REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
between
DERMA SCIENCES, INC. and SUNSHINE PRODUCTS, INC.
and
CAPITALSOURCE FINANCE LLC
Dated as of
April 30, 2002
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
TABLE OF CONTENTS
Page
I. DEFINITIONS............................................................1
1.1 General Terms...................................................1
II. ADVANCES, PAYMENT AND INTEREST.........................................1
2.1 The Revolving Facility..........................................1
2.2 The Revolving Note; Maturity....................................2
2.3 Interest........................................................2
2.4 Revolving Facility Disbursements; Requirement to Deliver
Borrowing Certificate...........................................3
2.5 Revolving Facility Collections; Repayment; Borrowing
Availability and Lockbox........................................3
2.6 Term Loan.......................................................4
2.7 Interest on the Term Note.......................................4
2.8 Repayment of Term Loan; Maturity................................4
2.9 Promise to Pay; Manner of Payment...............................5
2.10 Repayment of Excess Advances....................................5
2.11 Other Mandatory Prepayments.....................................5
2.12 Payments by Lender..............................................6
2.13 Grant of Security Interest; Collateral..........................6
2.14 Collateral Administration.......................................7
2.15 Power of Attorney...............................................8
III. FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE...................9
3.1 Commitment Fee..................................................9
3.2 Unused Line Fee.................................................9
3.3 Collateral Management Fee.......................................9
3.4 Early Termination Fee...........................................9
3.5 Computation of Fees; Lawful Limits.............................10
3.6 Default Rate of Interest.......................................10
3.7 Acknowledgement of Joint and Several Liability.................10
IV. CONDITIONS PRECEDENT..................................................11
4.1 Conditions to Initial Advance and Closing......................11
4.2 Conditions to Each Additional Advance..........................13
4.3 Conditions to Funding the Term Loan............................13
V. REPRESENTATIONS AND WARRANTIES........................................15
5.1 Organization and Authority.....................................15
5.2 Loan Documents.................................................15
5.3 Subsidiaries, Capitalization and Ownership Interests...........16
5.4 Properties.....................................................16
5.5 Other Agreements...............................................16
5.6 Litigation.....................................................17
5.7 Hazardous Materials............................................17
5.8 Tax Returns; Governmental Reports..............................17
5.9 Financial Statements and Reports...............................17
5.10 Compliance with Law............................................18
5.11 Intellectual Property..........................................18
5.12 Licenses and Permits; Labor....................................18
5.13 No Default.....................................................18
5.14 Disclosure.....................................................19
5.15 Existing Indebtedness; Investments, Guarantees and
Certain Contracts..............................................19
5.16 Other Agreements...............................................19
5.17 Insurance......................................................19
5.18 Names; Location of Offices, Records and Collateral.............19
5.19 Non-Subordination..............................................20
5.20 Accounts.......................................................20
5.21 Survival.......................................................20
VI. AFFIRMATIVE COVENANTS.................................................21
6.1 Financial Statements, Reports and Other Information............21
6.2 Payment of Obligations.........................................22
6.3 Conduct of Business and Maintenance of Existence and Assets....22
6.4 Compliance with Legal and Other Obligations....................23
6.5 Insurance......................................................23
6.6 True Books.....................................................23
6.7 Inspection; Periodic Audits....................................24
6.8 Further Assurances; Post Closing...............................24
6.9 Payment of Indebtedness........................................24
6.10 Lien Searches..................................................25
6.11 Use of Proceeds................................................25
6.12 Collateral Documents; Security Interest in Collateral..........25
6.13 Intentionally Omitted..........................................25
6.14 Taxes and Other Charges........................................25
VII. NEGATIVE COVENANTS....................................................26
7.1 Financial Covenants............................................26
7.2 Permitted Indebtedness.........................................26
7.3 Permitted Liens................................................27
7.4 Investments; New Facilities or Collateral; Subsidiaries........28
7.5 Dividends; Redemptions.........................................28
7.6 Transactions with Affiliates...................................28
7.7 Charter Documents; Fiscal Year; Dissolution; Use of Proceeds...29
7.8 Truth of Statements............................................29
7.9 Payment on Subordinated Debt...................................29
VIII. EVENTS OF DEFAULT.....................................................30
IX. RIGHTS AND REMEDIES AFTER DEFAULT.....................................32
9.1 Rights and Remedies............................................32
9.2 Application of Proceeds........................................33
9.3 Rights of Lender to Appoint Receiver...........................34
9.4 Rights and Remedies not Exclusive..............................34
X. WAIVERS AND JUDICIAL PROCEEDINGS......................................34
10.1 Waivers........................................................34
10.2 Delay; No Waiver of Defaults...................................34
10.3 Jury Waiver....................................................35
XI. EFFECTIVE DATE AND TERMINATION........................................35
11.1 Effectiveness and Termination..................................35
11.2 Survival.......................................................35
XII. MISCELLANEOUS.........................................................36
12.1 Governing Law; Jurisdiction; Service of Process; Venue.........36
12.2 Successors and Assigns; Participations; New Lenders............36
12.3 Application of Payments........................................37
12.4 Indemnity......................................................37
12.5 Notice.........................................................38
12.6 Severability; Captions; Counterparts; Facsimile Signatures.....38
12.7 Expenses.......................................................38
12.8 Entire Agreement...............................................39
12.9 Lender Approvals...............................................39
12.10 Confidentiality and Publicity..................................39
12.11 Release of Lender..............................................39
1) Minimum EBITDA..................................................1
2) Fixed Coverage Ratio (EBITDA/Fixed Charges).....................1
Execution Copy
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT (the "Agreement")
dated as of April 30, 2002, is entered into between DERMA SCIENCES, INC., a
Pennsylvania corporation ("Derma"), SUNSHINE PRODUCTS, INC., a Missouri
corporation ("Sunshine"; Derma and Sunshine shall be referred to herein
individually and collectively, as "Borrower"), and CAPITALSOURCE FINANCE LLC, a
Delaware limited liability company ("Lender").
WHEREAS, Borrower has requested that Lender make available to Borrower a
revolving credit facility (the "Revolving Facility") in a maximum principal
amount at any time outstanding of up to Two Million Five Hundred Thousand
Dollars ($2,500,000) (the "Facility Cap"), and a term loan (the "Term Loan") in
a maximum principal amount of Five Hundred Fifty Thousand Dollars ($550,000)
(the "Maximum Loan Amount"), the proceeds of which shall be used by Borrower for
working capital needs in connection with Borrower's business of manufacturing,
marketing and selling skin care, wound management and wound securement devices
and, upon the funding of the Term Loan, refinancing existing obligations and
indebtedness of FNC Medical Corporation, a California corporation ("FNC"), owing
to Montecito Bank, and the acquisition of FNC by Borrower; and
WHEREAS, Lender is willing to make the Revolving Facility and the Term Loan
available to Borrower upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which hereby are
acknowledged, Borrower and Lender hereby agree as follows:
I. DEFINITIONS
1.1 General Terms
For purposes of this Agreement, in addition to the definitions above and
elsewhere in this Agreement, the terms listed in Appendix A hereto shall have
the meanings given such terms in Appendix A, which is incorporated herein and
made a part hereof. All capitalized terms used which are not specifically
defined shall have meanings provided in Article 9 of the UCC in effect on the
date hereof to the extent the same are used or defined therein. Unless otherwise
specified herein or in Appendix A, any agreement or contract referred to herein
or in Appendix A shall mean such agreement as modified, amended or supplemented
from time to time. Unless otherwise specified, as used in the Loan Documents or
in any certificate, report, instrument or other document made or delivered
pursuant to any of the Loan Documents, all accounting terms not defined in
Appendix A elsewhere in this Agreement shall have the meanings given to such
terms in and shall be interpreted in accordance with GAAP.
II. ADVANCES, PAYMENT AND INTEREST
2.1 The Revolving Facility
(a) Subject to the provisions of this Agreement, Lender shall make Advances
to Borrower under the Revolving Facility from time to time during the Term,
provided that, notwithstanding any other provision of this Agreement, the
aggregate amount of all Advances at any one
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time outstanding under the Revolving Facility shall not exceed either of (a) the
Facility Cap, and (b) the Availability. The Revolving Facility is a revolving
credit facility, which may be drawn, repaid and redrawn, from time to time as
permitted under this Agreement. Any determination as to whether there is
availability within the Borrowing Base for Advances shall be made by Lender in
its sole discretion and is final and binding upon Borrower. Unless otherwise
permitted by Lender, each Advance shall be in an amount of at least $1,000.
Subject to the provisions of this Agreement, Borrower may request Advances under
the Revolving Facility up to and including the value, in U.S. Dollars, of (i)
eighty-five percent (85%) of the Borrowing Base for Eligible Receivables and
(ii) fifty percent (50%) of the Borrowing Base for Eligible Inventory Costs and
minus, if applicable, amounts reserved pursuant to this Agreement (such
calculated amount being referred to herein as the "Availability"). Advances
under the Revolving Facility automatically shall be made for the payment of
interest on the Revolving Note and other Obligations on the date when due to the
extent available and as provided for herein.
(b) Lender has established the above-referenced advance rate for
Availability and, in its sole credit judgment, may further adjust the
Availability and such advance rate by applying percentages (known as "liquidity
factors") to Eligible Receivables by payor class based upon Borrower's actual
recent collection history for each such payor class (i.e., commercial insurance,
etc.) in a manner consistent with Lender's underwriting practices and
procedures, including without limitation Lender's review and analysis of, among
other things, Borrower's historical returns, rebates, discounts, credits and
allowances (collectively, the "Dilution Items"). Such liquidity factors and the
advance rate for Availability may be adjusted by Lender throughout the Term as
warranted by Lender's underwriting practices and procedures in its sole credit
judgment. Also, Lender shall have the right to establish from time to time, in
its sole credit judgment, reserves against the Borrowing Base, which reserves
shall have the effect of reducing the amounts otherwise eligible to be disbursed
to Borrower under the Revolving Facility pursuant to this Agreement.
2.2 The Revolving Note; Maturity
(a) All Advances under the Revolving Facility shall be evidenced by the
Revolving Note, payable to the order of Lender, duly executed and delivered by
Borrower and dated the Closing Date, evidencing the aggregate indebtedness of
Borrower to Lender resulting from Advances under the Revolving Facility, from
time to time. Lender hereby is authorized, but is not obligated, to enter the
amount of each Advance under the Revolving Facility and the amount of each
payment or prepayment of principal or interest thereon in the appropriate spaces
on the reverse of or on an attachment to the Revolving Note. Lender will account
to Borrower monthly with a statement of Advances under the Revolving Facility
and charges and payments made pursuant to this Agreement, and in the absence of
manifest error, such accounting rendered by Lender shall be deemed final,
binding and conclusive unless Lender is notified by Borrower in writing to the
contrary within 15 Business Days of Receipt of each accounting, which notice
shall be deemed an objection only to items specifically objected to therein.
(b) All amounts outstanding under the Revolving Note and other Obligations
shall be due and payable in full, if not earlier in accordance with this
Agreement, on the earlier of (i) the occurrence of an Event of Default if
required pursuant hereto or Lender's demand upon an Event of Default, and (ii)
the last day of the Term (such earlier date being the "Revolving Facility
Maturity Date").
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2.3 Interest
Interest on outstanding Advances under the Revolving Note shall be payable
monthly in arrears on the first day of each calendar month at an annual rate of
Prime Rate plus 2.5%, provided, however, that, notwithstanding any provision of
any Loan Document, the interest on outstanding Advances under the Revolving Note
shall be not less than 7.5%, in each case calculated on the basis of a 360-day
year and for the actual number of calendar days elapsed in each interest
calculation period. Interest accrued on each Advance under the Revolving Note
shall be due and payable on the first day of each calendar month, in accordance
with the procedures provided for in Section 2.5 and Section 2.9, commencing June
1, 2002, and continuing until the later of the expiration of the Term and the
full performance and irrevocable payment in full in cash of the Obligations and
termination of this Agreement.
2.4 Revolving Facility Disbursements; Requirement to Deliver Borrowing
Certificate
So long as no Default or Event of Default shall have occurred and be
continuing, Borrower may give Lender irrevocable written notice requesting an
Advance under the Revolving Facility by delivering to Lender not later than
11:00 a.m. (New York City time) at least two but not more than four Business
Days before the proposed borrowing date of such requested Advance (the
"Borrowing Date"), a completed Borrowing Certificate and relevant supporting
documentation satisfactory to Lender, which shall (i) specify the proposed
Borrowing Date of such Advance which shall be a Business Day, (ii) specify the
principal amount of such requested Advance, (iii) certify the matters contained
in Section 4.2, and (iv) specify the amount of any recoupments of any
third-party payor being sought, requested or claimed, or, to Borrower's
knowledge, threatened against Borrower or Borrower's Affiliates. Each time a
request for an Advance is made, and, in any event and regardless of whether an
Advance is being requested, on Tuesday of each week during the Term (and more
frequently if Lender shall so request) until the Obligations are indefeasibly
paid in cash in full and this Agreement is terminated, Borrower shall deliver to
Lender a Borrowing Certificate accompanied by a separate detailed aging and
categorizing of Borrower's accounts receivable and accounts payable and such
other supporting documentation with respect to the figures and information in
the Borrowing Certificate as Lender shall reasonably request from a credit or
security perspective or otherwise. On each Borrowing Date, Borrower irrevocably
authorizes Lender to disburse the proceeds of the requested Advance to the
appropriate Borrower's account(s) as set forth on Schedule 2.4, in all cases for
credit to the appropriate Borrower (or to such other account as to which the
appropriate Borrower shall instruct Lender) via Federal funds wire transfer no
later than 4:00 p.m. (New York City time).
2.5 Revolving Facility Collections; Repayment; Borrowing Availability and
Lockbox
Each Borrower shall maintain one or more lockbox accounts (individually and
collectively, the "Lockbox Account") with one or more banks acceptable to Lender
(each, a "Lockbox Bank"), and shall execute with each Lockbox Bank one or more
agreements acceptable to Lender (individually and collectively, the "Lockbox
Agreement"), and such other agreements related thereto as Lender may require.
Each Borrower shall ensure that all collections of their respective Accounts and
all other cash payments received by any Borrower are paid and delivered directly
from Account Debtors and other Persons into the appropriate Lockbox Account. The
Lockbox Agreements shall provide that the Lockbox Banks immediately will
transfer all funds paid into the Lockbox Accounts into a depository account or
accounts maintained by Lender or an Affiliate of Lender at such bank as Lender
may communicate to Borrower from time to time (the "Concentration Account").
Notwithstanding and without limiting any other provision of any Loan Document,
Lender shall apply, on a daily basis, all
3
funds transferred into the Concentration Account pursuant to the Lockbox
Agreement and this Section 2.5 in such order and manner as determined by Lender
in its Permitted Discretion. To the extent that any Accounts collections of any
Borrower or any other cash payments received by any Borrower are not sent
directly to the appropriate Lockbox Account but are received by any Borrower or
any of their Affiliates, such collections and proceeds shall be held in trust
for the benefit of Lender and immediately remitted (and in any event within two
(2) Business Days), in the form received, to the appropriate Lockbox Account for
immediate transfer to the Concentration Account. Borrower acknowledges and
agrees that compliance with the terms of this Section 2.5 is an essential term
of this Agreement. All funds transferred to the Concentration Account for
application to the Obligations under the Revolving Facility shall be applied to
reduce the Obligations under the Revolving Facility, but, for purposes of
calculating interest hereunder, shall be subject to a five Business Day
clearance period. If as the result of collections of Accounts and/or any other
cash payments received by any Borrower pursuant to this Section 2.5 a credit
balance exists with respect to the Concentration Account, such credit balance
shall not accrue interest in favor of a Borrower, but shall be available to the
appropriate Borrower in accordance with the terms of this Agreement. If
applicable, at any time prior to the execution of all or any of the Lockbox
Agreements and operation of all or any of the Lockbox Accounts, each Borrower
and their Affiliates shall direct all collections or proceeds it receives on
Accounts or from other Collateral to the accounts(s) and in the manner specified
by Lender in its sole discretion.
2.6 Term Loan
Subject to the terms and conditions set forth in this Agreement, Lender
agrees to loan to Borrower on the Term Loan Closing Date up to the Maximum Loan
Amount in the form of the Term Loan to be constituted of a single draw equal to
such amount to be in accordance with Borrower's instructions set forth in a
disbursement of funds letter delivered by Borrower on the Term Loan Closing
Date. The Term Loan is not a revolving credit facility, and any repayments of
principal shall be applied to permanently reduce the Term Loan. The Term Loan
shall be evidenced by the Term Note.
2.7 Interest on the Term Note
Interest on the outstanding balance of the Term Loan under the Term Note
shall be payable monthly in arrears on the first day of each calendar month at
an annual rate of Prime Rate plus 4.5%, provided, however, that,
notwithstanding, any other provision of any Loan Document, the interest on the
outstanding principal balance of the Term Loan under the Term Note shall be not
less than 11.5%, in each case calculated on the basis of a 360-day year and for
the actual number of calendar days elapsed in each interest calculation period.
Interest accrued on the Term Loan shall be due and payable on the first day of
each calendar month commencing on the first day of such month following the Term
Loan Closing Date, and continuing until the full performance and irrevocable
payment in full in cash of the Term Loan and all Obligations with respect to the
Term Loan. Advances under the Revolving Facility shall be made automatically for
the payment of interest on the Term Loan and other Obligations on the date when
due to the extent available and as provided for herein.
2.8 Repayment of Term Loan; Maturity
Payment of principal (in addition to the interest payments in Section 2.7)
and all other amounts outstanding under the Term Loan shall be made in
accordance with an amortization schedule to be attached as Schedule A on the
Term Loan Closing Date. Any unpaid principal of the Term Loan and all
4
other Obligations under the Term Loan shall be due and payable in full, and the
Term Note shall mature, if not earlier in accordance with this Agreement, on the
earlier of (i) the occurrence of an Event of Default if required pursuant hereto
or Lender's demand upon an Event of Default, and (ii) the first anniversary of
the Term Loan Closing Date (such earlier date being the "Term Loan Maturity
Date").
2.9 Promise to Pay; Manner of Payment
Borrower promises to pay principal, interest and all other amounts payable
hereunder, or under any other Loan Document, without any deduction whatsoever,
including any deduction for any setoff, recoupment, or counterclaim each of
which claim or defense hereby is waived. All payments made by Borrower (other
than payments automatically paid through Advances under the Revolving Facility
as provided herein or through transfers from the Lockbox Accounts to the
Concentration Account as provided in Section 2.5), shall be made only by wire
transfer to the Concentration Account or such other account designated by
Lender, on the date when due, in U.S. Dollars, in immediately available funds to
such account as may be indicated in writing by Lender to Borrower from time to
time. Any such payment received after 2:00 p.m. (New York City time) on the date
when due shall be deemed received on the following Business Day. Whenever any
payment hereunder shall be stated to be due or shall become due and payable on a
day other than a Business Day, the due date thereof shall be extended to, and
such payment shall be made on, the next succeeding Business Day, and such
extension of time in such case shall be included in the computation of payment
of any interest (at the interest rate then in effect during such extension)
and/or fees, as the case may be.
2.10 Repayment of Excess Advances
Any balance of Advances under the Revolving Facility outstanding at any
time in excess of the lesser of the Facility Cap or the Availability shall be
immediately due and payable by Borrower without the necessity of any demand, at
the Payment Office, whether or not a Default or Event of Default has occurred or
is continuing and shall be paid in the manner specified in Section 2.9.
2.11 Other Mandatory Prepayments
In addition to and without limiting any provision of any Loan Document,
after the funding of the Term Loan hereunder:
(a) if a Change of Control occurs, on or prior to the first Business Day
following the date of such Change of Control, Borrower shall prepay the Loans,
including, without limitation, all outstanding Advances and all other
Obligations, in full in cash together with accrued interest thereon to the date
of prepayment and all other amounts owing to Lender under the Loan Documents;
(b) if Borrower, in any transaction or series of transactions, (i) sells
any assets or properties (outside the ordinary course of its business) that have
a value equal to or in excess of $5,000 individually or $10,000 in the
aggregate, (ii) sells or issues any debt securities (other than Permitted
Subordinated Debt) or any equity securities pursuant to a registration statement
filed and effective with the Securities and Exchange Commission or public equity
securities otherwise than through any such registration statement in excess of
$500,000, (iii) receives any property damage or insurance award which is not
used to repair or replace the property or assets covered thereby or paid to a
third-party as a result of or relating to the incidents giving rise to such
award, then Borrower shall apply 100% of the
5
proceeds thereof to the prepayment of the Term Loan, together with accrued
interest thereon to the date of prepayment and all other amounts owing to Lender
under the Term Loan; provided that such payments shall be applied in such manner
and order as Lender shall decide in its Permitted Discretion.
2.12 Payments by Lender
Should any amount required to be paid under any Loan Document be unpaid,
such amount may be paid by Lender, which payment shall be deemed a request for
an Advance under the Revolving Facility as of the date such payment is due, and
Borrower irrevocably authorizes disbursement of any such funds to Lender by way
of direct payment of the relevant amount, interest or Obligations. No payment or
prepayment of any amount by Lender or any other Person shall entitle any Person
to be subrogated to the rights of Lender under any Loan Document unless and
until the Obligations have been fully performed and paid irrevocably in cash and
this Agreement has been terminated. Any sums expended by Lender as a result of
any Borrower's or any Guarantor's failure to pay, perform or comply with any
Loan Document or any of the Obligations may be charged to Borrower's account as
an Advance under the Revolving Facility and added to the Obligations.
2.13 Grant of Security Interest; Collateral
(a) To secure the payment and performance of the Obligations, each Borrower
hereby grants to Lender a continuing security interest in and Lien upon, and
pledges to Lender, all of its right, title and interest in and to the following
(collectively and each individually, the "Collateral"), which security interest
is intended to be a first priority security interest:
(i) all of such Borrower's tangible personal property, including
without limitation all present and future Inventory and Equipment
(including items of equipment which are or become Fixtures), now owned or
hereafter acquired;
(ii) all of such Borrower's intangible personal property, including
without limitation all present and future Accounts, securities, contract
rights, Permits, General Intangibles, Chattel Paper, Investment Property,
Documents, Instruments, Deposit Accounts, Letter-of-Credit Rights and
Supporting Obligations, rights to the payment of money or other forms of
consideration of any kind, tax refunds, insurance proceeds, now owned or
hereafter acquired, and all intangible and tangible personal property
relating to or arising out of any of the foregoing;
(iii) all of such Borrower's present and future Government Contracts
and rights thereunder and the related Government Accounts and proceeds
thereof, now or hereafter owned or acquired by such Borrower; provided,
however, that Lender shall not have a security interest in any rights under
any Government Contract of such Borrower or in the related Government
Account where the taking of such security interest would be a violation of
an express prohibition contained in the Government Contract (for purposes
of this limitation, the fact that a Government Contract is subject to, or
otherwise refers to, Title 31, ss. 203 or Title 41, ss. 15 of the United
States Code shall not be deemed an express prohibition against assignment
thereof) or is prohibited by applicable law; and
(iv) any and all additions to any of the foregoing, and any and all
replacements, products and proceeds (including insurance proceeds) of any
of the foregoing.
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(b) Notwithstanding the foregoing provisions of this Section 2.13, such
grant of a security interest shall not extend to, and the term "Collateral"
shall not include, any General Intangibles of Borrower to the extent that (i)
such General Intangibles are not assignable or capable of being encumbered as a
matter of law or under the terms of any license or other agreement applicable
thereto (but solely to the extent that any such restriction shall be enforceable
under applicable law) without the consent of the licensor thereof or other
applicable party thereto, and (ii) such consent has not been obtained; provided,
however, that the foregoing grant of a security interest shall extend to, and
the term "Collateral" shall include, each of the following: (a) any General
Intangible which is in the nature of an Account or a right to the payment of
money or a proceed of, or otherwise related to the enforcement or collection of,
any Account or right to the payment of money, or goods which are the subject of
any Account or right to the payment of money, (b) any and all proceeds of any
General Intangible that is otherwise excluded to the extent that the assignment,
pledge or encumbrance of such proceeds is not so restricted, and (c) upon
obtaining the consent of any such licensor or other applicable party with
respect to any such otherwise excluded General Intangible, such General
Intangible as well as any and all proceeds thereof that might theretofore have
been excluded from such grant of a security interest and from the term
"Collateral."
(c) In addition to the foregoing, to secure the payment and performance of
the Obligations, Borrower has pledged to Lender all of the securities Derma owns
in Sunshine pursuant to the Stock Pledge Agreement.
(d) Upon the execution and delivery of this Agreement, and upon the proper
filing of the necessary financing statements, recordation of the Collateral
Patent, Trademark and Copyright Assignment in the United States Patent and
Trademark Office, and proper delivery of the necessary stock certificates,
without any further action, Lender will have a good, valid and perfected first
priority Lien and security interest in the Collateral, subject to no transfer or
other restrictions or Liens of any kind in favor of any other Person except for
Permitted Liens (as defined in Section 7.3). No financing statement relating to
any of the Collateral is on file in any public office except those (i) on behalf
of Lender, (ii) in connection with Permitted Liens, and/or (iii) for
pre-existing and terminated debt or other obligations of Borrower as to which
Borrower is actively pursuing terminations. Borrower agrees to actively pursue
the termination of such financing statements noted in subsection (iii) above,
which includes the filing by Borrower of UCC terminations for such financing
statements after Borrower has made a proper demand upon the appropriate lender
to do so; provided that any such filing by Borrower shall be in accordance with,
and after the number of days required under, Article 9 of the UCC.
2.14 Collateral Administration
(a) All Collateral (except Deposit Accounts) will at all times be kept by
Borrower at the locations set forth on Schedule 5.18B hereto and shall not,
without thirty (30) calendar days prior written notice to Lender, be moved
therefrom, and in any case shall not be moved outside the continental United
States.
(b) Borrower shall keep accurate and complete records of its Accounts and
all payments and collections thereon and shall submit such records to Lender on
such periodic bases as Lender may request in its Permitted Discretion. In
addition, if Accounts of Borrower in an aggregate face amount in excess of
$10,000 become ineligible because they fall within one of the specified
categories of ineligibility set forth in the definition of Eligible Receivables,
Borrower shall notify Lender of such occurrence on the first Business Day
following such occurrence and the Borrowing Base shall
7
thereupon be adjusted to reflect such occurrence. If requested by Lender,
Borrower shall execute and deliver to Lender formal written assignments of all
of its Accounts weekly or daily as Lender may request, including all Accounts
created since the date of the last assignment, together with copies of claims,
invoices and/or other information related thereto. To the extent that
collections from such assigned accounts exceed the amount of the Obligations,
such excess amount shall not accrue interest in favor of Borrower, but shall be
available to Borrower upon Borrower's written request.
(c) Whether or not an Event of Default has occurred, any of Lender's
officers, employees, representatives or agents shall have the right, at any time
during normal business hours and, upon reasonable advanced notice to Borrower if
no Event of Default has occurred and is continuing, in the name of Lender, any
designee of Lender or Borrower, to review the books and records of Borrower to
verify the validity, amount or any other matter relating to any Accounts of
Borrower. Borrower shall cooperate fully with Lender in an effort to facilitate
and promptly conclude such verification process.
(d) To expedite collection, Borrower shall endeavor in the first instance
to make collection of its Accounts for Lender. Lender shall have the right at
all times after the occurrence of an Event of Default to notify Account Debtors
owing Accounts to Borrower that their Accounts have been assigned to Lender and
to collect such Accounts directly in its own name and to charge collection costs
and expenses, including reasonable attorney's fees, to Borrower.
(e) As and when determined by Lender in its sole discretion, Lender will
perform the searches described in clauses (i) and (ii) below against Borrower
and Guarantors (the results of which are to be consistent with Borrower's
representations and warranties under this Agreement), all at Borrower's expense:
(i) UCC searches with the Secretary of State and local filing offices of each
jurisdiction where Borrower and/or any Guarantors maintains their respective
executive offices, a place of business or assets; and (ii) judgment, federal tax
lien and corporate and partnership tax lien searches, in each jurisdiction
searched under clause (i) above.
(f) Borrower (i) shall provide prompt written notice to its current bank to
transfer all collections and remittances to the Concentration Account, (ii)
shall provide prompt written notice to each Account Debtor that Lender has been
granted a lien and security interest in, upon and to all Accounts applicable to
such Account Debtor and shall direct each Account Debtor to make payments to the
appropriate Lockbox Account, and Borrower hereby authorizes Lender, upon any
failure to send such notices and directions within ten (10) Business Days after
the date of this Agreement (or ten (10) Business Days after the Person becomes
an Account Debtor), to send any and all similar notices and directions to such
Account Debtors, and (iii) shall do anything further that may be lawfully
required by Lender to secure Lender and effectuate the intentions of the Loan
Documents. At Lender's request, Borrower shall immediately deliver to Lender the
following items for which Lender must receive possession to obtain a perfected
security interest: all notes, certificates, and documents of title, Chattel
Paper, warehouse receipts, Instruments, and any other similar instruments
constituting Collateral.
2.15 Power of Attorney
Lender is hereby irrevocably made, constituted and appointed the true and
lawful attorney for Borrower (without requiring any of them to act as such) with
full power of substitution to do the following upon the occurrence and
continuation of an Event of Default: (i) endorse the name of any such Person
upon any and all checks, drafts, money orders, and other instruments for the
payment of money that are payable to such Person and constitute collections on
its or their Accounts; (ii) execute in the name of such Person any financing
statements, schedules, assignments, instruments, documents, and
8
statements that it is or they or are obligated to give Lender under any of the
Loan Documents; and (iii) do such other and further acts and deeds in the name
of such Person that Lender may deem necessary or desirable to enforce any
Account or other Collateral or to perfect Lender's security interest or lien in
any Collateral. In addition, if any such Person breaches its obligation
hereunder to direct payments of Accounts or the proceeds of any other Collateral
to the appropriate Lockbox Account, Lender, as the irrevocably made, constituted
and appointed true and lawful attorney for such Person pursuant to this
paragraph, may, by the signature or other act of any of Lender's officers or
authorized signatories (without requiring any of them to do so), direct any
federal, state or private payor or fiscal intermediary to pay proceeds of
Accounts or any other Collateral to the appropriate Lockbox Account.
III. FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE
3.1 Commitment Fee
Borrower has paid to Lender 1.0% of the Facility Cap as a nonrefundable
commitment fee. Borrower shall pay on or before the Term Loan Closing Date, 1.5%
of the Maximum Loan Amount as a nonrefundable commitment fee (collectively, the
"Commitment Fee").
3.2 Unused Line Fee
Commencing on August 1, 2002, Borrower shall pay to Lender a monthly an
unused line fee in an amount equal to 0.6% (per annum) of the difference derived
by subtracting (i) the daily average amount of the balances under the Revolving
Facility outstanding during the preceding month from (ii) $2,000,000; provided
that the first day of the month after the earlier of (x) the Term Loan Closing
Date or (y) the date on which Borrower's Availability is greater than
$2,000,000, Borrower shall pay to Lender a monthly an unused line fee in an
amount equal to 0.6% (per annum) of the difference derived by subtracting (i)
the daily average amount of the balances under the Revolving Facility
outstanding during the preceding month, from (ii) the Facility Cap (the
applicable amount shall be referred to as the "Unused Line Fee"). The Unused
Line Fee shall be payable monthly in arrears on the first day of each successive
calendar month (starting with the month in which the Closing Date occurs).
3.3 Collateral Management Fee
Borrower shall pay Lender as additional interest a monthly collateral
management fee (the "Collateral Management Fee") equal to 1.5% (per annum) of
the daily average amount of the balances under the Revolving Facility
outstanding during the preceding month. The Collateral Management Fee shall be
payable monthly in arrears on the first day of each successive calendar month
(starting with the month in which the Closing Date occurs).
3.4 Early Termination Fee
If (i) Borrower terminates the Revolving Facility under Section 11.1
hereof, (ii) Lender demands or Borrower is otherwise required to make payment in
full of the Revolving Facility and/or Obligations relating to the Revolving
Facility upon the occurrence of an Event of Default, (iii) a mandatory
prepayment pursuant to Section 2.11 is required, (iv) any other voluntary or
involuntary prepayment of the Revolving Facility and/or Obligations relating to
the Revolving Facility by Borrower or any other Person occurs (other than
reductions to zero of the outstanding balance of the Revolving
9
Facility resulting from the ordinary course operation of the provisions of
Section 2.5), whether by virtue of Lender's exercising its right of set-off or
otherwise, (v) Lender accelerates the Revolving Note or makes any demand on the
Revolving Note, or (vi) any payment or reduction of the outstanding balance of
the Revolving Note and/or the Revolving Facility is made during a bankruptcy,
reorganization or other proceeding or is made pursuant to any plan of
reorganization or liquidation or any Debtor Relief Law (each, a "revolver
termination"), then, at the effective date of any such revolver termination,
Borrower shall pay Lender (in addition to the then outstanding principal,
accrued interest and other Obligations relating to the Revolving Facility
pursuant to the terms of this Agreement and any other Loan Document), as yield
maintenance for the loss of bargain and not as a penalty, an amount equal to the
applicable Minimum Termination Fee.
3.5 Computation of Fees; Lawful Limits
All fees hereunder shall be computed on the basis of a year of 360 days and
for the actual number of days elapsed in each calculation period, as applicable.
In no contingency or event whatsoever, whether by reason of acceleration or
otherwise, shall the interest and other charges paid or agreed to be paid to
Lender for the use, forbearance or detention of money hereunder exceed the
maximum rate permissible under applicable law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. If, due to
any circumstance whatsoever, fulfillment of any provision hereof, at the time
performance of such provision shall be due, shall exceed any such limit, then,
the obligation to be so fulfilled shall be reduced to such lawful limit, and, if
Lender shall have received interest or any other charges of any kind which might
be deemed to be interest under applicable law in excess of the maximum lawful
rate, then such excess shall be applied first to any unpaid fees and charges
hereunder, then to unpaid principal balance owed by Borrower hereunder, and if
the then remaining excess interest is greater than the previously unpaid
principal balance, Lender shall promptly refund such excess amount to Borrower
and the provisions hereof shall be deemed amended to provide for such
permissible rate. The terms and provisions of this Section 3.5 shall control to
the extent any other provision of any Loan Document is inconsistent herewith.
3.6 Default Rate of Interest
Upon the occurrence and during the continuation of an Event of Default, the
Applicable Rate of interest in effect at such time with respect to the
Obligations shall be increased by 4.0% per annum (the "Default Rate").
3.7 Acknowledgement of Joint and Several Liability
Each Borrower acknowledges that it is jointly and severally liable for all
of the Obligations under the Loan Documents. Each Borrower expressly
understands, agrees and acknowledges that (i) Borrowers are all affiliated
entities by common ownership, (ii) each Borrower desires to have the
availability of one common credit facility instead of separate credit
facilities, (iii) each Borrower has requested that Lender extend such a common
credit facility on the terms herein provided, (iv) Lender will be lending
against, and relying on a Lien upon, all of Borrowers' assets even though the
proceeds of any particular loan made hereunder may not be advanced directly to a
particular Borrower, (v) each Borrower will nonetheless benefit by the making of
all such loans by Lender and the availability of a single credit facility of a
size greater than each could independently warrant, and (vi) all
10
of the representations, warranties, covenants, obligations, conditions,
agreements and other terms contained in the Loan Documents shall be applicable
to and shall be binding upon each Borrower.
3.8 Term Loan IRR Assurance Fee
On the Term Loan Maturity Date or the date of any prepayment in full of the
Term Loan (the "Assurance Fee Payment Date"), Borrower shall pay as a fee to
Lender an amount designed to ensure that Lender earns an IRR on the Term Loan
equal to 22.5% on an annual basis (the "Minimum Term Loan Yield"). Accordingly,
on the Assurance Fee Payment Date, the actual IRR shall be calculated and, to
the extent that such yield is below the Minimum Term Loan Yield, Borrower shall
pay as a fee to Lender an amount which would result in Lender earning the
Minimum Term Loan Yield (the "Term Loan Assurance Fee"). The calculation shall
take into consideration the Commitment Fee with respect to the Term Loan and all
interest paid to date by Borrower on the Term Loan.
IV. CONDITIONS PRECEDENT
4.1 Conditions to Initial Advance and Closing
The obligations of Lender to consummate the transactions contemplated
herein and to make the initial Advance under the Revolving Facility (the
"Initial Advance") are subject to the satisfaction, in the sole judgment of
Lender, of the following:
(a) Borrower shall have delivered to Lender (A) the Loan Documents to which
it is a party, each duly executed by an authorized officer of Borrower and the
other parties thereto and (B) a Borrowing Certificate for the Initial Advance
under the Revolving Facility executed by an authorized officer of Borrower;
(b) all in form and substance satisfactory to Lender in its sole
discretion, Lender shall have received (i) a report of Uniform Commercial Code
financing statement, tax and judgment lien searches performed with respect to
each Borrower and Guarantor in each jurisdiction determined by Lender in its
sole discretion, and such report shall show no Liens on the Collateral (other
than Permitted Liens), (ii) each document (including, without limitation, any
Uniform Commercial Code financing statement) required by any Loan Document or
under law or requested by Lender to be filed, registered or recorded to create
in favor of Lender, a perfected, first priority security interest upon the
Collateral, and (iii) evidence of each such filing, registration or recordation
and of the payment by Borrower of any necessary fee, tax or expense relating
thereto;
(c) Lender shall have received (i) the Charter and Good Standing Documents,
all in form and substance acceptable to Lender, (ii) a certificate of the
corporate secretary or assistant secretary of each Borrower dated the Closing
Date, as to the incumbency and signature of the Persons executing the Loan
Documents, in form and substance acceptable to Lender, and (iii) the written
legal opinion of counsel for Borrower in form and substance satisfactory to
Lender and its counsel;
(d) Lender shall have received a certificate of the chief financial officer
(or, in the absence of a chief financial officer, the chief executive officer)
of each Borrower, in form and substance
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satisfactory to Lender (each, a "Solvency Certificate"), certifying (i) that
such Person is not insolvent and will not be rendered insolvent after giving
effect to the transactions and the Indebtedness contemplated by the Loan
Documents, and (ii) as to such Person's financial resources and ability to meet
its obligations and liabilities as they become due, to the effect that as of the
Closing Date and the Borrowing Date for the Initial Advance and after giving
effect to such transactions and Indebtedness: (A) the assets of such Person, at
a Fair Valuation, exceed the total liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) of such Person, and (B)
such Person possesses sufficient capital to effectively operate its business as
currently conducted and as currently proposed to be conducted;
(e) Lender shall have completed examinations, the results of which shall be
satisfactory in form and substance to Lender, of the Collateral, the financial
statements and the books, records, business, obligations, financial condition
and operational state of each Borrower and Guarantor, and each such Person shall
have demonstrated to Lender's satisfaction that (i) its operations comply, in
all respects deemed material by Lender, in its sole judgment, with all
applicable federal, state, foreign and local laws, statutes and regulations,
(ii) its operations are not the subject of any governmental investigation,
evaluation or any remedial action which could result in any expenditure or
liability deemed material by Lender, in its sole judgment, and (iii) it has no
liability (whether contingent or otherwise) that is deemed material by Lender,
in its sole judgment;
(f) Lender shall have received all fees, charges and expenses payable to
Lender on or prior to the Closing Date pursuant to the Loan Documents;
(g) all in form and substance satisfactory to Lender in its Permitted
Discretion, Lender shall have received such consents, approvals and agreements,
including, without limitation, any applicable Landlord Waivers and Consents with
respect to any and all leases set forth on Schedule 5.4, from such third parties
as Lender and its counsel shall determine are necessary or desirable with
respect to (i) the Loan Documents and/or the transactions contemplated thereby,
and/or (ii) claims against any Borrower or the Collateral;
(h) Borrower shall be in compliance with Section 6.5, and Lender shall have
received (i) certified copies of all such insurance policies, and (ii) original
certificates of such insurance policies confirming that they are in effect and
that the premiums due and owing with respect thereto have been paid in full and
naming Lender as sole beneficiary or loss payee and additional insured, as
appropriate;
(i) all corporate and other proceedings, documents, instruments and other
legal matters in connection with the transactions contemplated by the Loan
Documents (including, but not limited to, those relating to corporate and
capital structures of Borrower) shall be satisfactory to Lender;
(j) Lender shall have received, in form and substance satisfactory to
Lender, evidence of release and termination of any and all Liens, security
interests and/or Uniform Commercial Code financing statements in, on, against or
with respect to any of the Collateral (other than Permitted Liens);
(k) Borrower shall have delivered to Lender evidence of the existence and
implementation of Borrower's back-up and disaster recovery plan; and
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(l) Borrower shall have completed, executed and filed IRS Form 8821 in
accordance with Lender's instructions.
4.2 Conditions to Each Additional Advance
The obligations of Lender to make any Advance (including, without
limitation, the Initial Advance) are subject to the satisfaction, in the sole
judgment of Lender, of the following additional conditions precedent:
(a) Borrower shall have delivered to Lender a Borrowing Certificate for the
Advance executed by an authorized officer of Borrower, which shall constitute a
representation and warranty by Borrower as of the Borrowing Date of such Advance
that the conditions contained in this Section 4.2 have been satisfied; provided,
however, that any determination as to whether to fund Advances or extensions of
credit shall be made by Lender in its Permitted Discretion;
(b) each of the representation and warranties made by Borrower in or
pursuant to this Agreement shall be accurate, before and after giving effect to
such Advance and/or funding the Term Loan;
(c) no Default or Event of Default shall have occurred or be continuing or
would exist after giving effect to the Advance under the Revolving Facility on
such date;
(d) immediately after giving effect to the requested Advance, the aggregate
outstanding principal amount of Advances under the Revolving Facility shall not
exceed either the Availability and the Facility Cap;
(e) except as disclosed in the historical financial statements, there shall
be no liabilities or obligations with respect to Borrower of any nature
whatsoever which, either individually or in the aggregate, would reasonably be
likely to have a Material Adverse Effect;
(f) Lender shall have received all fees, charges and expenses payable to
Lender on or prior to such date pursuant to the Loan Documents.
4.3 Conditions to Funding the Term Loan
The obligations of Lender to fund the Term Loan are subject to the
satisfaction, in the sole judgment of Lender, of the following additional
conditions precedent:
(a) Derma, FNC and Xxxxxxxx, as appropriate, shall have entered into the
Acquisition Documents, which shall be in form and substance satisfactory to
Lender in its Permitted Discretion, and Borrower shall have provided to Lender
certified copies of the executed Acquisition Documents and all other documents
required to be delivered pursuant thereto, together with evidence that all
conditions precedent to the effectiveness thereof have been satisfied;
(b) FNC shall have executed a Joinder Agreement becoming a party to and
bound by this Agreement as a "Borrower" and to and by the other Loan Documents
to which Borrower is a party in the appropriate capacity and other agreements
and instruments as required by Lender in its Permitted
13
Discretion; and Borrower and FNC shall have delivered to Lender the Term Note
and the Subordination Agreement, and other Loan Documents to which it is a
party, each duly executed by an authorized officer of Borrower and FNC and the
other parties thereto;
(c) all in form and substance satisfactory to Lender in its sole
discretion, Lender shall have received (i) a report of Uniform Commercial Code
financing statement, tax and judgment lien searches performed with respect to
FNC in each jurisdiction determined by Lender in its sole discretion, and such
report shall show no Liens on the Collateral (other than Permitted Liens), (ii)
each document (including, without limitation, any Uniform Commercial Code
financing statement) required by any Loan Document or under law or requested by
Lender to be filed, registered or recorded to create in favor of Lender, a
perfected, first priority security interest upon the Collateral, and (iii)
evidence of each such filing, registration or recordation and of the payment by
Borrower of any necessary fee, tax or expense relating thereto;
(d) Lender shall have received (i) the Charter and Good Standing Documents
for FNC, all in form and substance acceptable to Lender, (ii) a certificate of
the corporate secretary or assistant secretary of FNC dated the Term Loan
Closing Date, as to the incumbency and signature of FNC executing the Loan
Documents, in form and substance acceptable to Lender, and (iii) the written
legal opinion of counsel for FNC in form and substance satisfactory to Lender
and its counsel;
(e) Lender shall have received a Solvency Certificate of the chief
financial officer (or, in the absence of a chief financial officer, the chief
executive officer) of FNC;
(f) Lender shall have completed examinations, the results of which shall be
satisfactory in form and substance to Lender, of the Collateral, the financial
statements and the books, records, business, obligations, financial condition
and operational state of FNC, and FNC shall have demonstrated to Lender's
satisfaction that (i) its operations comply, in all respects deemed material by
Lender, in its sole judgment, with all applicable federal, state, foreign and
local laws, statutes and regulations, (ii) its operations are not the subject of
any governmental investigation, evaluation or any remedial action which could
result in any expenditure or liability deemed material by Lender, in its sole
judgment, and (iii) it has no liability (whether contingent or otherwise) that
is deemed material by Lender, in its sole judgment;
(g) Lender shall have received all fees, charges and expenses payable to
Lender on or prior to the Term Loan Closing Date;
(h) all in form and substance satisfactory to Lender in its Permitted
Discretion, Lender shall have received such consents, approvals and agreements,
including, without limitation, any applicable Landlord Waivers and Consents with
respect to any and all leases set forth on an amended Schedule 5.4 delivered in
connection with the Joinder Agreement, from such third parties as Lender and its
counsel shall determine are necessary or desirable with respect to (i) the Loan
Documents and/or the transactions contemplated thereby, and/or (ii) claims
against FNC;
(i) FNC shall be in compliance with Section 6.5, and Lender shall have
received (i) certified copies of all such insurance policies, and (ii) original
certificates of such insurance policies confirming that they are in effect and
that the premiums due and owing with respect thereto have been paid in full and
naming Lender as sole beneficiary or loss payee and additional insured, as
appropriate;
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(j) Lender shall have received, in form and substance satisfactory to
Lender, (i) evidence of the repayment in full and termination of all
indebtedness and obligations owing by FNC to Montecito Bank & Trust and other
Indebtedness owing by FNC and all related documents, agreements and instruments
and of all Liens, security interests and Uniform Commercial Code financing
statements relating thereto, and (ii) release and termination of any and all
Liens, security interests and/or Uniform Commercial Code financing statements
in, on, against or with respect to any of the Collateral (other than Permitted
Liens);
(k) Borrower shall have delivered to Lender evidence of equity capital to
Derma in an amount equal to or greater than $1,000,000; and
(l) FNC shall have completed, executed and filed IRS Form 8821 in
accordance with Lender's instructions.
V. REPRESENTATIONS AND WARRANTIES
Each Borrower, jointly and severally, represents and warrants as of the
date hereof, the Closing Date, each Borrowing Date and the date of funding of
the Term Loan as follows:
5.1 Organization and Authority
Each Borrower is a corporation duly organized, validly existing and in good
standing under the laws of its state of formation. Borrower (i) has all
requisite corporate power and authority to own its properties and assets and to
carry on its business as now being conducted and as contemplated in the Loan
Documents, (ii) is duly qualified to do business in every jurisdiction in which
failure so to qualify would reasonably be expected to have a Material Adverse
Effect, and (iii) has all requisite power and authority (A) to execute, deliver
and perform the Loan Documents to which it is a party, (B) to borrow hereunder,
(C) to consummate the transactions contemplated under the Loan Documents, and
(D) to grant the Liens with regard to the Collateral pursuant to the Security
Documents to which it is a party. No Borrower is an "investment company"
registered or required to be registered under the Investment Company Act of
1940, as amended, or is controlled by such an "investment company."
5.2 Loan Documents
The execution, delivery and performance by Borrower of the Loan Documents
to which it is a party, and the consummation of the transactions contemplated
thereby, (i) have been duly authorized by all requisite action of each such
Person and have been duly executed and delivered by or on behalf of each such
Person; (ii) do not violate any provisions of (A) applicable law, statute, rule,
regulation, ordinance or tariff, the effect of which would reasonably be
expected to have a Material Adverse Effect, (B) any order of any Governmental
Authority binding on any such Person or any of their respective properties, or
(C) the certificate of incorporation or bylaws (or any other equivalent
governing agreement or document) of any such Person, or any agreement between
any such Person and its respective stockholders, members, partners or equity
owners; (iii) are not in conflict with, and do not result in a breach or default
of or constitute an event of default, or an event, fact, condition or
circumstance which, with notice or passage of time, or both, would constitute or
result in a conflict, breach, default or event of default under, any indenture,
agreement or other instrument to which any such
15
Person is a party, or by which the properties or assets of such Person are
bound, the effect of which could reasonably be expected to have a Material
Adverse Effect; (iv) except as set forth therein, will not result in the
creation or imposition of any Lien of any nature upon any of the properties or
assets of any such Person, and (v) except as set forth on Schedule 5.2, do not
require the consent, approval or authorization of, or filing, registration or
qualification with, any Governmental Authority or any other Person. When
executed and delivered, each of the Loan Documents to which Borrower is a party
will constitute the legal, valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its terms, subject to the effect of any
applicable bankruptcy, moratorium, insolvency, reorganization or other similar
law affecting the enforceability of creditors' rights generally and to the
effect of general principles of equity which may limit the availability of
equitable remedies (whether in a proceeding at law or in equity).
5.3 Subsidiaries, Capitalization and Ownership Interests
Sunshine is a Subsidiary of Derma, with the number and class of equity
securities owned by Derma as listed on Schedule 5.3. Sunshine has no
Subsidiaries. Schedule 5.3 states the authorized and issued capitalization of
Borrower, the number and class of equity securities and/or ownership, voting or
partnership interests issued and outstanding of Borrower (including options,
warrants and other rights to acquire any of the foregoing). The outstanding
equity securities and/or ownership, voting or partnership interests of Borrower
have been duly authorized and validly issued and are fully paid and
nonassessable, and each Person listed on Schedule 5.3 owns beneficially and of
record all the equity securities and/or ownership, voting or partnership
interests it is listed as owning free and clear of any Liens other than Liens
created by the Security Documents. Schedule 5.3 also lists the directors,
members, managers and/or partners of Borrower. Except as listed on Schedule 5.3,
Borrower does not own an interest or participate or engage in any joint venture,
partnership or similar arrangements with any Person.
5.4 Properties
Borrower (i) is the sole owner and has good, valid and marketable title to,
or a valid leasehold interest in, all of its properties and assets, including
the Collateral, whether personal or real, subject to no transfer restrictions or
Liens of any kind except for Permitted Liens, and (ii) is in compliance in all
material respects with each lease to which it is a party or otherwise bound.
Schedule 5.4 lists all real properties (and their locations) owned or leased by
or to, and all other assets or property that are leased or licensed by, Borrower
and all leases (including leases of leased real property) covering or with
respect to such properties and assets. Borrower enjoys peaceful and undisturbed
possession under all such leases and such leases are all the leases necessary
for the operation of such properties and assets, are valid and subsisting and
are in full force and effect.
5.5 Other Agreements
Borrower is not (i) a party to any judgment, order or decree or any
agreement, document or instrument, or subject to any restriction, which would
materially adversely affect its ability to execute and deliver, or perform
under, any Loan Document or to pay the Obligations, (ii) in default in the
performance, observance or fulfillment of any obligation, covenant or condition
contained in any agreement, document or instrument to which it is a party or to
which any of its properties or assets are subject, which default, if not
remedied within any applicable grace or cure period could reasonably be expected
to have a Material Adverse Effect, nor is there any event, fact, condition or
circumstance which, with notice or passage of time or both, would constitute or
result in a conflict, breach, default or event of default under, any of the
foregoing which, if not remedied within any applicable grace or cure period
could reasonably be
16
expected to have a Material Adverse Effect; or (iii) a party or subject to any
agreement, document or instrument with respect to, or obligation to pay any,
service or management fee with respect to, the ownership, operation, leasing or
performance of any of its business or any facility.
5.6 Litigation
There is no action, suit, proceeding or investigation pending or, to their
knowledge, threatened against Borrower that (i) questions or could prevent the
validity of any of the Loan Documents or the right of Borrower to enter into any
Loan Document or to consummate the transactions contemplated thereby, (ii) could
reasonably be expected to be or have, either individually or in the aggregate,
any Material Adverse Change or Material Adverse Effect, or (iii) could
reasonably be expected to result in any Change of Control or other change in the
current ownership, control or management of Borrower. Borrower is not aware that
there is any basis for the foregoing. Borrower is not a party or subject to any
order, writ, injunction, judgment or decree of any Governmental Authority. There
is no action, suit, proceeding or investigation initiated by Borrower currently
pending. Borrower has not any existing accrued and/or unpaid Indebtedness to any
Governmental Authority or any other governmental payor.
5.7 Hazardous Materials
Borrower is in compliance in all material respects with all applicable
Environmental Laws. Borrower has not been notified of any action, suit,
proceeding or investigation (i) relating in any way to compliance by or
liability of Borrower under any Environmental Laws, (ii) which otherwise deals
with any Hazardous Substance or any Environmental Law, or (iii) which seeks to
suspend, revoke or terminate any license, permit or approval necessary for the
generation, handling, storage, treatment or disposal of any Hazardous Substance.
5.8 Tax Returns; Governmental Reports
Borrower (i) has filed all federal, state, foreign (if applicable) and
local tax returns and other reports which are required by law to be filed by
Borrower, and (ii) has paid all taxes, assessments, fees and other governmental
charges, including, without limitation, payroll and other employment related
taxes, in each case that are due and payable, except only for items that
Borrower is currently contesting in good faith and that are described on
Schedule 5.8.
5.9 Financial Statements and Reports
All financial statements and financial information relating to Borrower
that have been or may hereafter be delivered to Lender by Borrower are accurate
and complete and have been prepared in accordance with GAAP consistently applied
with prior periods. Borrower has no material obligations or liabilities of any
kind not disclosed in such financial information or statements, and since the
date of the most recent financial statements submitted to Lender, there has not
occurred any Material Adverse Change or Material Adverse Effect or, to
Borrower's knowledge, any other event or condition that could reasonably be
expected to have a Material Adverse Effect.
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5.10 Compliance with Law
Borrower (i) is in compliance in all material respects with all laws,
statutes, rules, regulations, ordinances and tariffs of any Governmental
Authority applicable to Borrower and/or Borrower's business, assets or
operations, including, without limitation, ERISA, and (ii) is not in violation
of any order of any Governmental Authority or other board or tribunal, except
where noncompliance or violation could not reasonably be expected to have a
Material Adverse Effect. To the best of Borrower's knowledge, there is no event,
fact, condition or circumstance which, with notice or passage of time, or both,
would constitute or result in any noncompliance with, or any violation of, any
of the foregoing , in each case except where noncompliance or violation could
not reasonably be expected to have a Material Adverse Effect. Borrower has not
received any notice that Borrower is not in compliance in any respect with any
of the requirements of any of the foregoing. Borrower has (a) not engaged in any
Prohibited Transactions as defined in Section 406 of ERISA and Section 4975 of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder, (b) not failed to meet any applicable minimum funding
requirements under Section 302 of ERISA in respect of its plans and no funding
requirements have been postponed or delayed, (c) no knowledge of any event or
occurrence which would cause the Pension Benefit Guaranty Corporation to
institute proceedings under Title IV of ERISA to terminate any of the employee
benefit plans, (d) no fiduciary responsibility under ERISA for investments with
respect to any plan existing for the benefit of Persons other than its employees
or former employees, or (e) not withdrawn, completely or partially, from any
multi-employer pension plans so as to incur liability under the MultiEmployer
Pension Plan Amendments of 1980. With respect to Borrower, there exists no event
described in Section 4043 of ERISA, excluding Subsections 4043(b)(2) and
4043(b)(3) thereof, for which the thirty (30) day notice period contained in 12
C.F.R. ss. 2615.3 has not been waived.
5.11 Intellectual Property
Except as set forth on Schedule 5.11, Borrower does not own, license or
utilize, and is not a party to, any patents, patent applications, trademarks,
trademark applications, service marks, registered copyrights, copyright
applications, copyrights, trade names, trade secrets, software or licenses
(collectively, the "Intellectual Property").
5.12 Licenses and Permits; Labor
Borrower is in compliance with and has all Permits and Intellectual
Property necessary or required by applicable law or Governmental Authority for
the operation of its businesses. All of the foregoing are in full force and
effect and not in known conflict with the rights of others. Borrower is not (i)
in breach of or default under the provisions of any of the foregoing, nor is
there any event, fact, condition or circumstance which, with notice or passage
of time or both, would constitute or result in a conflict, breach, default or
event of default under, any of the foregoing which, if not remedied within any
applicable grace or cure period could reasonably be expected to have a Material
Adverse Effect, (ii) a party to or subject to any agreement, instrument or
restriction that is so unusual or burdensome that it might have a Material
Adverse Effect, and/or (ii) and has not been, involved in any labor dispute,
strike, walkout or union organization which could reasonably be expected to have
a Material Adverse Effect
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5.13 No Default
There does not exist any Default or Event of Default or any event, fact,
condition or circumstance which, with the giving of notice or passage of time or
both, would constitute or result in a Default or Event of Default.
5.14 Disclosure
No Loan Document nor any other agreement, document, certificate, or
statement furnished to Lender by or on behalf of Borrower in connection with the
transactions contemplated by the Loan Documents, nor any representation or
warranty made by Borrower in any Loan Document, contains any untrue statement of
material fact or omits to state any fact necessary to make the statements
therein not materially misleading. There is no fact known to Borrower which has
not been disclosed to Lender in writing which could reasonably be expected to
have a Material Adverse Effect.
5.15 Existing Indebtedness; Investments, Guarantees and Certain Contracts
Except as contemplated by the Loan Documents, the Acquisition Documents, or
as otherwise set forth on Schedule 5.15, Borrower (i) has no outstanding
Indebtedness, (ii) is not subject or party to any mortgage, note, indenture,
indemnity or guarantee of, with respect to or evidencing any Indebtedness of any
other Person, or (iii) does not own or hold any equity or long-term debt
investments in, and does not have any outstanding advances to or any outstanding
guarantees for the obligations of, or any outstanding borrowings from, any
Person. Borrower has performed all material obligations required to be performed
by Borrower pursuant to or connection with any items listed on Schedule 5.15 and
to the best of Borrower's knowledge, there has occurred no breach, default or
event of default under any document evidencing any such items or any fact,
circumstance, condition or event which, with the giving of notice or passage of
time or both, would constitute or result in a breach, default or event of
default thereunder.
5.16 Other Agreements
Except for the Acquisition Documents and as set forth on Schedule 5.16, (i)
there are no existing or proposed agreements, arrangements, understandings or
transactions between Borrower and any of Borrower's officers, members, managers,
directors, stockholders, partners, other interest holders, employees or
Affiliates or any members of their respective immediate families, and (ii) none
of the foregoing Persons are directly or indirectly, indebted to or have any
direct or indirect ownership, partnership or voting interest in, to Borrower's
knowledge, any Affiliate of Borrower or any Person with which Borrower has a
business relationship or which competes with Borrower (except that any such
Persons may own stock in (but not exceeding five (5%) percent of the outstanding
capital stock of) any publicly traded company that may compete with Borrower.
5.17 Insurance
Borrower has in full force and effect such insurance policies as are
customary in its industry and as may be required pursuant to Section 6.5 hereof.
All such insurance policies are listed and described on Schedule 5.17.
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5.18 Names; Location of Offices, Records and Collateral
During the preceding five years, Borrower has not conducted business under
or used any name (whether corporate, partnership or assumed) other than as shown
on Schedule 5.18A. Borrower is the sole owner of all of its names listed on
Schedule 5.18A. Each trade name of Borrower represents a division or trading
style of Borrower. Borrower maintains its places of business and chief executive
offices only at the locations set forth on Schedule 5.18B, and all Accounts of
Borrower arise, originate and are located, and all of the Collateral and all
books and records in connection therewith or in any way relating thereto or
evidencing the Collateral are located and shall be only, in and at such
locations. All of the Collateral is located only in the continental United
States.
5.19 Non-Subordination
The Obligations are not subordinated in any way to any other obligations of
Borrower or to the rights of any other Person.
5.20 Accounts
In determining which Accounts are Eligible Receivables, Lender may rely on
all statements and representations made by Borrower with respect to any Account.
Unless otherwise indicated in writing to Lender, each Account of Borrower (i) is
genuine and in all respects what it purports to be and is not evidenced by a
judgment, (ii) arises out of a completed, bona fide sale and delivery of goods
or rendering of services by Borrower in the ordinary course of business and in
accordance with the terms and conditions of all purchase orders, contracts,
certifications, participations, certificates of need and other documents
relating thereto or forming a part of the contract between Borrower and the
Account Debtor, (iii) is for a liquidated amount maturing as stated in a claim
or invoice covering such sale of goods or rendering of services, a copy of which
has been furnished or is available to Lender, (iv) together with Lender's
security interest therein, is not and will not be in the future (by voluntary
act or omission by Borrower), subject to any offset, lien, deduction, defense,
dispute, counterclaim or other adverse condition, is absolutely owing to
Borrower and is not contingent in any respect or for any reason, (v) there are
no facts, events or occurrences which in any way impair the validity or
enforceability thereof or tend to reduce the amount payable thereunder from the
face amount of the claim or invoice and statements delivered to Lender with
respect thereto, (vi) to the best of Borrower's knowledge, (A) the Account
Debtor thereunder had the capacity to contract at the time any contract or other
document giving rise thereto was executed and (B) such Account Debtor is
solvent, (vii) to the best of Borrower's knowledge, there are no proceedings or
actions which are threatened or pending against any Account Debtor thereunder
which might result in any Material Adverse Change or the collectability thereof,
(viii) has been billed and forwarded to the Account Debtor for payment in
accordance with applicable laws and is in compliance and conformance with any
requisite procedures, requirements and regulations governing payment by such
Account Debtor with respect to such Account, and (ix) Borrower has obtained and
currently has all Permits necessary in the generation of its Accounts.
5.21 Survival
Borrower makes the representations and warranties contained herein with the
knowledge and intention that Lender is relying and will rely thereon. All such
representations and warranties will survive the execution and delivery of this
Agreement, the making of the Advances under the Revolving Facility and the
funding of the Term Loan.
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VI. AFFIRMATIVE COVENANTS
Each Borrower, jointly and severally, covenants and agrees that, until full
performance and satisfaction, and indefeasible payment in full in cash, of all
the Obligations and termination of this Agreement:
6.1 Financial Statements, Reports and Other Information
(a) Financial Reports. Borrower shall furnish to Lender (i) as soon as
available and in any event within ninety (90) calendar days after the end of
each fiscal year of Borrower, audited annual consolidated and consolidating
financial statements of Borrower, including the notes thereto, consisting of a
consolidated and consolidating balance sheet at the end of such completed fiscal
year and the related consolidated and consolidating statements of income,
retained earnings, cash flows and owners' equity for such completed fiscal year,
which financial statements shall be prepared and certified without qualification
by an independent certified public accounting firm satisfactory to Lender and
accompanied by related management letters, if available, and (ii) as soon as
available and in any event within thirty (30) calendar days after the end of
each calendar month, unaudited consolidated and consolidating financial
statements of Borrower consisting of a balance sheet and statements of income,
retained earnings, cash flows and owners' equity as of the end of the
immediately preceding calendar month. All such financial statements shall be
prepared in accordance with GAAP consistently applied with prior periods,
subject to normal year-end and other applicable adjustments. With each such
financial statement, Borrower shall also deliver a certificate of its chief
financial officer stating that (A) such person has reviewed the relevant terms
of the Loan Documents and the condition of Borrower, (B) no Default or Event of
Default has occurred or is continuing, or, if any of the foregoing has occurred
or is continuing, specifying the nature and status and period of existence
thereof and the steps taken or proposed to be taken with respect thereto, (C)
Borrower is in compliance with all financial covenants attached as Annex I
hereto. Such certificate shall be accompanied by the calculations necessary to
show compliance with the financial covenants in a form satisfactory to Lender.
(b) Other Materials. Borrower shall furnish to Lender as soon as available,
and in any event within ten (10) calendar days after the preparation or issuance
thereof or at such other time as set forth below: (i) copies of such financial
statements (other than those required to be delivered pursuant to Section
6.1(a)) prepared by, for or on behalf of Borrower and any other notes, reports
and other materials related thereto, including, without limitation, any pro
forma financial statements, (ii) any reports, returns, information, notices and
other materials that Borrower shall send to its stockholders, members, partners
or other equity owners at any time, (iii) within fifteen (15) calendar days
after the end of each calendar month for such month, (A) a sales and collection
report and accounts receivable and accounts payable aging schedule, including a
report of sales, credits issued and collections received, all such reports
showing a reconciliation to the amounts reported in the monthly financial
statements, (iv) promptly upon receipt thereof, copies of any reports submitted
to Borrower by its independent accountants in connection with any interim audit
of the books of such Person or any of its Affiliates and copies of each
management control letter provided by such independent accountants, (v)
simultaneously upon delivery to Xxxxxxxx, copies of Borrower's determination of
the Shield Sales, prepared in accordance with Section 2.3(c) of the Stock
Purchase Agreement, and a calculation of Borrower's Excess Cash Flow, and (vi)
such additional information, documents, statements, reports and other materials
as Lender may reasonably request from a credit or security perspective from time
to time.
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(c) Notices. Borrower shall promptly, and in any event within two (2)
Business Days after Borrower or any authorized officer of Borrower obtains
knowledge thereof, notify Lender in writing of (i) any pending or threatened (in
writing) litigation, suit, investigation, arbitration, dispute resolution
proceeding or administrative proceeding brought or initiated by Borrower or
otherwise affecting or involving or relating to Borrower or any of its property
or assets to the extent (A) the amount in controversy exceeds $10,000, or (B) to
the extent any of the foregoing seeks injunctive relief, (ii) any Default or
Event of Default, which notice shall specify the nature and status thereof, the
period of existence thereof and what action is proposed to be taken with respect
thereto, (iii) any other development, event, fact, circumstance or condition
that would reasonably be expected to have a Material Adverse Effect, in each
case describing the nature and status thereof and the action proposed to be
taken with respect thereto, (iv) any notice received by Borrower from any payor
of a claim, suit or other action such payor has, claims or has filed against
Borrower, (v) any matter(s) affecting the value, enforceability or
collectability of any of the Collateral, in the amount of $10,000 or more,
singly or in the aggregate, in existence at any one time, (vi) any notice given
by Borrower to any other lender of Borrower and shall furnish to Lender a copy
of such notice, and (vii) if any Account becomes evidenced or secured by an
Instrument or Chattel Paper.
(d) Consents. Borrower shall obtain and deliver from time to time all
required consents, approvals and agreements from such third parties as Lender
shall determine are necessary or desirable in its Permitted Discretion and that
are satisfactory to Lender with respect to (i) the Loan Documents and the
transactions contemplated thereby, (ii) claims against Borrower or the
Collateral, and/or (iii) any agreements, consents, documents or instruments to
which Borrower is a party or by which any properties or assets of Borrower or
any of the Collateral is or are bound or subject, including, without limitation,
Landlord Waivers and Consents with respect to leases.
(e) Operating Budget. Borrower shall furnish to Lender on or prior to the
Closing Date and for each fiscal year of Borrower thereafter not less than
thirty (30) calendar days prior to the commencement of such fiscal year,
consolidated and consolidating projected operating budgets, annual projections,
profit and loss statements, balance sheets and cash flow reports of and for
Borrower for such upcoming fiscal year (including an income statement for each
month and a balance sheet as at the end of the last month in each fiscal
quarter), in each case prepared in accordance with GAAP consistently applied
with prior periods.
6.2 Payment of Obligations
Borrower shall make full and timely indefeasible payment in cash of the
principal of and interest on the Loans, Advances and all other Obligations.
Simultaneously upon any prepayment of the Revolving Facility and termination of
the Revolving Facility, Borrower shall make full indefeasible payment in cash of
the principal of and interest on the Term Loan and all other Obligations
relating to the Term Loan.
6.3 Conduct of Business and Maintenance of Existence and Assets
Borrower shall (i) conduct its business in accordance with good business
practices customary to the industry, (ii) engage principally in the same or
similar lines of business substantially as heretofore conducted; PROVIDED
however that Borrower may make such changes as it deems necessary or appropriate
to integrate, centralize or allocate its business or lines of business amongst
Derma and its
22
Subsidiaries, (iii) collect its Accounts in the ordinary course of business,
(iv) maintain all of its material properties, assets and equipment used or
useful in its business in good repair, working order and condition (normal wear
and tear excepted and except as may be disposed of in the ordinary course of
business and in accordance with the terms of the Loan Documents), (v) from time
to time to make all necessary or desirable repairs, renewals and replacements
thereof, (vi) maintain and keep in full force and effect its existence and all
material Permits and qualifications to do business and good standing in each
jurisdiction in which the ownership or lease of property or the nature of its
business makes such Permits or qualification necessary and in which failure to
maintain such Permits or qualification could reasonably be likely to have a
Material Adverse Effect; and (vii) remain in good standing and maintain
operations in all jurisdictions in which currently located; provided however
that Borrower may make such changes as it deems necessary or appropriate to
integrate, centralize or allocate its business or lines of business amongst
Derma and its Subsidiaries.
6.4 Compliance with Legal and Other Obligations
Borrower shall (i) comply with all laws, statutes, rules, regulations,
ordinances and tariffs of all Governmental Authorities applicable to it or its
business, assets or operations, except where the failure to so comply would not
reasonably be expected to have a Material Adverse Effect, (ii) pay all taxes,
assessments, fees, governmental charges, claims for labor, supplies, rent and
all other obligations or liabilities of any kind, except liabilities being
contested in good faith and against which adequate reserves have been
established, (iii) perform in accordance with its terms each contract, agreement
or other arrangement to which it is a party or by which it or any of the
Collateral is bound, except where the failure to comply, pay or perform could
not reasonably be expected to have a Material Adverse Effect, and (iv) maintain
and comply with all Permits necessary to conduct its business and comply with
any new or additional requirements that may be imposed on it or its business.
6.5 Insurance
Borrower shall (i) keep all of its insurable properties and assets
adequately insured in all material respects against losses, damages and hazards
as are customarily insured against by businesses engaging in similar activities
or owning similar assets or properties and at least the minimum amount required
by applicable law, including, without limitation, medical malpractice and
professional liability insurance, as applicable; and maintain general public
liability insurance at all times against liability on account of damage to
persons and property having such limits, deductibles, exclusions and
co-insurance and other provisions as are customary for a business engaged in
activities similar to those of Borrower; and (ii) maintain insurance under all
applicable workers' compensation laws; all of the foregoing insurance policies
to (A) be satisfactory in form and substance to Lender, (B) name Lender as loss
payee and additional insured thereunder, and (C) expressly provide that they
cannot be altered, amended, modified or canceled without thirty (30) Business
Days prior written notice to Lender and that they inure to the benefit of Lender
notwithstanding any action or omission or negligence of or by Borrower or any
insured thereunder.
6.6 True Books
Borrower shall (i) keep true, complete and accurate books of record and
account in accordance with commercially reasonable business practices in which
true and correct entries are made of all of its and their dealings and
transactions in all material respects; and (ii) set up and maintain on its
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books such reserves as may be required by GAAP with respect to doubtful accounts
and all taxes, assessments, charges, levies and claims and with respect to its
business, and include such reserves in its quarterly as well as year end
financial statements.
6.7 Inspection; Periodic Reviews
Borrower shall permit the representatives of Lender, at the expense of
Borrower, from time to time during normal business hours upon reasonable notice,
to (i) not more than four times per calendar year visit and inspect any of its
offices or properties or any other place where Collateral is located to inspect
the Collateral and/or to examine or review all of its books of account, records,
reports and other papers, (ii) make copies and extracts therefrom, and (iii)
discuss its business, operations, prospects, properties, assets, liabilities,
condition and/or Accounts with its officers and independent public accountants
(and by this provision such officers and accountants are authorized to discuss
the foregoing); provided that the fees to conduct such reviews shall not exceed
$20,000 in the aggregate per calendar year; provided, further, however, that the
fees to conduct such reviews are permitted to exceed $20,000 in the aggregate
and Lender shall be entitled to do or take any of the foregoing actions,
including, without limitation, to make such visits, reviews and/or inspections,
in each case as it deems necessary or appropriate in its sole discretion at any
time during normal business hours following reasonable notice to Borrower (a)
upon the occurrence of any Default or Event of Default or (b) if Borrower
requests that Lender take or withhold from taking any action and Lender
determines in its Permitted Discretion that any such action, visit, review
and/or inspection is necessary or desirable.
6.8 Further Assurances; Post Closing
At Borrower's cost and expense, Borrower shall (i) within five (5) Business
Days after Lender's demand, take such further actions, obtain such consents and
approvals and duly execute and deliver such further agreements, assignments,
instructions or documents as Lender may reasonably request with respect to the
purposes, terms and conditions of the Loan Documents and the consummation of the
transactions contemplated thereby, whether before, at or after the performance
and/or consummation of the transactions contemplated hereby or the occurrence of
a Default or Event of Default, (ii) without limiting and notwithstanding any
other provision of any Loan Document, execute and deliver, or cause to be
executed and delivered, such agreements and documents, and take or cause to be
taken such actions, and otherwise perform, observe and comply with such
obligations, as are set forth on Schedule 6.8, and (iii) upon the exercise by
Lender or any of its Affiliates of any power, right, privilege or remedy
pursuant to any Loan Document or under applicable law or at equity which
requires any consent, approval, registration, qualification or authorization of
any Governmental Authority, execute and deliver, or use its reasonable business
efforts to cause the execution and delivery of, all applications, certificates,
instruments and other documents that may be so required for such consent,
approval, registration, qualification or authorization. Without limiting the
foregoing, upon the exercise by Lender or any of its Affiliates of any right or
remedy under any Loan Document which requires any consent, approval or
registration with, consent, qualification or authorization by, any Person,
Borrower shall execute and deliver, or use it reasonable business efforts to
cause the execution and delivery of, all applications, certificates, instruments
and other documents that Lender or its Affiliate may be required to obtain for
such consent, approval, registration, qualification or authorization.
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6.9 Payment of Indebtedness
Except as otherwise prescribed in the Loan Documents, Borrower shall pay,
discharge or otherwise satisfy at or before maturity (subject to applicable
grace periods and, in the case of trade payables, to ordinary course payment
practices) all of its material obligations and liabilities, except when the
amount or validity thereof is being contested in good faith by appropriate
proceedings and such reserves as Lender may deem proper and necessary in
accordance with the terms herein shall have been made.
6.10 Lien Searches
If Liens other than Permitted Liens exist, Borrower immediately shall take,
execute and deliver all actions, documents and instruments necessary to release
and terminate such Liens.
6.11 Use of Proceeds
Borrower shall use the proceeds from the Revolving Facility and the Term
Loan only for the purposes set forth in the first "WHEREAS" clause of this
Agreement.
6.12 Collateral Documents; Security Interest in Collateral
Borrower shall (i) execute, obtain, deliver, file, register and/or record
any and all financing statements, continuation statements, stock powers,
instruments and other documents, or cause the execution, filing, registration,
recording or delivery of any and all of the foregoing, that are necessary or
required under law or otherwise or reasonably requested by Lender to be
executed, filed, registered, obtained, delivered or recorded to create,
maintain, perfect, preserve, validate or otherwise protect the pledge of the
Collateral to Lender and Lender's perfected first priority Lien on the
Collateral (and Borrower irrevocably grants Lender the right, at Lender's
option, to file any or all of the foregoing), (ii) immediately upon learning
thereof, report to Lender any reclamation, return or repossession of goods in
excess of $10,000.00 (individually or in the aggregate), and (iii) defend the
Collateral and Lender's perfected first priority Lien thereon against all claims
and demands of all Persons at any time claiming the same or any interest therein
adverse to Lender, and pay all reasonable costs and expenses (including, without
limitation, in-house documentation and diligence fees and legal expenses and
reasonable attorneys' fees and expenses) in connection with such defense, which
may at Lender's discretion be added to the Obligations.
6.13 Intentionally Omitted.
6.14 Taxes and Other Charges
All payments and reimbursements to Lender made under any Loan Document
shall be free and clear of and without deduction for all taxes, levies, imposts,
deductions, assessments, charges or withholdings, and all liabilities with
respect thereto of any nature whatsoever, excluding taxes to the extent imposed
on Lender's net income. If Borrower shall be required by law to deduct any such
amounts from or in respect of any sum payable under any Loan Document to Lender,
then the sum payable to Lender shall be increased as may be necessary so that,
after making all required deductions, Lender receives an amount equal to the sum
it would have received had no such deductions been made. Notwithstanding any
other provision of any Loan Document, if at any time after the Closing (i) any
25
change in any existing law, regulation, treaty or directive or in the
interpretation or application thereof, (ii) any new law, regulation, treaty or
directive enacted or any interpretation or application thereof, or (iii)
compliance by Lender with any request or directive (whether or not having the
force of law) from any Governmental Authority: (A) subjects Lender to any tax,
levy, impost, deduction, assessment, charge or withholding of any kind
whatsoever with respect to any Loan Document, or changes the basis of taxation
of payments to Lender of any amount payable thereunder (except for net income
taxes, or franchise taxes imposed in lieu of net income taxes, imposed generally
by federal, state or local taxing authorities with respect to interest or
commitment fees or other fees payable hereunder or changes in the rate of tax on
the overall net income of Lender), or (B) imposes on Lender any other condition
or increased cost in connection with the transactions contemplated thereby or
participations therein; and the result of any of the foregoing is to increase
the cost to Lender of making or continuing any Loan hereunder or to reduce any
amount receivable hereunder, then, in any such case, Borrower shall promptly pay
to Lender any additional amounts necessary to compensate Lender, on an after-tax
basis, for such additional cost or reduced amount as determined by Lender. If
Lender becomes entitled to claim any additional amounts pursuant to this Section
6.14 it shall promptly notify Borrower of the event by reason of which Lender
has become so entitled. Without limiting or being limited by any other provision
of any Loan Document, Borrower at all times shall retain and use a Person
reasonably acceptable to Lender in its Permitted Discretion to process, manage
and pay its payroll taxes and shall cause to be delivered to Lender within ten
(10) calendar days after the end of each calendar month a report of its payroll
taxes for the immediately preceding calendar month and evidence of payment
thereof. Lender hereby represents that it does not currently know of any amount
that would be payable under this Section 6.14 as of the Closing Date or become
payable thereafter, although there may be current laws or regulations that may
cause an amount to be payable hereunder after the Closing Date. Notwithstanding
any other provision of this Section 6.14, Lender will not assess amounts under
this Section 6.14 unless Lender is generally charging such amounts to a majority
of its other borrowers to the extent applicable.
VII. NEGATIVE COVENANTS
Each Borrower, jointly and severally, covenants and agrees that, until full
performance and satisfaction, and indefeasible payment in full in cash, of all
the Obligations and termination of this Agreement:
7.1 Financial Covenants
Borrower shall not violate the financial covenants set forth on Annex I to
this Agreement, which is incorporated herein and made a part hereof.
7.2 Permitted Indebtedness
Borrower shall not create, incur, assume or suffer to exist any
Indebtedness, except the following (collectively, "Permitted Indebtedness"): (i)
Indebtedness under the Loan Documents, (ii) any Indebtedness set forth on
Schedule 7.2, (iii) Capitalized Lease Obligations incurred after the Closing
Date and Indebtedness incurred pursuant to purchase money Liens permitted by
Section 7.3(v), provided that the aggregate amount thereof outstanding at any
time shall not exceed $25,000, (iv) Indebtedness in connection with advances
made by a stockholder in order to cure any default of the
26
financial covenants set forth on Annex I; provided, however, that such
Indebtedness shall be on an unsecured basis, subordinated in right of repayment
and remedies to all of the Obligations and to all of Lender's rights and in form
and substance satisfactory to Lender; (v) accounts payable to trade creditors
and current operating expenses (other than for borrowed money) which are not
aged more than 120 calendar days from the billing date or more than 30 days from
the due date, in each case incurred in the ordinary course of business and paid
within such time period, unless the same are being contested in good faith and
by appropriate and lawful proceedings and such reserves, if any, with respect
thereto as are required by GAAP and deemed adequate by Borrower's independent
accountants shall have been reserved; (vi) borrowings incurred in the ordinary
course of business and not exceeding $10,000 individually or in the aggregate
outstanding at any one time; provided, however, that such Indebtedness shall be
on an unsecured basis, subordinated in right of repayment and remedies to all of
the Obligations and to all of Lender's rights and in form and substance
satisfactory to Lender; and (vii) Permitted Subordinated Debt. Borrower shall
not make prepayments on any existing or future Indebtedness to any Person other
than to Lender or to the extent specifically permitted by this Agreement or any
subsequent agreement between Borrower and Lender.
7.3 Permitted Liens
Borrower shall not create, incur, assume or suffer to exist any Lien upon,
in or against, or pledge of, any of the Collateral or any of its properties or
assets or any of its shares, securities or other equity or ownership or
partnership interests, whether now owned or hereafter acquired, except the
following (collectively, "Permitted Liens"): (i) Liens under the Loan Documents
or otherwise arising in favor of Lender, (ii) Liens imposed by law for taxes,
assessments or charges of any Governmental Authority for claims not yet due or
which are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves or other appropriate provisions are being
maintained by such Person in accordance with GAAP to the satisfaction of Lender
in its Permitted Discretion, (iii) (A) statutory Liens of landlords (provided
that any such landlord has executed a Landlord Waiver and Consent in form and
substance satisfactory to Lender) and of carriers, warehousemen, mechanics,
materialmen, and (B) other Liens imposed by law or that arise by operation of
law in the ordinary course of business from the date of creation thereof, in
each case only for amounts not yet due or which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained by such Person in accordance
with GAAP to the satisfaction of Lender in its Permitted Discretion, (iv) Liens
(A) incurred or deposits made in the ordinary course of business (including,
without limitation, surety bonds and appeal bonds) in connection with workers'
compensation, unemployment insurance and other types of social security benefits
or to secure the performance of tenders, bids, leases, contracts (other than for
the repayment of Indebtedness), statutory obligations and other similar
obligations, or (B) arising as a result of progress payments under government
contracts, (v) purchase money Liens (A) securing Indebtedness permitted under
Section 7.2(iii), or (B) in connection with the purchase by such Person of
equipment in the normal course of business, provided that such payables shall
not exceed any limits on Indebtedness provided for herein and shall otherwise be
Permitted Indebtedness hereunder, (vi) Liens necessary and desirable for the
operation of such Person's business, provided Lender has consented to such Liens
in writing before their creation and existence and the priority of such Liens
and the debt secured thereby are both subject and subordinate in all respects to
the Liens securing the Collateral and to the Obligations and all of the rights
and remedies of Lender, all in form and substance satisfactory to Lender in its
sole discretion, (vii) Liens pursuant to Permitted Subordinated Debt in
accordance with the terms of the Subordination Agreement, and (viii) Liens
disclosed on Schedule 7.3.
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7.4 Investments; New Facilities or Collateral; Subsidiaries
Borrower, directly or indirectly, shall not (i) purchase, own, hold, invest
in or otherwise acquire obligations or stock or securities of, or any other
interest in, or all or substantially all of the assets of, any Person or any
joint venture, other than Permitted Investments, or (ii) make or permit to exist
any loans, advances or guarantees to or for the benefit of any Person or assume,
guarantee, endorse, contingently agree to purchase or otherwise become liable
for or upon or incur any obligation of any Person (other than those created by
the Loan Documents and Permitted Indebtedness and other than (A) trade credit
extended in the ordinary course of business, (B) advances for business travel
and similar temporary advances made in the ordinary course of business to
officers, directors and employees, and (C) the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business). Borrower, directly or indirectly, shall not purchase, own,
operate, hold, invest in or otherwise acquire any facility, property or assets
or any Collateral that is not located at the locations set forth on Schedule
5.18B unless Borrower shall provide to Lender at least thirty (30) Business Days
prior written notice. Borrower shall have no Subsidiaries other than those
existing as of the Closing Date.
7.5 Dividends; Redemptions
Borrower shall not (i) declare, pay or make any dividend or distribution on
any shares of capital stock or other securities or interests (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock), (ii) apply any of its funds, property or assets
to the acquisition, redemption or other retirement of any capital stock or other
securities or interests or of any options to purchase or acquire any of the
foregoing other than the 9 shares of preferred stock of Sunshine held by
minority shareholders (provided, however, that Borrower may redeem its capital
stock from terminated employees pursuant to, but only to the extent required
under, the terms of the related employment agreements as long as no Default or
Event of Default has occurred and is continuing or would be caused by or result
therefrom), (iii) otherwise make any payments or Distributions to any
stockholder, member, partner or other equity owner in such Person's capacity as
such other than payments required pursuant to the Acquisition Documents, or (iv)
make any payment of any management, service or related or similar fee to any
Person or with respect to any facility owned, operated or leased by Borrower.
7.6 Transactions with Affiliates
Borrower shall not enter into or consummate any transaction of any kind
with any of its Affiliates or any Guarantor or any of their respective
Affiliates other than: (i) salary, bonus, employee stock option and other
compensation and employment arrangements with directors or officers in the
ordinary course of business, provided, that no payment of any bonus shall be
permitted if a Default or Event of Default has occurred and remains in effect or
would be caused by or result from such payment, (ii) distributions and dividends
permitted pursuant to Section 7.5, (iii) transactions on overall terms at least
as favorable to Borrower as would be the case in an arm's-length transaction
between unrelated parties of equal bargaining power, (iv) transactions with
Lender or any Affiliate of Lender, (v) payments permitted under and pursuant to
written agreements entered into by and between Borrower and one or more of its
Affiliates that both (A) reflect and constitute transactions on overall terms at
least as favorable to Borrower as would be the case in an arm's-length
transaction between unrelated parties of equal bargaining power, and (B) are
subject to such terms and conditions as determined by Lender in its Permitted
Discretion; PROVIDED, that notwithstanding the foregoing Borrower shall not (Y)
enter into or
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consummate any transaction or agreement pursuant to which it
becomes a party to any mortgage, note, indenture or guarantee evidencing any
Indebtedness of any of its Affiliates or otherwise to become responsible or
liable, as a guarantor, surety or otherwise, pursuant to agreement for any
Indebtedness of any such Affiliate, or (Z) make any payment to any of its
Affiliates in excess of $10,000 without the prior written consent of Lender, and
(vi) payments required under the Acquisition Documents.
7.7 Charter Documents; Fiscal Year; Dissolution; Use of Proceeds
Borrower shall not (i) amend, modify, restate or change its certificate of
incorporation or formation or bylaws or similar charter documents in a manner
that would be adverse to Lender, (ii) change its fiscal year unless Borrower
demonstrates to Lender's satisfaction compliance with the covenants contained
herein for both the fiscal year in effect prior to any change and the new fiscal
year period by delivery to Lender of appropriate interim and annual pro forma,
historical and current compliance certificates for such periods and such other
information as Lender may reasonably request, (iii) amend, alter or suspend or
terminate or make provisional in any material way, any Permit material to the
operation of any of Borrower's business without the prior written consent of
Lender, which consent shall not be unreasonably withheld, (iv) wind up,
liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any
proceedings seeking or that would result in any of the foregoing, or (v) use any
proceeds of any Advance for "purchasing" or "carrying" "margin stock" as defined
in Regulations U, T or X of the Board of Governors of the Federal Reserve
System.
7.8 Truth of Statements
Borrower shall not furnish to Lender any certificate or other document that
contains any untrue statement of a material fact or that omits to state a
material fact necessary to make it not misleading in light of the circumstances
under which it was furnished.
7.9 Payment on Subordinated Debt
(a) Borrower shall not (i) make any prepayment of any part or all of any
Permitted Subordinated Debt, (ii) repurchase, redeem or retire any instrument
evidencing any such Permitted Subordinated Debt prior to maturity, or (iii)
enter into any agreement (oral or written) which could in any way be construed
to amend, modify, alter or terminate any one or more instruments or agreements
evidencing or relating to any Permitted Subordinated Debt in a manner adverse to
Lender, as determined by Lender in its Permitted Discretion.
(b) Borrower shall not make any Earn-out Payments to Xxxxxxxx (i) if
Borrower is not in compliance with all financial covenants in Annex I hereto,
(ii) in excess of Borrower's cumulative Excess Cash Flow as measured from the
Closing Date to the last day of the month prior to Earn-out Payment due date,
and (iii) unless Borrower has delivered to Lender and Lender has approved, in
its Permitted Discretion, Borrower's determination of Shield Sales and
calculation of Excess Cash Flow, in accordance with Section 6.1(b)(v).
(c) Borrower shall not make any payments with respect to the Seller Note
until the later of (i) the one year anniversary date of the Closing Date and
(ii) the Term Loan and all Obligations with respect to the Term Loan have been
paid and satisfied in full.
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7.10 IRS Form 8821
Borrower shall not alter, amend, restate, or otherwise modify, or withdraw,
terminate or re-file the IRS Form 8821 required to be filed pursuant to the
Conditions Precedent in Section 4.1 hereof.
VIII. EVENTS OF DEFAULT
The occurrence of any one or more of the following shall constitute an
"Event of Default:"
(a) Borrower shall fail to pay any amount on the Obligations or provided
for in any Loan Document when due (whether on any payment date, at maturity, by
reason of acceleration, by required prepayment or otherwise);
(b) any representation, statement or warranty made or deemed made by
Borrower or any Guarantor in any Loan Document or in any other certificate,
document, report or opinion delivered in conjunction with any Loan Document to
which it is a party, shall not be true and correct in all material respects or
shall have been false or misleading in any material respect on the date when
made or deemed to have been made (except to the extent already qualified by
materiality, in which case it shall be true and correct in all respects and
shall not be false or misleading in any respect);
(c) Borrower or any Guarantor or other party thereto other than Lender
shall be in violation, breach or default of, or shall fail to perform, observe
or comply with any covenant, obligation or agreement set forth in, any Loan
Document and such violation, breach, default or failure shall not be cured
within the applicable period set forth in the applicable Loan Document; provided
that, with respect to the affirmative covenants set forth in Article VI (other
than Sections 6.2, 6.3, and 6.11 for which there shall be no cure period), there
shall be a fifteen (15) calendar day cure period commencing from the earlier of
(i) Receipt by such Person of written notice of such breach, default, violation
or failure, and (ii) the time at which such Person or any authorized officer
thereof knew or became aware, or should have known or been aware, of such
failure, violation, breach or default;
(d) (i) any of the Loan Documents ceases to be in full force and effect, or
(ii) any Lien created thereunder ceases to constitute a valid perfected first
priority Lien on the Collateral in accordance with the terms thereof, or Lender
ceases to have a valid perfected first priority security interest in any of the
Collateral or any securities pledged to Lender pursuant to the Security
Documents;
(e) one or more judgments or decrees is rendered against any Borrower or
Guarantor in an amount in excess of $10,000 individually or $50,000 in the
aggregate, which is/are not satisfied, stayed, vacated or discharged of record
within sixty (60) calendar days of being rendered;
(f) (i) any default occurs, which is not cured or waived, (x) in the
payment of any amount with respect to any Indebtedness (other than the
Obligations) of any Borrower or Guarantor in excess of $10,000 (including
Permitted Subordinated Debt), (y) in the performance, observance or fulfillment
of any provision contained in any agreement, contract, document or instrument to
which any Borrower or Guarantor is a party or to which any of their properties
or assets are subject or bound under or pursuant to which any Indebtedness
(including Permitted Subordinated Debt) was issued, created, assumed, guaranteed
or secured and such default continues for more than any applicable grace period
or
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permits the holder of any Indebtedness to accelerate the maturity thereof, or
(z) in the performance, observance or fulfillment of any provision contained in
any agreement, contract, document or instrument between any Borrower or
Guarantor and Lender or Affiliate of Lender (other than the Loan Documents), or
(ii) any Indebtedness (including Permitted Subordinated Debt) of any Borrower or
Guarantor is declared to be due and payable or is required to be prepaid (other
than by a regularly scheduled payment) prior to the stated maturity thereof, or
any obligation of such Person for the payment of Indebtedness (other than the
Obligations) is not paid when due or within any applicable grace period, or any
such obligation becomes or is declared to be due and payable before the
expressed maturity thereof, or there occurs an event which, with the giving of
notice or lapse of time, or both, would cause any such obligation to become, or
allow any such obligation to be declared to be, due and payable;
(g) any Borrower or Guarantor shall (i) be unable to pay its debts
generally as they become due, (ii) file a petition under any insolvency statute,
(iii) make a general assignment for the benefit of its creditors, (iv) commence
a proceeding for the appointment of a receiver, trustee, liquidator or
conservator of itself or of the whole or any substantial part of its property,
or (v) file a petition seeking reorganization or liquidation or similar relief
under any Debtor Relief Law;
(h) (i) a court of competent jurisdiction shall (A) enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator or
conservator of any Borrower or Guarantor or the whole or any substantial part of
any such Person's properties, which shall continue unstayed and in effect for a
period of sixty (60) calendar days, (B) shall approve a petition filed against
any Borrower or Guarantor seeking reorganization, liquidation or similar relief
under the any Debtor Relief Law, which is not dismissed within sixty (60)
calendar days or, (C) under the provisions of any Debtor Relief Law or other
applicable law or statute, assume custody or control of any Borrower or
Guarantor or of the whole or any substantial part of any such Person's
properties, which is not irrevocably relinquished within sixty (60) calendar
days, or (ii) there is commenced against any Borrower or Guarantor any
proceeding or petition seeking reorganization, liquidation or similar relief
under any Debtor Relief Law, which (A) is not unconditionally dismissed within
sixty (60) calendar days after the date of commencement, or (B) is with respect
to which such Borrower or Guarantor takes any action to indicate its approval of
or consent to;
(i) (i) any Change of Control occurs or any agreement or commitment to
cause or that will result in any such Change of Control is entered into, (ii)
any Material Adverse Effect or Material Adverse Change occurs or is reasonably
expected to occur, or (iii) any Borrower or Guarantor ceases any material
portion of its business operations as currently conducted;
(j) Lender receives any indication or evidence that any Borrower or
Guarantor may have directly or indirectly been engaged in any type of activity
which, in Lender's Permitted Discretion, might result in forfeiture of any
property to any Governmental Authority which shall have continued unremedied for
a period of ten (10) calendar days after written notice from Lender;
(k) an Event of Default occurs under any other Loan Document;
(l) uninsured damage to, or loss, theft or destruction of, any portion of
the Collateral occurs that exceeds $10,000 in the aggregate;
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(m) any Borrower or Guarantor or any of their respective directors or
senior officers is criminally indicted or convicted under any law that could
lead to a forfeiture of any Collateral that exceeds $10,000 in the aggregate;
(n) the issuance of any process for levy, attachment or garnishment or
execution upon or prior to any judgment against any Borrower or Guarantor or any
of their property or assets that exceeds $10,000 in the aggregate;
(o) any Borrower or Guarantor does, or enters into or becomes a party to
any agreement or commitment to do, or cause to be done, any of the things
described in this Article VIII or otherwise prohibited by any Loan Document
(subject to any cure periods set forth therein); or
(p) any default or event of default occurs under the Acquisition Documents;
then, and in any such event, notwithstanding any other provision of any Loan
Document, Lender may, by notice to Borrower (i) terminate its obligations to
make Loans hereunder, whereupon the same shall immediately terminate, and (ii)
declare all or any of the Notes, all interest thereon and all other Obligations
to be due and payable immediately (except in the case of an Event of Default
under Section 8(d), (g), (h) or (i)(iii), in which event all of the foregoing
shall automatically and without further act by Lender be due and payable,
provided that, with respect to non-material breaches or violations that
constitute Events of Default under clause (ii) of Section 8(d), there shall be a
three (3) Business Day cure period commencing from the earlier of (A) Receipt by
the applicable Person of written notice of such breach or violation or of any
event, fact or circumstance constituting or resulting in any of the foregoing,
and (B) the time at which such Person or any authorized officer thereof knew or
became aware, or should have known or been aware, of such breach or violation
and resulting Event of Default or of any event, fact or circumstance
constituting or resulting in any of the foregoing)), in each case without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by Borrower.
IX. RIGHTS AND REMEDIES AFTER DEFAULT
9.1 Rights and Remedies
(a) In addition to the acceleration provisions set forth in Article VIII
above, upon the occurrence and continuation of an Event of Default, Lender shall
have the right to exercise any and all rights, options and remedies provided for
in any Loan Document, under the UCC or at law or in equity, including, without
limitation, the right to (i) apply any property of any Borrower held by Lender
to reduce the Obligations, (ii) foreclose the Liens created under the Security
Documents, (iii) realize upon, take possession of and/or sell any Collateral or
securities pledged with or without judicial process, but all in accordance with
applicable UCC requirements, (iv) exercise all rights and powers with respect to
the Collateral as any Borrower, as applicable, might exercise, (v) collect and
send notices regarding the Collateral, with or without judicial process but all
in accordance with applicable UCC requirements, (vi) by its own means or with
judicial assistance, enter any premises at which Collateral and/or pledged
securities are located, or render any of the foregoing unusable or dispose of
the Collateral and/or pledged securities on such premises without any liability
for rent, storage, utilities, or other sums, and no Borrower shall resist or
interfere with such action, (vii) at Borrower's expense, require that all or any
part of the Collateral be assembled and made available to Lender at any place
designated by Lender, (viii) reduce or otherwise change the Facility Cap and/or
the Maximum Loan Amount, and/or (ix)
32
relinquish or abandon any Collateral or securities pledged or any Lien thereon.
Notwithstanding any provision of any Loan Document, Lender, in its sole
discretion, shall have the right, at any time that Borrower fails to do so, and
from time to time, without prior notice, to: (i) obtain insurance covering any
of the Collateral to the extent required hereunder; (ii) pay for the performance
of any of Obligations; (iii) discharge taxes or Liens on any of the Collateral
that are in violation of any Loan document unless Borrower is in good faith with
due diligence by appropriate proceedings contesting those items; and (iv) pay
for the maintenance and preservation of the Collateral. Such expenses and
advances shall be added to the Obligations until reimbursed to Lender and shall
be secured by the Collateral, and such payments by Lender shall not be construed
as a waiver by Lender of any Event of Default or any other rights or remedies of
Lender.
(b) Borrower agrees that notice received by it at least ten (10) Business
Days before the time of any intended public sale, or the time after which any
private sale or other disposition of Collateral is to be made, shall be deemed
to be reasonable notice of such sale or other disposition. If permitted by the
UCC or other applicable law, any perishable Collateral which threatens to
speedily decline in value or which is sold on a nationally recognized market may
be sold immediately by Lender without prior notice to Borrower. At any sale or
disposition of Collateral or securities pledged, Lender may (to the extent
permitted by the UCC or other applicable law) purchase all or any part thereof
free from any right of redemption by any Borrower which right is hereby waived
and released. Borrower covenants and agrees not to, and not to permit or cause
any of its Subsidiaries to, interfere with or impose any obstacle to Lender's
exercise of its rights and remedies with respect to the Collateral. Lender, in
dealing with or disposing of the Collateral or any part thereof, shall not be
required to give priority or preference to any item of Collateral or otherwise
to marshal assets or to take possession or sell any Collateral with judicial
process.
9.2 Application of Proceeds
In addition to any other rights, options and remedies Lender has under the
Loan Documents, the UCC, at law or in equity, all dividends, interest, rents,
issues, profits, fees, revenues, income and other proceeds collected or received
from collecting, holding, managing, renting, selling, or otherwise disposing of
all or any part of the Collateral or any proceeds thereof upon exercise of its
remedies hereunder shall be applied in the following order of priority: (i)
FIRST, to the payment of all costs and expenses of such collection, storage,
lease, holding, operation, management, sale, disposition or delivery and of
conducting Borrower's business and of maintenance, repairs, replacements,
alterations, additions and improvements of or to the Collateral, and to the
payment of all sums which Lender may be required or may elect to pay, if any,
for taxes, assessments, insurance and other charges upon the Collateral or any
part thereof, and all other payments that Lender may be required or authorized
to make under any provision of this Agreement (including, without limitation, in
each such case, in-house documentation and diligence fees and legal expenses,
search, audit, recording, professional and filing fees and expenses and
reasonable attorneys' fees and all expenses, liabilities and advances made or
incurred in connection therewith); (ii) SECOND, to the payment of all
Obligations as provided herein; (iii) THIRD, to the satisfaction of Indebtedness
secured by any subordinate security interest of record in the Collateral if
written notification of demand therefor is received before distribution of the
proceeds is completed, PROVIDED, that, if requested by Lender, the holder of a
subordinate security interest shall furnish reasonable proof of its interest,
and unless it does so, Lender need not address its claims; and (iv) FOURTH, to
the payment of any surplus then remaining to Borrower, unless otherwise provided
by law or directed by a court of competent jurisdiction, provided that Borrower
shall be liable for any deficiency
33
if such proceeds are insufficient to satisfy the Obligations or any of the other
items referred to in this section.
9.3 Rights of Lender to Appoint Receiver
Without limiting and in addition to any other rights, options and remedies
Lender has under the Loan Documents, the UCC, at law or in equity, upon the
occurrence and continuation of an Event of Default, Lender shall have the right
to apply for and have a receiver appointed by a court of competent jurisdiction
in any action taken by Lender to enforce its rights and remedies in order to
manage, protect and preserve the Collateral and continue the operation of the
business of Borrower and to collect all revenues and profits thereof and apply
the same to the payment of all expenses and other charges of such receivership
including the compensation of the receiver and to the payments as aforesaid
until a sale or other disposition of such Collateral shall be finally made and
consummated.
9.4 Rights and Remedies not Exclusive
Lender shall have the right in its sole discretion to determine which
rights, Liens and/or remedies Lender may at any time pursue, relinquish,
subordinate or modify, and such determination will not in any way modify or
affect any of Lender's rights, Liens or remedies under any Loan Document,
applicable law or equity. The enumeration of any rights and remedies in any Loan
Document is not intended to be exhaustive, and all rights and remedies of Lender
described in any Loan Document are cumulative and are not alternative to or
exclusive of any other rights or remedies which Lender otherwise may have. The
partial or complete exercise of any right or remedy shall not preclude any other
further exercise of such or any other right or remedy.
X. WAIVERS AND JUDICIAL PROCEEDINGS
10.1 Waivers
Except as expressly provided for herein, Borrower hereby waives demand,
presentment, protest, all defenses with respect to any and all instruments and
all notices and demands of any description, and the pleading of any statute of
limitations as a defense to any demand under any Loan Document. Borrower hereby
waives any and all defenses and counterclaims it may have or could interpose in
any action or procedure brought by Lender to obtain an order of court
recognizing the assignment of, or Lien of Lender in and to, any Collateral.
10.2 Delay; No Waiver of Defaults
No course of action or dealing, renewal, release or extension of any
provision of any Loan Document, or single or partial exercise of any such
provision, or delay, failure or omission on Lender's part in enforcing any such
provision shall affect the liability of any Borrower or Guarantor or operate as
a waiver of such provision or affect the liability of any Borrower or Guarantor
or preclude any other or further exercise of such provision. No waiver by any
party to any Loan Document of any one or more defaults by any other party in the
performance of any of the provisions of any Loan Document shall operate or be
construed as a waiver of any future default, whether of a like or different
nature, and each such waiver shall be limited solely to the express terms and
provisions of such waiver. Notwithstanding
34
any other provision of any Loan Document, by completing the Closing under this
Agreement and/or by making Advances or funding the Term Loan, Lender does not
waive any breach of any representation or warranty of under any Loan Document,
and all of Lender's claims and rights resulting from any such breach or
misrepresentation are specifically reserved.
10.3 Jury Waiver
EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THE LOAN DOCUMENTS OR IN ANY
WAY CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH RESPECT TO
THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE WAIVER OF
THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.
XI. EFFECTIVE DATE AND TERMINATION
11.1 Effectiveness and Termination
Subject to Lender's right to terminate and cease making Loans upon or after
any Event of Default, this Agreement shall continue in full force and effect
until the full performance and indefeasible payment in cash of all Obligations,
unless terminated sooner as provided in this Section 11.1. Borrower may
terminate this Agreement at any time upon not less than thirty (30) calendar
days' prior written notice to Lender and upon full performance and indefeasible
payment in full in cash of all Obligations on or prior to such 30th calendar day
after Receipt by Lender of such written notice. All of the Obligations shall be
immediately due and payable upon any such termination on the termination date
stated in any notice of termination (the "Termination Date"); provided that,
notwithstanding any other provision of any Loan Document, the Termination Date
shall be effective no earlier than the first Business Day of the month following
the expiration of the thirty (30) calendar days' prior written notice period.
Notwithstanding any other provision of any Loan Document, no termination of this
Agreement shall affect Lender's rights or any of the Obligations existing as of
the effective date of such termination, and the provisions of the Loan Documents
shall continue to be fully operative until the Obligations have been fully
performed and indefeasibly paid in cash in full. The Liens granted to Lender
under the Security Documents and the financing statements filed pursuant thereto
and the rights and powers of Lender shall continue in full force and effect
notwithstanding the fact that Borrower's borrowings hereunder may from time to
time be in a zero or credit position until all of the Obligations have been
fully performed and indefeasibly paid in full in cash.
11.2 Survival
All obligations, covenants, agreements, representations, warranties,
waivers and indemnities made by Borrower in any Loan Document shall survive the
execution and delivery of the Loan Documents, the Closing, the making of the
Loans and any termination of this Agreement until all
35
Obligations are fully performed and indefeasibly paid in full in cash. The
obligations and provisions of Sections 3.5, 3.6, 6.13, 10.1, 10.3, 11.1, 11.2,
12.4, 12.7 and 12.9 shall survive termination of the Loan Documents and any
payment, in full or in part, of the Obligations.
XII. MISCELLANEOUS
12.1 Governing Law; Jurisdiction; Service of Process; Venue
The Loan Documents shall be governed by and construed in accordance with
the internal laws of the State of Maryland without giving effect to its choice
of law provisions. Any judicial proceeding against Borrower with respect to the
Obligations, any Loan Document or any related agreement may be brought in any
federal or state court of competent jurisdiction located in the State of
Maryland. By execution and delivery of each Loan Document to which it is a
party, each of Borrower and Lender (i) accepts the non-exclusive jurisdiction of
the aforesaid courts and irrevocably agrees to be bound by any judgment rendered
thereby, (ii) waives personal service of process, (iii) agrees that service of
process upon it may be made by certified or registered mail, return receipt
requested, pursuant to Section 12.5 hereof, and (iv) waives any objection to
jurisdiction and venue of any action instituted hereunder and agrees not to
assert any defense based on lack of jurisdiction, venue or convenience. Nothing
shall affect the right of Borrower or Lender to serve process in any manner
permitted by law or shall limit the right of Lender to bring proceedings against
Borrower in the courts of any other jurisdiction having jurisdiction. Any
judicial proceedings against Lender involving, directly or indirectly, the
Obligations, any Loan Document or any related agreement shall be brought only in
a federal or state court located in the State of Maryland. All parties
acknowledge that they participated in the negotiation and drafting of this
Agreement and that, accordingly, no party shall move or petition a court
construing this Agreement to construe it more stringently against one party than
against any other.
12.2 Successors and Assigns; Participations; New Lenders
The Loan Documents shall inure to the benefit of Lender, Transferees and
all future holders of any Note, the Obligations and/or any of the Collateral,
and each of their respective successors and assigns. Each Loan Document shall be
binding upon the Persons' other than Lender that are parties thereto and their
respective successors and assigns, and no such Person may assign, delegate or
transfer any Loan Document or any of its rights or obligations thereunder
without the prior written consent of Lender. No rights are intended to be
created under any Loan Document for the benefit of any third party donee,
creditor or incidental beneficiary of any Borrower or Guarantor. Nothing
contained in any Loan Document shall be construed as a delegation to Lender of
any other Person's duty of performance. BORROWER ACKNOWLEDGES AND AGREES THAT
LENDER AT ANY TIME AND FROM TIME TO TIME MAY (I) DIVIDE AND RESTATE ANY NOTE,
AND/OR (II) SELL, ASSIGN OR GRANT PARTICIPATING INTERESTS IN OR TRANSFER ALL OR
ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY LOAN DOCUMENT, NOTE, THE
OBLIGATIONS AND/OR THE COLLATERAL TO OTHER PERSONS (EACH SUCH TRANSFEREE,
ASSIGNEE OR PURCHASER, A "TRANSFEREE"). Each Transferee shall have all of the
rights and benefits with respect to the Obligations, Notes, Collateral and/or
Loan Documents held by it as fully as if the original holder thereof, and either
Lender or any Transferee may be designated as the sole agent to manage the
transactions and obligations contemplated therein; PROVIDED THAT,
notwithstanding anything to the contrary in any Loan Document, Borrower shall
not be obligated to pay under this Agreement to any Transferee any sum in excess
of the sum which Borrower would have been obligated to pay to Lender had such
participation
36
not been effected. Notwithstanding any other provision of any Loan Document,
Lender may disclose to any Transferee all information, reports, financial
statements, certificates and documents obtained under any provision of any Loan
Document.
12.3 Application of Payments
To the extent that any payment made or received with respect to the
Obligations is subsequently invalidated, determined to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver, custodian or any other Person under any Debtor Relief Law,
common law or equitable cause or any other law, then the Obligations intended to
be satisfied by such payment shall be revived and shall continue as if such
payment had not been received by Lender. Any payments with respect to the
Obligations received shall be credited and applied in such manner and order as
Lender shall decide in its Permitted Discretion.
12.4 Indemnity
Each Borrower jointly and severally shall indemnify Lender, its Affiliates
and its and their respective managers, members, officers, employees, Affiliates,
agents, representatives, successors, assigns, accountants and attorneys
(collectively, the "Indemnified Persons") from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, reasonable fees and disbursements of counsel and in-house
documentation and diligence fees and legal expenses) which may be imposed on,
incurred by or asserted against any Indemnified Person with respect to or
arising out of, or in any litigation, proceeding or investigation instituted or
conducted by any Person with respect to any aspect of, or any transaction
contemplated by or referred to in, or any matter related to, any Loan Document
or any agreement, document or transaction contemplated thereby, whether or not
such Indemnified Person is a party thereto, except to the extent that any of the
foregoing arises out of the gross negligence or willful misconduct of such
Indemnified Person. If any Indemnified Person uses in-house counsel for any
purpose for which any Borrower is responsible to pay or indemnify, each Borrower
expressly agrees that its indemnification obligations include reasonable charges
for such work commensurate with the fees that would otherwise be charged by
outside legal counsel selected by such Indemnified Person in its sole discretion
for the work performed. Lender agrees to give Borrower reasonable notice of any
event of which Lender becomes aware for which indemnification may be required
under this Section 12.4, and Lender may elect (but is not obligated) to direct
the defense thereof, provided that the selection of counsel shall be subject to
Borrower's consent, which consent shall not be unreasonably withheld or delayed.
Any Indemnified Person may, in its reasonable discretion, take such actions as
it deems necessary and appropriate to investigate, defend or settle any event or
take other remedial or corrective actions with respect thereto as may be
necessary for the protection of such Indemnified Person or the Collateral.
Notwithstanding the foregoing, if any Insurer agrees to undertake the defense of
an event (an "Insured Event"), Lender agrees not to exercise its right to select
counsel to defend the event if that would cause any Borrower's Insurer to deny
coverage; provided, however, that Lender reserves the right to retain counsel to
represent any Indemnified Person with respect to an Insured Event at its sole
cost and expense. To the extent that Lender obtains recovery from a third party
other than an Indemnified Person of any of the amounts that any Borrower has
paid to Lender pursuant to the indemnity set forth in this Section 12.4, then
Lender shall promptly pay to such Borrower the amount of such recovery.
37
12.5 Notice
Any notice or request under any Loan Document shall be given to any party
to this Agreement at such party's address set forth beneath its signature on the
signature page to this Agreement, or at such other address as such party may
hereafter specify in a notice given in the manner required under this Section
12.5. Any notice or request hereunder shall be given only by, and shall be
deemed to have been received upon (each, a "Receipt"): (i) registered or
certified mail, return receipt requested, on the date on which such is received
as indicated in such return receipt, (ii) delivery by a nationally recognized
overnight courier, one (1) Business Day after deposit with such courier, or
(iii) facsimile or electronic transmission, in each case upon telephone or
further electronic communication from the recipient acknowledging receipt
(whether automatic or manual from recipient), as applicable.
12.6 Severability; Captions; Counterparts; Facsimile Signatures
If any provision of any Loan Document is adjudicated to be invalid under
applicable laws or regulations, such provision shall be inapplicable to the
extent of such invalidity without affecting the validity or enforceability of
the remainder of the Loan Documents which shall be given effect so far as
possible. The captions in the Loan Documents are intended for convenience and
reference only and shall not affect the meaning or interpretation of the Loan
Documents. The Loan Documents may be executed in one or more counterparts (which
taken together, as applicable, shall constitute one and the same instrument) and
by facsimile transmission, which facsimile signatures shall be considered
original executed counterparts. Each party to this Agreement agrees that it will
be bound by its own facsimile signature and that it accepts the facsimile
signature of each other party.
12.7 Expenses
Borrower shall pay, whether or not the Closing occurs, all costs and
expenses incurred by Lender and/or its Affiliates, including, without
limitation, documentation and diligence fees and expenses, all search, audit,
appraisal, recording, professional and filing fees and expenses and all other
out-of-pocket charges and expenses (including, without limitation, UCC and
judgment and tax lien searches and UCC filings and fees for post-Closing UCC and
judgment and tax lien searches and wire transfer fees and audit expenses), and
reasonable attorneys' fees and expenses, (i) in any effort to enforce, protect
or collect payment of any Obligation or to enforce any Loan Document or any
related agreement, document or instrument, (ii) in connection with entering
into, negotiating, preparing, reviewing and executing the Loan Documents and/or
any related agreements, documents or instruments, (iii) arising in any way out
of administration of the Obligations, (iv) in connection with instituting,
maintaining, preserving, enforcing and/or foreclosing on Lender's Liens in any
of the Collateral or securities pledged under the Loan Documents, whether
through judicial proceedings or otherwise, (v) in defending or prosecuting any
actions, claims or proceedings arising out of or relating to Lender's
transactions with Borrower, (vi) in seeking, obtaining or receiving any advice
with respect to its rights and obligations under any Loan Document and any
related agreement, document or instrument, and/or (vii) in connection with any
modification, restatement, supplement, amendment, waiver or extension of any
Loan Document and/or any related agreement, document or instrument. All of the
foregoing shall be charged to Borrower's account and shall be part of the
Obligations. If Lender or any of its Affiliates uses in-house counsel for any
purpose under any Loan Document for which Borrower is responsible to pay or
indemnify, Borrower expressly agrees that its Obligations include reasonable
charges for such work commensurate with the fees that would otherwise be charged
by outside legal counsel selected by Lender
38
or such Affiliate in its sole discretion for the work performed. Without
limiting the foregoing, Borrower shall pay all taxes (other than taxes based
upon or measured by Lender's income or revenues or any personal property tax),
if any, in connection with the issuance of any Note and the filing and/or
recording of any documents and/or financing statements. Lender acknowledges and
agrees that it has received a deposit from Borrower in the amount of $28,250
towards such expenses and that all such costs and expenses payable by Borrower
to be incurred up to the Closing Date shall not exceed $42,500.
12.8 Entire Agreement
This Agreement and the other Loan Documents to which Borrower is a party
constitute the entire agreement between Borrower and Lender with respect to the
subject matter hereof and thereof, and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof or thereof. Any
promises, representations, warranties or guarantees not herein contained and
hereinafter made shall have no force and effect unless in writing signed by
Borrower and Lender. No provision of this Agreement may be changed, modified,
amended, restated, waived, supplemented, discharged, canceled or terminated
orally or by any course of dealing or in any other manner other than by an
agreement in writing signed by Lender and Borrower. Each party hereto
acknowledges that it has been advised by counsel in connection with the
negotiation and execution of this Agreement and is not relying upon oral
representations or statements inconsistent with the terms and provisions hereof.
12.9 Lender Approvals
Unless expressly provided herein to the contrary, any approval, consent,
waiver or satisfaction of Lender with respect to any matter that is subject of
any Loan Document may be granted or withheld by Lender in its sole and absolute
discretion.
12.10 Confidentiality and Publicity
Borrower agrees, and agrees to cause each of its Affiliates, (i) not to
transmit or disclose provision of any Loan Document to any Person (other than to
Borrower's accountants, attorneys, other advisors, directors, officers and
employees on a need-to-know basis) without Lender's prior written consent, (ii)
to inform all Persons of the confidential nature of the Loan Documents and to
direct them not to disclose the same to any other Person and to require each of
them to be bound by these provisions. Lender reserves the right to review and
approve all materials that Borrower or any of its Affiliates prepares (other
than for internal use or use by Borrower's attorneys, accountants, or other
advisers) that contain Lender's name or describe or refer to any Loan Document,
any of the terms thereof or any of the transactions contemplated thereby.
Borrower shall not, and shall not permit any of its Affiliates to, use Lender's
name (or the name of any of Lender's Affiliates) in connection with any of its
business operations. Nothing contained in any Loan Document is intended to
permit or authorize Borrower or any of its Affiliates to contract on behalf of
Lender. Further, Borrower hereby agrees that Lender or any Affiliate of Lender
may (i) disclose a general description of transactions arising under the Loan
Documents for advertising, marketing or other similar purposes and (ii) use
Borrower's or any Guarantor's name, logo or other indicia germane to such party
in connection with such advertising, marketing or other similar purposes.
39
12.11 Release of Lender
Notwithstanding any other provision of any Loan Document, Borrower
voluntarily, knowingly, and unconditionally, with specific and express intent,
for and on behalf of itself, it managers, members, directors, officers,
employees, stockholders, Affiliates, successors and assigns and their respective
Affiliates (collectively, the "Releasing Parties"), hereby fully and completely
releases and forever discharges the Indemnified Parties and any other Person or
insurer which may be responsible or liable for the acts or omissions of any of
the Indemnified Parties, or who may be liable for the injury or damage resulting
therefrom (collectively, with the Indemnified Parties, the "Released Parties"),
of and from any and all actions, causes of action, damages, claims, obligations,
liabilities, costs, expenses and demands of any kind whatsoever, at law or in
equity, matured or unmatured, vested or contingent, that any of the Releasing
Parties has against any of the Released Parties as of the date of the Closing.
Borrower acknowledges that the foregoing release is a material inducement to
Lender's decision to extend to Borrower the financial accommodations hereunder
and has been relied upon by Lender in agreeing to make the Loans.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
40
IN WITNESS WHEREOF, each of the parties has duly executed this Revolving
Credit, Term Loan and Security Agreement as of the date first written above.
DERMA SCIENCES, INC.
By:
---------------------------------
Xxxxxx Xxxxxx
Chairman, President and Chief Executive
Officer
Address for Notices for each Borrower:
-------------------------------------
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx, CFO
Telephone: 000-000-0000 x000
FAX: 000-000-0000
E-Mail: xxxxxxx@xxxxxxxxxxxxx.xxx
SUNSHINE PRODUCTS, INC.
By:
---------------------------------
Xxxxxx Xxxxxx
Chairman, President and Chief Executive
Officer
41
CAPITALSOURCE FINANCE LLC
By:
------------------------------------------
Name:
Title:
Address for Notices:
-------------------
CapitalSource Finance LLC
0000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: Healthcare Finance Group, Portfolio Manager
Telephone: (000) 000-0000
FAX: (000) 000-0000
E-Mail: xxxxxxx@xxxxxxxxxxxxx.xxx
42
Execution Copy
EXHIBITS
Exhibit A - Form of Borrowing Certificate
SCHEDULES
Schedule 2.4 -- Borrower's Deposit Accounts
Schedule 5.2 -- Required Consents
Schedule 5.3 -- Capitalization, Organization Chart (including all
subsidiaries, authorized/issued capitalization,
owners, directors, officers and managers) and Joint
Ventures
Schedule 5.4 -- Liens; Real and Personal Property Owned or Leased;
Leases
Schedule 5.8 -- Taxes
Schedule 5.11 -- Intellectual Property
Schedule 5.15 -- Existing Indebtedness
Schedule 5.16 -- Other Agreements
Schedule 5.17 -- Insurance
Schedule 5.18A -- Corporate Names
Schedule 5.18B -- Places of Business
Schedule 6.8 -- Further Assurances/Post Closing
Schedule 7.2 -- Permitted Indebtedness
Schedule 7.3 -- Permitted Liens
Schedule A -- Amortization Schedule (to be provided after the Term
Loan Closing Date)
Appendix A -- Definitions
ANNEX I
FINANCIAL COVENANTS
1) Minimum EBITDA
As of the Closing Date and as measured at the end of each month thereafter,
Borrower's EBITDA for any Test Period must be greater than zero; provided that
as of the Term Loan Closing Date and as measured at the end of each month
thereafter, Borrower shall not permit its EBITDA for any Test Period to be less
than 85% of the projected EBITDA as reported in Borrower's operating budget and
delivered to Lender in accordance with Section 6.1(e) of the Loan Agreement.
2) Fixed Coverage Ratio (EBITDA/Fixed Charges)
As of the Closing Date and as measured at the end of each month thereafter,
the Fixed Charge Ratio shall not be less than 1.2:1.0.
For purposes of the covenants set forth in this Annex I, the terms listed
below shall have the following meanings:
"Capital Expenditures" shall mean, for any Test Period, the sum (without
duplication) of all expenditures (whether paid in cash or accrued as
liabilities) during the Test Period that are or should be treated as capital
expenditures under GAAP.
"EBITDA" shall mean, for any Test Period, the sum, without duplication, of
the following for Borrower on a consolidated basis: Net Income determined in
accordance with GAAP, plus, (a) Interest Expense, (b) taxes on income, whether
paid, payable or accrued, (c) depreciation expense, (d) amortization expense,
(e) all other non-cash, non-recurring charges and expenses, excluding accruals
for cash expenses made in the ordinary course of business, and (f) loss from any
sale of assets, other than sales in the ordinary course of business, all of the
foregoing determined in accordance with GAAP, minus (a) gains from any sale of
assets, other than sales in the ordinary course of business and (b) other
extraordinary or non-recurring gains.
"Fixed Charge Ratio" shall mean for Borrower collectively on a consolidated
basis the ratio of (a) EBITDA for the Test Period, to (b) Fixed Charges for the
Test Period.
"Fixed Charges" shall mean the sum of the following: (a) Total Debt
Service, (b) Capital Expenditures, (c) income taxes paid in cash or accrued, (d)
dividends paid or accrued or declared, and (e) payments to Xxxxxxxx pursuant to
the Xxxxxxxx Non-Compete Agreement.
"Interest Expense" shall mean, for any Test Period, total interest expense
(including attributable to Capital Leases in accordance with GAAP) and fees with
respect to all outstanding Indebtedness including capitalized interest but
excluding commissions, discounts and other fees owed with respect to letters of
credit and bankers' acceptance financing and net costs under Interest Rate
Agreements.
Annex 1
"Interest Rate Agreement" shall mean any interest rate swap, cap or collar
agreement or other similar agreement or arrangement designed to hedge the
position with respect to interest rates.
"Net Income" shall mean the net income (or loss) determined in conformity
with GAAP, provided that there shall be excluded (i) the income (or loss) of any
Person in which any other Person (other than any Borrower) has a joint interest,
except to the extent of the amount of dividends or other distributions actually
paid to a Borrower by such Person, (ii) the income (or loss) of any Person
accrued prior to the date it becomes a Borrower or is merged into or
consolidated with a Borrower or that Person's assets are acquired by a Borrower,
(iii) the income of any Subsidiary of Borrower to the extent that the
declaration or payment of dividends or similar distributions of that income by
that Subsidiary is not at the time permitted by operation of the terms of the
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary, (iv) compensation expense
resulting from the issuance of capital stock, stock options or stock
appreciation rights issued to former or current employees, including officers,
of a Borrower, or the exercise of such options or rights, in each case to the
extent the obligation (if any) associated therewith is not expected to be
settled by the payment of cash by a Borrower or any affiliate thereof, and (v)
compensation expense resulting from the repurchase of capital stock, options and
rights described in clause (iv) of this definition of Net Income.
"Test Period" shall mean the three most recent calendar months then ended
(taken as one accounting period), or such other period as specified in the
Agreement or any Annex thereto.
"Total Debt Service" shall mean the sum of (i) scheduled or other required
payments of principal on Indebtedness, including payments with respect to the
Obligations and the Permitted Subordinated Debt (but excluding all Earn-out
Payments), and (ii) Interest Expense.
Annex 2
APPENDIX A
DEFINITIONS
"Accounts" shall mean all "accounts" (as defined in the UCC) of Borrower
(or, if referring to another Person, of such other Person), including without
limitation, accounts, accounts receivables, monies due or to become due and
obligations in any form (whether arising in connection with contracts, contract
rights, instruments, general intangibles or chattel paper), in each case whether
arising out of goods sold or services rendered or from any other transaction and
whether or not earned by performance, now or hereafter in existence, and all
documents of title or other documents representing any of the foregoing, and all
collateral security and guaranties of any kind, now or hereafter in existence,
given by any Person with respect to any of the foregoing.
"Account Debtor" shall mean any Person who is obligated under an Account.
"Acquisition Documents" shall mean the Stock Purchase Agreement, the Seller
Note, the Xxxxxxxx Employment Agreement, the McMeikan Employment Agreement, the
McMeikan Non-Solicitation Agreement, the Xxxxxxxx Non-Competition Agreement, and
all other agreements, documents, instruments and certificates executed,
delivered and certified by Borrower to Lender in connection with any of the
foregoing, as the same may be amended, modified or supplemented from time to
time.
"Advances" shall mean a borrowing under the Revolving Facility. Any amounts
paid by Lender on behalf of Borrower or any Guarantor under any Loan Document
shall be an Advance for purposes of the Agreement.
"Affiliate" shall mean, as to any Person, any other Person (a) that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person, (b) who is a
director or officer (i) of such Person, (ii) of any Subsidiary of such Person,
or (iii) of any Person described in clause (a) above with respect to such
Person, or (c) which, directly or indirectly through one or more intermediaries,
is the beneficial or record owner (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended, as the same is in effect on the date hereof)
of five percent (5%) or more of any class of the outstanding voting stock,
securities or other equity or ownership interests of such Person. For purposes
of this definition, the term "control" (and the correlative terms, "controlled
by" and "under common control with") shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies, whether through ownership of securities or other interests, by
contract or otherwise.
"Applicable Rate" shall mean the interest rates applicable from time to
time to Advances under the Agreement.
"Borrowing Base" shall mean, as of any date of determination, the net
collectible Dollar value of (a) Eligible Receivables and (b) Eligible Inventory
Costs, as determined with reference to the most recent Borrowing Certificate and
otherwise in accordance with the Agreement; provided, however, that if as of
such date the most recent Borrowing Certificate is of a date more than four
Business Days before or after such date, the Borrowing Base shall be determined
by Lender in its Permitted Discretion.
"Borrowing Certificate" shall mean a Borrowing Certificate substantially in
the form of Exhibit A.
Appendix 1
"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which the Federal Reserve or Lender is closed.
"Capital Lease" shall mean, as to any Person, a lease of any interest in
any kind of property or asset by that Person as lessee that is, should be or
should have been recorded as a "capital lease" in accordance with GAAP.
"Capitalized Lease Obligations" shall mean all obligations of any Person
under Capital Leases, in each case, taken at the amount thereof accounted for as
a liability in accordance with GAAP.
"Change of Control" shall mean, with respect to any Borrower or Guarantor,
the occurrence of any of the following: (i) a merger, consolidation,
reorganization, recapitalization or share or interest exchange, sale or transfer
or any other transaction or series of transactions in which its stockholders,
managers, partners or interest holders immediately prior to such transaction or
series of transactions receive, in exchange for the stock or interests owned by
them, cash, property or securities of the resulting or surviving entity or any
Affiliate thereof, and, as a result thereof, Persons who, individually or in the
aggregate, were holders of 50% or more of its voting stock, securities or
equity, partnership or ownership interests immediately prior to such transaction
or series of transactions hold less than 50% of the voting stock, securities or
other equity, partnership or ownership interests of the resulting or surviving
entity or such Affiliate thereof, calculated on a fully diluted basis, (ii) a
direct or indirect sale, transfer or other conveyance or disposition, in any
single transaction or series of transactions, of all or substantially all of its
assets, or (iii) Xxxxxxxx ceases to be employed as President and Chief Executive
Officer of FNC or his employment agreement is assigned by Borrower or he
otherwise becomes disabled and is not replaced within 60 calendar days by an
interim President and Chief Executive Officer of FNC, and within 150 calendar
days by a permanent President and Chief Executive Officer, each to Lender's
satisfaction as determined in its Permitted Discretion.
"Charter and Good Standing Documents" shall mean, for each Borrower (i) a
copy of the certificate of incorporation or formation (or other charter
document) certified as of a date not more than thirty (30) Business Days before
the Closing Date by the applicable Governmental Authority of the jurisdiction of
incorporation or organization of such Borrower, (ii) a copy of the bylaws or
similar organizational documents of certified as of a date not more than three
(3) Business Days before the Closing Date by the corporate secretary or
assistant secretary of such Borrower, (iii) an original certificate of good
standing as of a date acceptable to Lender issued by the applicable Governmental
Authority of the jurisdiction of incorporation or organization of such Borrower
and of every other jurisdiction in which such Borrower or is required to be in
good standing, and (iv) copies of the resolutions of the Board of Directors or
managers (or other applicable governing body) and, if required, stockholders,
members or other equity owners authorizing the execution, delivery and
performance of the Loan Documents to which such Borrower is a party, certified
by an authorized officer of such Person as of the Closing Date.
"Closing" shall mean the consummation of the transactions contemplated
hereby which shall occur upon satisfaction, or written waiver by Lender, of all
of the conditions precedent set forth in Section 4.1 of the Agreement.
"Closing Date" shall mean the date the Closing occurs.
Appendix 2
"Collateral" shall mean, collectively and each individually, all collateral
and/or security granted to Lender by Borrower and/or Guarantors pursuant to the
Loan Documents.
"Collateral Patent, Trademark, and Copyright Assignment" shall mean any
patent, trademark, or copyright assignment or acknowledgement executed by and
between Borrower and Lender, as such may be modified, amended or supplemented
from time to time.
"Debtor Relief Law" shall mean, collectively, the Bankruptcy Code of the
United States of America and all other applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization
or similar debtor relief laws from time to time in effect affecting the rights
of creditors generally, as amended from time to time.
"Default" shall mean any event, fact, circumstance or condition that, with
the giving of applicable notice or passage of time or both, would constitute or
be or result in an Event of Default.
"Deposit Account" shall mean, collectively, the Lockbox Account and all
bank or other depository accounts of any Borrower.
"Distribution" shall mean any fee, payment, bonus or other remuneration of
any kind, and any repayment of or debt service on loans or other indebtedness.
"Earn-out Payments" shall mean all payments with respect to Shield Sales
made by Borrower to Xxxxxxxx in accordance with Section 2.3(c) of the Stock
Purchase Agreement.
"Eligible Inventory Costs" shall mean the value of Borrower's saleable
Inventory, after taking into account all discounts, which inventory is
maintained in the ordinary course of Borrower's business unless such Inventory
is deemed ineligible by Lender because:
(a) such Inventory is not subject to a valid perfected first priority
security interest in favor of Lender, subject to no other Lien of equal or
higher priority;
(b) any consent, license, approval or authorization required to be
obtained by Borrower in connection with the granting of the security
interest under the Security Documents or in connection with manufacture or
sale of such Inventory has not been or was not duly obtained and is not in
full force and effect;
(c) any covenant, representation or warranty contained in this
Agreement or in any other Loan Document with respect to such Inventory has
been breached and remains uncured;
(d) such Inventory does not comply, or was not manufactured in
compliance, in all material respects with all applicable requirements of
all statutes, laws, rules, regulations, ordinances, codes, policies, rules
of common law, and the like, now or hereafter in effect, of any
Governmental Authority, including any judicial or administrative
interpretations thereof, and any judicial or administrative orders,
consents, decrees or judgments;
(e) such Inventory does not, or at the time of its purchase from the
vendor did not, constitute "inventory" under Article 9 of the UCC as then
in effect in the jurisdiction whose law governs perfection of the security
interest;
Appendix 3
(f) the Person for whose account such Inventory is being or was
produced has commenced a voluntary case under any federal bankruptcy or
state or federal insolvency laws or has made an assignment for the benefit
of creditors, or if a decree or order for relief has been entered by a
court having jurisdiction in respect of such Person in an involuntary case
under any federal bankruptcy or state or federal insolvency laws which is
not dismissed, vacated, stayed or the like within a period of 60 days, or
if any other petition or application for relief under any federal
bankruptcy or state or federal insolvency laws has been filed against such
Person which is not dismissed, vacated, stayed or the like within a period
of 60 days, or if such Person has failed, suspended business, ceased to be
solvent, called a meeting of its creditors, or has consented to or suffered
a receiver, trustee, liquidator or custodian to be appointed for it or for
all or a significant portion of its assets or affairs;
(g) the transfer of Inventory to Borrower by vendor, supplier or other
Person did not constitute a valid sale and transfer to Borrower of all
right, title and interest of such Person in the Inventory enforceable
against all creditors of and purchasers from the vendor;
(h) (A) Borrower is not the sole owner of all right, title and
interest in and to such Inventory, (B) Borrower does not have a valid
ownership interest therein free and clear of all Liens other than Liens
granted under the Loan Documents, or (C) any offsets, defenses or
counterclaims have been asserted or threatened in writing against such
Inventory but only to the extent of such offset, defense or counterclaim;
(i) such Inventory is not in good working order or is damaged;
(j) such Inventory is not located at one of Borrower's premises or
warehouse;
(k) such Inventory consists only of works-in-process, raw materials,
packing materials, stock, supplies, parts or other components, returned
goods, or obsolete or discontinued items;
(l) such Inventory is subject to a bona fide dispute or is or has been
classified as counterfeit or fraudulent;
(m) such Inventory has been sold, assigned, or otherwise encumbered by
Borrower or Guarantor except pursuant to the Loan Documents;
(n) such Inventory fails to meet other specifications and requirements
which may from time to time be established by Lender or is not otherwise
satisfactory to Lender, as determined in the sole discretion of Lender.
"Eligible Receivables" shall mean each Account arising in the ordinary
course of Borrower's business from the sale of goods or rendering of services
which Lender, in its Permitted Discretion, deems an Eligible Receivable unless:
(a) it is not subject to a valid perfected first priority security
interest in favor of Lender, subject to no other Lien of equal or higher
priority;
(b) it is not evidenced by an invoice, statement or other documentary
evidence reasonably satisfactory to Lender (it being agreed that Borrower's
standard invoice or other statement form which has been historically used
by Borrower for such purposes is satisfactory to Lender; PROVIDED,
Appendix 4
that Lender in its sole discretion may from time to time include as
Accounts that are not evidenced by an invoice, statement or other
documentary evidence satisfactory to Lender as Eligible Receivables and
determine the advance rate, liquidity factors and reserves applicable to
Advances made on any such Accounts;
(c) it arises out of services rendered or a sale made to, or out of
any other transaction between with , one or more Affiliates of any
Borrower;
(d) it remains unpaid for longer than 90 calendar days after the
invoice date;
(e) with respect to all Accounts owed by any particular Account Debtor
and/or its Affiliates, if more than 25% of the aggregate balance of all
such Accounts owing from such Account Debtor and/or its Affiliates remain
unpaid for longer than 90 calendar days after the invoice date;
(f) with respect to all Accounts owed by any particular Account Debtor
and/or its Affiliates, 50% or more of all such Accounts are not deemed
Eligible Receivables for any reason hereunder (which percentage may, in
Lender's Permitted Discretion, be increased or decreased);
(g) with respect to all Accounts owed by any particular Account Debtor
and/or its Affiliates, if such Accounts exceed 20% of the net collectible
dollar value of all Eligible Receivables at any one time but only to the
extent which 20% of such net collectible dollar value is exceeded (which
percentage may, in Lender's Permitted Discretion, be increased or
decreased);
(h) any covenant, agreement, representation or warranty contained in
any Loan Document with respect to such Account has been breached and
remains uncured;
(i) the Account Debtor for such Account has commenced a voluntary case
under any Debtor Relief Law or has made an assignment for the benefit of
creditors, or a decree or order for relief has been entered by a court
having jurisdiction in respect of such Account Debtor in an involuntary
case under any Debtor Relief Law which is not dismissed, vacated, stayed or
the like within a period of 60 days, or any other petition or application
for relief under any Debtor Relief Law has been filed against such Account
Debtor which is not dismissed, vacated, stayed or the like within a period
of 60 days, or such Account Debtor has suspended business, ceased to be
solvent, called a meeting of its creditors, or has consented to or suffered
a receiver, trustee, liquidator or custodian to be appointed for it or for
all or a significant portion of its assets or affairs, or Borrower, in the
ordinary course of business, knows of any of the foregoing;
(j) it arises from the sale of property or services rendered to one or
more Account Debtors outside the United States or that have their principal
place of business or chief executive offices outside the United States;
provided that such Accounts shall be ineligible only to the extent that
they exceed in the aggregate 10% of the net collectible dollar value of all
Eligible Receivables;
(k) it represents the sale of goods or rendering of services to an
Account Debtor on a xxxx-and-hold, guaranteed sale, sale-and-return, sale
on approval, consignment or any other repurchase or return basis or is
evidenced by chattel paper or an instrument of any kind or has been reduced
to judgment;
Appendix 5
(l) the applicable Account Debtor for such Account is any Governmental
Authority, unless rights to payment of such Account have been assigned to
Lender pursuant to the Assignment of Claims Act of 1940, as amended (31
U.S.C. Section 3727, et seq. and 41 U.S.C. Section 15, et seq.), or
otherwise all with applicable statutes or regulations respecting the
assignment of government Accounts have been complied with;
(m) the Account is subject to any offset, credit (including any
resource or other income credit or offset) deduction, defense, discount,
chargeback, freight claim, allowance, adjustment, dispute or counterclaim,
or is contingent in any respect or for any reason, but only to the extent
of such offset, credit, deduction, defense, discount, chargeback, freight
claim, allowance, adjustment, dispute or counterclaim, or such contingency;
(n) there is any agreement with an Account Debtor for any deduction
from such Account, except for discounts or allowances made in the ordinary
course of business for prompt payment, all of which discounts or allowances
are reflected in the calculation of the face value of each invoice related
thereto, such that only the discounted amount of such Account after giving
effect to such discounts and allowances shall be considered an Eligible
Receivable, but only to the extent of such deduction;
(o) any return, rejection or repossession of goods or services related
to it has occurred;
(p) it is not payable to Borrower;
(q) Borrower has agreed to accept or has accepted any non-cash payment
for such Account;
(r) with respect to any Account arising from the sale of goods, the
goods have not been shipped to the Account Debtor or its designee;
(s) with respect to any Account arising from the performance of
services, the services have not been actually performed or the services
were undertaken in violation of any law; or
(t) such Account fails to meet such other specifications and
requirements which may from time to time be established by Lender or is not
otherwise satisfactory to Lender, as determined in Lender's sole
discretion.
"Environmental Laws" shall mean, collectively and each individually, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendment and Reauthorization Act of 1986, the Resource
Conservation and Recovery Act, the Toxic Substances Control Act, the Clean Air
Act, the Clean Water Act, any other "Superfund" or "Superlien" law and all other
federal, state and local and foreign environmental, land use, zoning, health,
chemical use, safety and sanitation laws, statutes, ordinances and codes
relating to the protection of the environment and/or governing the use, storage,
treatment, generation, transportation, processing, handling, production or
disposal of Hazardous Substances, in each case, as amended, and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of Governmental Authorities with respect thereto.
Appendix 6
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Event of Default" shall mean the occurrence of any event set forth in
Article VIII.
"Excess Cash Flow"shall mean, on a cumulative basis from the Closing Date
to any date of determination, without duplication, an amount equal to (i)
consolidated net income or loss of Borrower for such period, plus (ii) an amount
equal to the amount of depreciation expenses, amortization expense (including
the amortization of goodwill), accrued non-cash interest expense and all other
non-cash charges deducted in arriving at such consolidated net income or loss,
less (iii) an amount equal to the aggregate net cash proceeds of the sale,
lease, transfer or other disposition of assets by Borrower during such period to
the extent not required to be applied to mandatory prepayments or payments on
the Loans, plus (iv) an amount equal to the net loss on the sale, lease,
transfer or other disposition of assets by Borrower during such period to the
extent deducted in arriving at such consolidated net income or loss, less (v)
without duplication with other items included in this definition other amount of
any tax refunds or credits received by Borrower during such period, less (vi) an
amount equal to the permitted Capital Expenditures of Borrower for such period,
less (vii) an amount equal to the sum of all regularly scheduled payments and
optional and mandatory prepayments of principal on Indebtedness for money
borrowed of Borrower (other than on the Loans) actually made during such period
to the extent permitted hereunder.
"Fair Valuation" shall mean the determination of the value of the
consolidated assets of a Person on the basis of the amount which may be realized
by a willing seller within a reasonable time through collection or sale of such
assets at market value on a going concern basis to an interested buyer who is
willing to purchase under ordinary selling conditions in an arm's length
transaction.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time as applied by nationally
recognized accounting firms.
"Government Account" shall be defined to mean all Accounts arising out of
or with respect to any Government Contract.
"Government Contract" shall be defined to mean all contracts with the
United States Government or with any agency thereof, and all amendments thereto.
"Guarantor" shall mean, collectively and each individually, all guarantors
of the Obligations or any part thereof.
"Guaranty" shall mean, collectively and each individually, all guarantees
executed by any Guarantors.
"Governmental Authority" shall mean any federal, state, municipal,
national, local or other governmental department, court, commission, board,
bureau, agency or instrumentality or political subdivision thereof, or any
entity or officer exercising executive, legislative or judicial, regulatory or
administrative functions of or pertaining to any government or any court, in
each case, whether of the United States or a state, territory or possession
thereof, a foreign sovereign entity or country or jurisdiction or the District
of Columbia.
Appendix 7
"Hazardous Substances" shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances or
related materials as defined in or subject to any applicable Environmental Law.
"Indebtedness" of any Person shall mean, without duplication, (a) all items
which, in accordance with GAAP, would be included in determining total
liabilities as shown on the liability side of the balance sheet of such Person
as of the date as of which Indebtedness is to be determined, including any lease
which, in accordance with GAAP would constitute Indebtedness, (b) all
indebtedness secured by any mortgage, pledge, security, Lien or conditional sale
or other title retention agreement to which any property or asset owned or held
by such Person is subject, whether or not the indebtedness secured thereby shall
have been assumed, (c) all indebtedness of others which such Person has directly
or indirectly guaranteed, endorsed (otherwise than for collection or deposit in
the ordinary course of business), discounted or sold with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which such Person has agreed to supply or advance funds (whether
by way of loan, stock, equity or other ownership interest purchase, capital
contribution or otherwise) or otherwise to become directly or indirectly liable.
"Insurer" shall mean a Person that insures another Person against costs
incurred by such other Person of services.
"Inventory" shall mean all "inventory" (as defined in the UCC) of Borrower
(or, if referring to another Person, of such other Person), now owned or
hereafter acquired, and all documents of title or other documents representing
any of the foregoing, and all collateral security and guaranties of any kind,
now or hereafter in existence, given by any Person with respect to any of the
foregoing.
"IRR" shall mean the internal rate of return, as determined by Lender in
accordance with accepted financial practice, recognized by Lender in connection
with the Term Loan by Lender to Borrower.
"Joinder Agreement" shall mean an agreement in form and substance
acceptable to Lender in its sole discretion, the material terms of which shall
provide that FNC shall become a party to and become bound by the terms of this
Agreement and/or any other Loan Document in the same capacity and to the same
extent as Derma and Sunshine.
"Landlord Waiver and Consent" shall mean a waiver/consent in form and
substance satisfactory to Lender from the owner/lessor of any premises not owned
by Borrower at which any of the Collateral is now or hereafter located for the
purpose of providing Lender access to such Collateral, in each case as such may
be modified, amended or supplemented from time to time.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
restriction, lien 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), or any other arrangement pursuant to which title
to the property is retained by or vested in some other Person for security
purposes.
"Loan" or "Loans" shall mean, individually and collectively, the Term Loan
and all Advances under the Revolving Facility.
Appendix 8
"Loan Documents" shall mean, collectively and each individually, the
Agreement, the Notes, the Guaranties, the other Security Documents, the
Subordination Agreement, the Landlord Waiver and Consents, the Borrowing
Certificates, and all other agreements, documents, instruments and certificates
heretofore or hereafter executed or delivered to Lender in connection with any
of the foregoing or the Loans, as the same may be amended, modified or
supplemented from time to time.
"Lockbox Accounts" shall mean the accounts maintained by Borrower at the
Lockbox Banks into which all collections or payments on their Accounts and other
Collateral are paid.
"Material Adverse Effect" or "Material Adverse Change" shall mean any
event, condition or circumstance or set of events, conditions or circumstances
or any change(s) which (i) has, had or could reasonably be expected to have any
material adverse effect upon or change in the validity or enforceability of any
Loan Document, (ii) has been or could reasonably be expected to be material and
adverse to the value of any of the Collateral in excess of $10,000 in the
aggregate or to the business, operations, prospects, properties, assets,
liabilities or condition of Borrower and/or Guarantors, either individually or
taken as a whole, or (iii) has materially impaired or could reasonably be
expected to materially impair the ability of any Borrower or Guarantor to
perform the Obligations or to consummate the transactions under the Loan
Documents executed by such Person.
"McMeikan Employment Agreement" shall mean that certain Employment
Agreement, which may be entered into between Xxxxx XxXxxxxx, and FNC.
"McMeikan Non-Solicitation Agreement" shall mean that certain
Non-Solicitation Agreement, which may be entered into between Xxxxx XxXxxxxx and
FNC.
"Minimum Termination Fee" shall mean (for the time period indicated) the
amount equal to (i) 2% of the Facility Cap, if the date of notice of such
termination by Borrower is after the Closing Date but before the first
anniversary of the Closing Date; (ii) 1% of the Facility Cap, if the date of
notice of such termination by Borrower is on or after the first anniversary of
the Closing Date but before the second anniversary of the Closing Date; and
(iii) there shall be no Minimum Termination Fee if such termination by Borrower
is after the second anniversary.
"Note" shall mean, collectively and each individually, the Revolving Note
and the Term Note.
"Obligations" shall mean all shall mean all present and future obligations,
Indebtedness and liabilities of Borrower and/or Guarantors to Lender at any time
and from time to time of every kind, nature and description, direct or indirect,
secured or unsecured, joint and several, absolute or contingent, due or to
become due, matured or unmatured, now existing or hereafter arising, contractual
or tortious, liquidated or unliquidated, under any of the Loan Documents or
otherwise relating to Notes and/or Loans, including, without limitation, all
applicable fees, charges and expenses and/or all amounts paid or advanced by
Lender on behalf of or for the benefit of any Borrower and/or Guarantor for any
reason at any time, including in each case obligations of performance as well as
obligations of payment and interest that accrue after the commencement of any
proceeding under any Debtor Relief Law by or against any such Person.
"Xxxxxxxx" shall mean Xxxxxx X. Xxxxxxxx, an individual resident of
California, and Chief Executive Officer and President of FNC.
Appendix 9
"Xxxxxxxx Employment Agreement" shall mean that certain Employment
Agreement, which may be entered into between Xxxxxxxx and FNC.
"Xxxxxxxx Non-Competition Agreement" shall mean that certain
Non-Competition Agreement, which may be entered into among FNC, Derma and
Xxxxxxxx.
"Payment Office" shall mean initially the address set forth beneath
Lender's name on the signature page of the Agreement, and thereafter, such other
office of Lender, if any, which it may designate by notice to Borrower to be the
Payment Office.
"Permit" shall mean collectively all licenses, leases, powers, permits,
franchises, certificates, authorizations, approvals, certificates of need,
provider numbers and other rights.
"Permitted Discretion" shall mean a determination or judgment made by
Lender in good faith in the exercise of reasonable (from the perspective of a
secured lender) business judgment.
"Permitted Investments" shall mean: (i) direct obligations of the United
States or any agency thereof, or obligations guaranteed by the United States or
any agency thereof, in each case supported by the full faith and credit of the
United States and maturing within one year from the date of creation thereof;
(ii) commercial paper maturing within one year from the date of creation thereof
rated in the highest grade by a nationally recognized credit rating agency; and
(iii) time deposits maturing within one year from the date of creation thereof
with, including certificates of deposit issued by, any office located in the
United States of any bank or trust company which is organized under the laws of
the United States of any state thereof and has capital, surplus and undivided
profits aggregating at least $500,000,000.
"Permitted Subordinated Debt" shall mean (i) the Seller Note and (ii) any
other Indebtedness of Borrower (A) that is expressly subordinated to the
Obligations on terms satisfactory to Lender, (B) that matures by its terms no
earlier than 6 months after the end of the Term with no scheduled principal
payments permitted prior to such maturity, and (C) that is evidenced by an
indenture or other similar agreement that is in a form satisfactory to Lender in
its sole discretion.
"Person" shall mean an individual, a partnership, a corporation, a limited
liability company, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture, a Governmental Authority or any
other entity of whatever nature.
"Prime Rate" shall mean a fluctuating interest rate per annum equal at all
times to the rate of interest announced publicly from time to time by Citibank,
N.A. as its base rate; provided, that such rate is not necessarily the best rate
offered to its customers, and, should Lender be unable to determine such rate,
such other indication of the prevailing prime rate of interest as may reasonably
be chosen by Lender; provided, that each change in the fluctuating interest rate
shall take effect simultaneously with the corresponding change in the Prime
Rate.
"Revolving Facility Maturity Date" shall have the meaning assigned to such
term in Section 2.2(b).
Appendix 10
"Revolving Note" shall mean, collectively and each individually, the
promissory note(s) payable to the order of Lender executed by Borrower
evidencing the Revolving Facility, as the same may be modified, amended or
supplemented from time to time.
"Security Documents" shall mean this Agreement, the Notes, Guaranties,
Stock Pledge Agreements, Collateral Patent, Trademark, and Copyright Assignment,
Lockbox Agreements, UCC Financing Statements and all other documents or
instruments necessary to create or perfect the Liens in the Collateral, as such
may be modified, amended or supplemented from time to time.
"Seller Note" shall mean that certain Promissory Note which may be made by
Derma in favor of Xxxxxxxx as amended, restated, supplemented or otherwise
modified.
"Shield Sales" shall have the meaning assigned to such term in the Stock
Purchase Agreement.
"Stock Pledge Agreement" shall mean, collectively and each individually,
(i) that certain Stock Pledge Agreement by and between Derma and Lender executed
in connection herewith, and (ii) if applicable, all stock pledge agreements
executed by and between Lender and any Guarantors, in each case as such may be
modified, amended or supplemented from time to time.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement, which
may be entered into by and among FNC, Xxxxxxxx and Derma, as amended, restated,
supplemented or as otherwise modified.
"Subordination Agreement" shall mean the Subordination Agreement, which may
be entered into between Derma, Xxxxxxxx and Lender on or prior to the Term Loan
Closing Date, as amended, restated, supplemented or otherwise modified.
"Subsidiary" shall mean, (i) as to Borrower, any Person in which more than
50% of all equity, membership, partnership or other ownership interests is owned
directly or indirectly by Borrower or one or more of its Subsidiaries, and (ii)
as to any other Person, any Person in which more than 50% of all equity,
membership, partnership or other ownership interests is owned directly or
indirectly by such Person or by one or more of such Person's Subsidiaries.
"Term" shall mean the period commencing on the date set forth on the first
page hereof and ending on the date that is three (3) years after the Closing
Date.
"Term Loan Closing Date" shall mean the consummation of the Term Loan
contemplated hereby which shall occur upon satisfaction, or written waiver by
Lender, of all of the conditions precedent set forth in Section 4.3 of the
Agreement.
"Term Note" shall mean, collectively and each individually, the promissory
note(s) payable to the order of Lender executed by Borrower evidencing the Term
Loan, as the same may be modified, amended or supplemented from time to time.
"UCC" shall mean the Uniform Commercial Code as in effect in the State of
Maryland from time to time.
Appendix 11