereof;
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(d) Promptly upon receipt thereof, a copy of each "management
letter" submitted to Borrower by its independent accountants in connection
with any compilation, review or audit made by them of the books of
Borrower.
(e) Promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by Borrower to its securityholders of all regular and periodic
reports and all registration statements and prospectuses, if any, filed by
Borrower with any securities exchange or with the United States Securities
and Exchange Commission and of all press releases and other statements
made available generally by Borrower to the public.
(f) Prompt written notice (x) of any condition or event which
constitutes a Default or Event of Default, (y) that any holder of any note
or other evidence of Indebtedness of Borrower has given any notice to
Borrower or taken any other action with respect to a claimed default or
event or condition of the type referred to in Section 7.4, or (z) of any
event which could reasonably be expected to have a Material Adverse
Effect.
(g) Prompt written notice of the institution of, or written threat
of, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Borrower or any property of any of
Borrower not previously disclosed to Lender, which action, suit,
proceeding, governmental investigation or arbitration which seeks (or in
the case of multiple actions, suits, proceedings, governmental
investigations or arbitrations arising out of the same general allegations
or circumstances which seek) recovery from Borrower aggregating $100,000
or more. In addition to the requirements set forth in the previous
sentence, Borrower upon request shall promptly give notice of the status
of any action, suit, proceeding, governmental investigation or arbitration
covered by a report delivered to Lender pursuant to this Section 5.1(g)
and provide such other information as may be reasonably available to it
(exclusive of privileged documents) to enable Lender and its counsel to
evaluate such matters.
(h) On demand, such other information that Lender shall reasonably
request.
5.2 Books, Records and Inspections. Borrower will keep true books of
records and accounts in which full and correct entries will be made of all of
its business transactions and will reflect in its financial statements adequate
accruals and appropriations to reserves, all in accordance with GAAP. Borrower
will permit officers and designated representatives of Lender to visit and
inspect any of the properties or assets of Borrower in
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whomsoever possession, and to examine the books of account of Borrower (and to
make copies thereof at Borrower's expense) and discuss the affairs, finances and
accounts of Borrower with, and be advised as to the same by, appropriate
officers of Borrower, all at such reasonable times and intervals and to such
reasonable extent as Lender may reasonably request.
5.3 Maintenance of Property; Licenses; Insurance.
(a) Borrower will exercise commercially reasonable efforts to
maintain or cause to be maintained in good repair, working order and condition
(subject to normal wear and tear) all properties used in its businesses and from
time to time will make or cause to be made all appropriate repairs, renewals and
replacements thereof.
(b) Borrower will maintain in full force and effect all of its
rights, franchises, licenses and permits and other rights in or to use any
licenses, patents, processes, trademarks, trade names or copyrights owned or
possessed by it, except where such failure to keep in full force and effect such
rights, franchises, licenses or permits could not reasonably be expected to have
a Material Adverse Effect.
(c) Borrower will maintain or cause to be maintained, with
financially sound and reputable insurers, insurance with respect to their
properties and business against loss or damage of the kinds customarily insured
against by Persons of established reputation engaged in the same or similar
businesses and similarly situated, of such types and in such amounts as are
customarily carried under similar circumstances by such other Persons to the
extent that such types and such amounts of insurance are available at
commercially reasonable rates. Borrower will furnish to Lender, upon reasonable
request, information as to the insurance carried, and will not cancel, without
replacement, any such insurance without the consent of Lender, which consent
shall not be unreasonably withheld.
5.4 Payment of Taxes. Borrower will pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or upon their
income or profits, or upon any properties belonging to it, prior to the date on
which material penalties attach thereto, and Borrower will promptly pay and
discharge all other taxes, assessments and governmental charges or levies
imposed upon each of them or upon their income or profits, or upon any
properties belonging to it, and all lawful claims which, if unpaid, might become
a Lien or charge upon any properties of Borrower or cause a failure or
forfeiture of title thereto, prior to the date on which material penalties
attach thereto; provided that Borrower shall not be required to pay any such
tax, assessment, charge, levy or claim that is being contested in good faith and
by proper proceedings promptly instituted and diligently conducted, which
proceedings have the effect of preventing the forfeiture or sale of
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the property or asset that may become subject to such Lien, if it has maintained
adequate reserves with respect thereto in accordance with and to the extent
required under GAAP.
5.5 Maintain Existence. Borrower will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence rights and authority.
5.6 Compliance With Statutes, etc. Borrower will comply with all
applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, all Governmental Authorities, the non compliance of which would have
a Material Adverse Effect.
5.7 Performance of Obligations. Borrower will perform in all
material respects all of their obligations under the terms of each Material
Agreement, except where such nonperformance would not reasonably be expected to
have a Material Adverse Effect.
5.8 Notice of Litigation. Borrower will promptly notify Lender if it
receives: (i) any notice of any violation or administrative or judicial
complaint or order having been filed or about to be filed against it, including
without limitation, all complaints or orders alleging violations of any law
material to its business, (ii) any notice from any Governmental Authority or any
other Person alleging that it is or may be subject to any liability under any
law material to its business; and promptly upon receipt thereof, provide Lender
with a copy of such notice together with a statement of the action it has or
intends to take with respect thereto.
5.9 Bank Statements. Borrower shall cause to be delivered to Lender
copies of all statements and reports relating to each Bank Account, at such time
as such statements and reports become available to Borrower.
SECTION 6. Negative Covenants. Borrower covenants and agrees that
while each Loan is outstanding, until each Note is paid in full, and until full
and complete performance of the Obligations:
6.1 Changes in Business. Borrower will not engage in any business
other than business of Borrower currently conducted.
6.2 Liens. Borrower will not directly or indirectly create, incur,
assume or permit or suffer to exist any Lien upon or with respect to any item
constituting Collateral, whether now owned or hereafter acquired, or sell any
such Collateral subject to an understanding or agreement, contingent or
otherwise, to repurchase such Collateral or assign any right to receive income,
or file or permit the filing of any financing statement under the UCC or any
other similar notice of Lien under any similar recording or notice statute,
except for (i) Liens in favor of Lender, (ii) Liens expressly permitted by any
Security Document, and (iii) Liens set
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forth on Schedule 6.2 to this Agreement, which are herein collectively referred
to as "Permitted Liens."
6.3 Indebtedness. Borrower will not contract, create, incur, assume
or suffer to exist any Indebtedness, except the Indebtedness incurred or
otherwise contemplated by this Agreement.
6.4 Advances, Investments and Notes. Borrower will not lend money or
credit or make advances to any Person, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to any Person, except:
(a) investments in Cash and Cash Equivalents;
(b) receivables owing to Borrower and advances to customers and
suppliers, in each case if created, acquired or made in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
and
(c) investments (including debt obligations) received in connection
with the bankruptcy or reorganization of suppliers and customers and in
settlement of delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business.
6.5 Modification of Organizational Documents. Borrower will not
amend, modify or change any of its organizational documents including, without
limitation, its certificate of incorporation, or any agreement entered into by
Borrower with respect to its capital stock or enter into any new agreement with
respect to its capital stock, the result of which is reasonably likely to be
adverse to the interests of Lender.
6.6 Dividends, etc. Borrower will not declare or pay or authorize
any dividend, distribution, payment or delivery of property or cash to its
stockholders as such, or redeem, retire, purchase or otherwise acquire, directly
or indirectly, for any consideration, any of the capital stock or other equity
interests of Borrower now or hereafter outstanding (or any warrants or options
in respect of such equity interests), or set aside any funds for any of the
foregoing purposes.
6.7 Disbursements. Borrower shall not cause any funds in any Bank
Account to be disbursed without the prior written consent of Lender.
6.8 Subsidiaries. Borrower shall not form, acquire or permit any
Person to become its Subsidiary.
6.9 Disposition of Assets. Borrower will not engage in any sale,
transfer, assignment, lease or other disposition of any of its assets to any
Person, except that Borrower may sell, assign,
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transfer, convey, or otherwise dispose of or lease all or any part of its
Inventory, acquired and disposed of in the ordinary course of business.
6.10 ERISA. Borrower will not adopt, or become obligated to
contribute to, or allow any of its ERISA Affiliates to adopt, maintain, or
contribute to, a Pension Plan, and Borrower will not become obligated to
contribute to, or allow any of its ERISA affiliates to become obligated to
contribute to, any Multi- employer Plan.
6.11 Mergers and Acquisitions. Borrower will not acquire any Person
(including through the purchase of all of the capital stock or other ownership
interests of such Person or through merger or consolidation or acquisition of
all or substantially all of the assets of such Person) or merge with any other
Person.
6.12 Limitations on Issuances of Common Stock. Borrower will not,
nor permit any Subsidiary to, issue, sell or otherwise dispose of any shares of
any of its capital stock, any option rights thereto or any securities
convertible into capital stock of Borrower or any Subsidiary to any vendor or
other third party provider of goods or services to the Company or any
Subsidiary.
SECTION 7. Events of Default. Each of the following upon its
occurrence and during its continuance shall constitute an event of default
("Event of Default"):
7.1 Payments. Borrower shall fail to pay when due any principal of,
or interest on, the Loans or any fee payable under this Agreement or any of the
other Loan Documents and such failure shall continue unremedied for five or more
Business Days.
7.2 Representations, etc. Any representation, warranty or statement
made or deemed made by Borrower herein, or in any other Loan Document, or in any
statement or certificate delivered or required to be delivered pursuant hereto
or thereto shall prove to be untrue in any material respect on the date as of
which made or deemed made.
7.3 Covenants. Borrower shall (a) default in the due performance or
observance by it of any term, covenant or agreement contained in Section 6, or
(b) default in the due performance or observance by it of any other term,
covenant or agreement contained in this Agreement or any Loan Document and such
default shall continue unremedied for a period of at least fifteen days after
the date of such default.
7.4 Default Under Other Agreements. (a) Borrower shall (i) default
in any payment with respect to any Indebtedness (other than the Obligations) in
excess of $50,000 beyond the period of grace, if any, provided in the instrument
or agreement under which
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such Indebtedness was created or (ii) default in the observance or performance
of any agreement or condition relating to any such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, any such Indebtedness to become due prior to its stated maturity, or (b)
any such Indebtedness of Borrower shall be declared to be due and payable, or
required to be prepaid other than by a regularly scheduled required prepayment,
prior to the stated maturity thereof.
7.5 Bankruptcy, etc. Borrower shall commence a voluntary case
concerning itself under the Bankruptcy Code; or an involuntary case is commenced
against Borrower and the petition is not controverted within ten days, or is not
dismissed or stayed within sixty days, after commencement of the case; or a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of Borrower; or Borrower commences
any other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to Borrower; or there
is commenced against Borrower any such proceeding which remains undismissed and
unstayed for a period of sixty days; or Borrower is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or Borrower suffers any appointment of any custodian or
the like for it or any substantial part of its property to continue undischarged
or unstayed for a period of sixty days; or Borrower makes a general assignment
for the benefit of creditors; or any corporate action is authorized by Borrower
for the purpose of effecting any of the foregoing.
7.6 Security Documents. Any Security Document shall cease to be in
full force and effect, or shall cease to give Lender the Liens, rights, powers
and privileges purported to be created thereby, in favor of Lender, superior to
and prior to the rights of all third Persons and subject to no Liens other than
Liens expressly permitted by this Agreement and the applicable Security
Document.
7.7 Judgments. One or more judgments or decrees shall be entered
against Borrower involving a liability of $100,000 or more in the case of any
one such judgment or decree and $100,000 or more in the aggregate for all such
judgments and decrees (in either case in excess of the amount covered by
insurance as to which the insurance company has acknowledged coverage) and (i)
any such judgments or decrees shall not have been vacated, discharged, bonded or
enforcement thereof stayed pending appeal within sixty days from the entry
thereof or (ii) any enforcement proceeding therefor shall have been commenced.
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Then, and in any such event, and at any time thereafter, if any
Event of Default shall then be continuing, Lender shall, by written notice to
Borrower, take any or all of the following actions, without prejudice to the
rights of Lender, to enforce its claims against Borrower; provided, however,
that, if an Event of Default specified in Section 7.5 shall occur, the result
which would occur upon the giving of written notice by Lender as specified in
clauses (i) and (ii) below shall occur automatically without the giving of any
such notice): (i) terminate the availability of any Loan not theretofore made to
Borrower and/or accelerate the maturity date of each Loan outstanding and
declare the principal of and accrued interest in respect of each such Loan, and
all other Obligations owing hereunder and under any Loan Document, to be
immediately due and payable, whereupon the same shall become, forthwith due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by Borrower, and/or (ii) enforce any or all of the
remedies created pursuant to the Security Documents.
SECTION 8. Miscellaneous.
8.1 Payment of Expenses, etc. Borrower agrees to: (i) pay all
reasonable out-of-pocket costs and expenses of Lender (including, without
limitation, the reasonable attorneys' fees and disbursements in connection with
the enforcement of, or the preservation of rights under, this Agreement and any
of the other Loan Documents (including, without limitation, in any bankruptcy,
insolvency, reorganization or similar proceedings); (ii) pay and hold Lender
harmless from and against any and all present and future stamp and other similar
taxes with respect to this Agreement and the other Loan Documents and save
Lender harmless from and against any and all liabilities with respect to or
resulting from any delay or omission (other than to the extent attributable to
Lender) to pay such taxes; (iii) pay all filing and recording fees relating to,
and taxes and other charges incurred in connection with, perfecting, maintaining
and protecting the Liens created or contemplated to be created pursuant to the
Security Documents; and (iv) indemnify Lender, its officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all losses, liabilities, claims, damages, costs or expenses
incurred by any of them (except to the extent resulting from their gross
negligence or willful misconduct) as a result of, or arising out of, or in any
way related to, or by reason of, any investigation, litigation or other
proceeding (whether or not Lender is a party thereto) related to the entering
into and/or performance of any Loan Document or the use of the proceeds of each
Loan hereunder or the consummation of any other transactions contemplated in any
Loan Document, including, without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation,
litigation or other proceeding.
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8.2 Right of Set-off. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, Lender is hereby authorized at any time or from time to time
thereafter, without presentment, demand, protest or other notice of any kind to
Borrower or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and apply any and all deposits (general or
special) and any other Indebtedness at any time held or owing by Lender to or
for the credit or the account of Borrower against and on account of the
Obligations of Borrower to Lender under this Agreement or under any of the other
Loan Documents, and all other claims of any nature or description arising out of
or connected with this Agreement or any other Loan Document, irrespective of
whether or not Lender shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
8.3 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to Borrower to:
XXXX/Biophile International Corp., 0000 XX 00xx Xxxx, Xxxxx X, Xxxxxxxxxxx, XX
00000, Attention: Xxxxxx X. Xxxx, Xx. with a copy to: Marks & Murase LLP, 000
Xxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxx Xxxxxxxxx; if to Lender, at
Clearwater Fund IV, LLC, 000 Xxxxx Xxxx Xxxx #000, Xxxxxxxxxx, Xxxxxxx 00000,
with a copy to: Rosenman & Colin LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, Attention: Xxxx X. Xxxxxxxx; or, at such other address as shall be
designated by any party in a written notice to the other parties hereto. All
such notices and communications shall, when mailed, be effective upon receipt,
or when telegraphed, telexed, telecopied, or cabled or sent by overnight
courier, be effective when delivered to the telegraph company, cable company or
overnight courier, as the case may be, or when sent by telex or telecopier.
8.4 Benefit of Agreement. (a) This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto, all future
holders of each Note, and their respective successors and assigns. Borrower may
not assign or delegate any of its rights and obligations hereunder without the
prior written consent of Lender.
(b) Lender shall have the right to transfer or assign all or any
part of each Note. Lender may furnish any information concerning Borrower in the
possession of Lender from time to time to assignees (including prospective
assignees).
8.5 No Waiver; Remedies Cumulative. No failure or delay on the part
of Lender in exercising any right, power or privilege under this Agreement or
under any other Loan Document and no course of dealing between Borrower and
Lender shall operate as a waiver
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thereof, nor shall any single or partial exercise of any right, power, or
privilege hereunder or under any other Loan Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which Lender would
otherwise have. No notice to or demand on Borrower in any case shall entitle
Borrower to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of Lender to any other or
further action in any circumstances without notice or demand.
8.6 Governing Law; Submission to Jurisdiction; Venue.
(a) This Agreement and the rights and obligations of the parties
hereunder shall be construed and enforced in accordance with and be governed by
the laws of the State of New York without regard to principles of conflict of
laws. Any legal action or proceeding with respect to this Agreement or any other
Loan Document may be brought in the courts of the State of New York or of the
United States for the Southern District of New York, and, by execution and
delivery of this Agreement, Borrower and Lender hereby irrevocably accept for
themselves and in respect of their property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts.
(b) Borrower and Lender hereby irrevocably waive any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
any other Loan Document brought in the courts referred to in clause (a) above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
8.7 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A set of counterparts
executed by all the parties hereto shall be lodged with Borrower and Lender.
8.8 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
8.9 Amendment or Waiver. Neither this Agreement nor any other Loan
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by the parties hereto.
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8.10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE LOAN DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
8.11 Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitation of, another covenant shall
not avoid the occurrence of a Default or an Event of Default if such action is
taken or condition exists.
8.12 Entire Agreement. This Agreement together with the other Loan
Documents embodies the entire agreement and understanding among the parties
hereto and supersedes all prior agreements and understandings relating to the
subject matter hereof.
8.13 Execution by Facsimile Transmission. This Agreement may be
validly executed and delivered by exchange of executed signature pages by
facsimile transmission, provided that original executed signature pages are
promptly delivered to each party thereafter by overnight courier.
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IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
CLEARWATER FUND IV, LLC
By: /s/ Hans Xxxxxxxx Xxxx
-------------------------------------
Name: Hans Xxxxxxxx Xxxx
Title: President
XXXX/BIOPHILE INTERNATIONAL CORPORATION
By: /s/ Xxxxxx X. Xxxx, Xx.
-------------------------------------
Name: Xxxxxx X. Xxxx, Xx.
Title: Chairman & CEO
Page 39 of 76
