WAIVER AND THIRD AMENDMENT
TO
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS WAIVER AND THIRD AMENDMENT ("Amendment") is entered
into as of January 11, 1999, by and among HEALTH-CHEM
CORPORATION, a corporation organized under the laws of the
State of Delaware ("Holdings"), HERCULITE PRODUCTS, INC., a
corporation organized under the laws of the State of New York
("HPI"), TRANSDERM LABORATORIES CORPORATION, a corporation
organized under the laws of the State of Delaware ("TLC"),
HERCON ENVIRONMENTAL CORPORATION, a corporation organized under
the laws of the State of Delaware ("HEC"), PACIFIC COMBINING
CORPORATION, a corporation organized under the laws of the
State of California ("PCC") and HERCON LABORATORIES
CORPORATION, a corporation organized under the laws of the
State of Delaware ("HLC") (Holdings, HPI, TLC, HEC, PCC and
HLC, each a "Borrower" and collectively "Borrowers"), and IBJ
WHITEHALL BUSINESS CREDIT CORPORATION (f/k/a IBJ Xxxxxxxx
Business Credit Corporation) (as successor in interest to IBJ
Xxxxxxxx Bank & Trust Company), as agent (in such capacity, the
"Agent") for itself and the financial institutions which are
now or which hereafter become a party (collectively, the
"Lenders" and individually a "Lender") to the Loan Agreement
(as hereafter defined).
BACKGROUND
Borrowers, Agent and Lender are parties to a Revolving
Credit, Term Loan and Security Agreement dated as of January
9, 1997 (as amended, supplemented or otherwise modified from
time to time, the "Loan Agreement") pursuant to which Agent
and Lenders provided Borrowers with certain financial
accommodations.
Borrower has requested that Agent and Lenders waive
certain Events of Default and amend the Loan Agreement to,
among other things, continue to provide Borrower with an
overadvance facility which shall terminate no later than
March 31, 1999 and Agent and Lenders are willing to do so on
the terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance
or grant of credit heretofore or hereafter made to or for
the account of Borrowers by Agent and Lenders, and for other
good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Definitions. All capitalized terms not otherwise
defined herein shall have the meanings given to them in the
Loan
Agreement.
2. Amendment to Loan Agreement. Subject to satisfaction
of the conditions precedent set forth in Section 4 below, the
Loan Agreement is hereby amended as follows:
(a) by adding the following defined terms in their
appropriate order:
"Special Letter of Credit" shall mean a standby
letter of credit caused to be issued by Agent on behalf of
Borrower for the benefit of The Park Avenue Bank, N.A. in a
maximum face amount equal to $106,875.
"Special Letter of Credit Collateral" shall mean (i)
investment property consisting of marketable securities, cash
or cash equivalents pledged by Xxxxxx X. Xxxxxxx and Xxxxx X.
Xxxxxxx as collateral security for the Special Letter of Credit
in an amount not less than the undrawn amount of the Special
Letter of Credit and pursuant to a pledge and security
agreement in form and substance satisfactory to Agent or (ii)
such other collateral satisfactory to Agent and pledged as
collateral security for the Special Letter of Credit in an
amount not less than the undrawn amount of the Special Letter
of Credit and in form and substance satisfactory to Agent.
(b) by amending the defined term "Obligations" by
inserting the parenthetical phrase "(including reimbursement
liabilities)" after the word "liabilities" in the second line
thereof and by inserting the following phrase at the end
thereof:
"and all obligations, fees, charges, expenses,
attorneys' fees and any other sum chargeable to
any Borrower or any Guarantor under this
Agreement or any Other Document."
(c) by amending the defined term "Other Documents"
by inserting the words "or any Guarantor" after each reference
to the word "Borrower" appearing therein.
(d) by amending the following defined terms in their
entirety to provide as follows:
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Real Property;
(f) all Subsidiary Stock;
(g) all of each Borrower's right, title and
interest in and to (i) its respective goods and other
property including, but not limited to, all merchandise
returned or rejected by Customers, relating to or securing any
of the Receivables; (ii) all of each Borrower's rights as a
consignor, a consignee, an unpaid vendor, mechanic, artisan, or
other lienor, including stoppage in transit, setoff, detinue,
replevin, reclamation and repurchase; (iii) all additional
amounts due to any Borrower from any Customer relating to the
Receivables; (iv) other property, including warranty claims,
relating to any goods securing this Agreement; (v) all of
each Borrower's contract rights, rights of payment which have
been earned under a contract right, instruments, documents,
chattel paper, warehouse receipts, deposit accounts, money and
securities; (vi) if and when obtained by any Borrower, all
real and personal property of third parties in which such
Borrower has been granted a lien or security interest as
security for the payment or enforcement of Receivables; and
(vii) any other goods, personal property or real property now
owned or hereafter acquired in which any Borrower has expressly
granted a security interest or may in the future grant a
security interest to Agent hereunder, or in any amendment or
supplement hereto or thereto, or under any other agreement
between Agent and any
Borrower;
(h) all of each Borrower's investment property,
including without limitation all of each Borrower's (i)
securities, whether certificated or uncertificated, including
stocks, bonds, interests in limited liability companies,
partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) securities entitlements, including
the rights of each Borrower to any securities account and the
financial assets held by a securities intermediary in such
securities account and any free credit balance or other money
owing by any securities intermediary with respect to that
account; (iii) securities accounts; (iv) all commodity
contracts; and (v) commodity accounts.
(i) all of each Borrower's ledger sheets,
ledger cards, files, correspondence, records, books of account,
business papers, computers, computer software (owned by any
Borrower or in which it has an interest), computer programs,
tapes, disks and documents relating to (a), (b), (c), (d), (e),
(f), (g) or (h) of this Paragraph; and
(j) all proceeds and products of (a), (b), (c),
(d), (e), (f), (g), (h) and (i) in whatever form, including,
but not limited to: cash, deposit accounts (whether or not
comprised solely of proceeds), certificates of deposit,
insurance proceeds (including hazard, flood and credit
insurance), negotiable instruments and other instruments for
the payment of money, chattel paper, security agreements,
documents, eminent domain proceeds, condemnation proceeds and
tort claim proceeds.
"General Intangibles" shall mean and include as to
each Borrower all of such Borrower's general intangibles,
whether now owned or hereafter acquired including, without
limitation, all choses in action, causes of action, corporate
or other business records, inventions, designs, patents, patent
applications, equipment formulations, manufacturing procedures,
quality control procedures, trademarks, service marks, trade
secrets, goodwill, copyrights, design rights, registrations,
licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties,
security interests or other security held by or granted to such
Borrower to secure payment of any of the Receivables by a
Customer all rights of indemnification, all rights and claims
in or under insurance policies (including fire, damage, loss
and casualty, whether covering personal property, real
property, tangible rights or intangible rights, all liability,
life, keyman and business interruption insurance and all
unearned premiums), and all other intangible property of every
kind and nature (other than Receivables).
"Guarantor" shall mean, jointly and severally, each
of the Persons on Schedule 1.2(A) and Xxxxxx X. Xxxxxxx and
Xxxxx X. Xxxxxxx.
"Special Advance Amount" shall mean an amount equal
to (i) $400,000 during the period January 21, 1998 through
July 31, 1998, (ii) $600,000 during the period August 1, 1998
through January 10, 1999, (iii) $1,310,000 during the period
January 11, 1999 through March 31, 1999 less the outstanding
undrawn amount of the Special Letter of Credit, and (iv) at
all other times, $106,875 if the undrawn amount of the Special
Letter of Credit is still outstanding and collateralized by the
Special Letter of Credit Collateral and $0 if the Special
Letter of Credit is not outstanding or is not collateralized by
the Special Letter of Credit Collateral.
(e) by amending Section 2.1(a)(y)(iv) by inserting
the following phrase at the end thereof and before the period:
", including, without limitation, a reserve equal to the
outstanding undrawn amount of the Special Letter of Credit to
the extent not secured by the Special Letter of Credit
Collateral".
(f) by adding a new Section 2.14 to read in its
entirety as follows:
"2.14 Special Letter of Credit.
(a) Subject to the terms and conditions
hereof, upon the request of Borrowing Agent, Agent shall issue
or cause the issuance of the Special Letter of Credit. All
disbursements or payments related to the Special Letter of
Credit shall be deemed to be a Revolving Advance and shall bear
interest at the Revolving Interest Rate. Borrowing Agent on
behalf of Borrowers may request Agent to issue or cause the
issuance of the Special Letter of Credit by delivering to Agent
at the Payment Office, Agent's standard form of Letter of
Credit and Security Agreement together with the Bank's standard
form of Letter of Credit Application (collectively, the "Letter
of Credit Application") completed to the satisfaction of Agent;
and, such other certificates, documents and other papers and
information as Agent or Bank may reasonably request.
(b) In connection with the issuance of the
Special Letter of Credit Borrowers shall indemnify, save and
hold Agent and each Lender harmless from any loss, cost,
expense or liability, including, without limitation, payments
made by Agent and Lender, and expenses and reasonable
attorneys' fees incurred by Agent or Lender arising out of, or
in connection with, the Special Letter of Credit. Borrowers
shall be bound by Agent's or any issuing or accepting bank's
regulations and good faith interpretations of the Special
Letter of Credit, although this interpretation may be dif-
ferent from its own; and, neither Agent nor Lender, the bank
which opened the Special Letter of Credit, nor any of its
correspondents shall be liable for any error, negligence, or
mistakes, whether of omission or commission, in following
Borrowing Agent's or any Borrower's instructions or those
contained in the Special Letter of Credit or of any
modifications, amendments or supplements thereto or in issuing
or paying the Special Letter of Credit, except for Agent's or
any Lender's or such correspondents' willful misconduct.
(c) Borrowing Agent shall authorize and direct
any bank which issues the Special Letter of Credit to name the
applicable Borrower as the "Account Party" therein and to
deliver to Agent all instruments, documents, and other writings
and property received by the bank pursuant to the Special
Letter of Credit and to accept and rely upon Agent's
instructions and agreements with respect to all matters arising
in connection with the Special Letter of Credit, or the
application therefor.
(d) Borrowers shall pay Agent (i) for the
ratable benefit of Lenders for issuing or causing the issuance
of the Special Letter of Credit, the fees set forth in the
Letter of Credit Security Agreement and the Letter of Credit
Application and (ii) Bank's other customary charges payable in
connection with letters of credit, as in effect from time to
time.
On demand, following an Event of Default,
Borrowers will cause cash to be deposited and maintained in an
account with Agent, as cash collateral, in an amount equal to
the outstanding Special Letter of Credit, and each Borrower
hereby irrevocably authorizes Agent, in its discretion, on such
Borrower's behalf and in such Borrower's name, to open such an
account and to make and maintain deposits therein, or in an
account opened by such Borrower, in the amounts required to be
made by such Borrower, out of the proceeds of Receivables or
other Collateral or out of any other funds of such Borrower
coming into Agent's possession at any time. Agent will invest
such cash collateral (less applicable reserves) in such
short-term money-market items as to which Agent and such
Borrower mutually agree and the net return on such investments
shall be credited to such account and constitute additional
cash collateral. No Borrower may withdraw amounts credited to
any such account except upon payment and performance in full of
all Obligations and termination of this Agreement."
3. Waiver. Subject to the satisfaction of the
conditions precedent set forth in Section 4 below, Agent hereby
waives the following Events of Default which have occurred as a
result of Borrower's non-compliance with the following
provisions of the Loan Agreement on September 30, 1998:
(a) Section 6.5, to the extent that such Event of
Default arose solely as a result of Borrowers' failure to have
a Net Worth equal to or greater than $3,250,000 at September
30, 1998.
(b) Section 6.6, to the extent that such Event of
Default arose solely as a result of Borrowers' failure to have
a ratio of Current Assets to Current Liabilities equal to or
greater than 1.75 to 1 at September 30, 1998.
(c) Section 6.7, to the extent that such Event of
Default arose solely as a result of Borrowers' failure to have
a Fixed Charge Coverage equal to or greater than .55 to 1 for
the four quarter period ended September 30, 1998.
(d) Section 6.7, to the extent that such Event of
default arose solely as a result of Borrowers' failure to have
EBITDA equal to or greater than $1,885,000 for the four quarter
period ended September 30, 1998.
4. Conditions of Effectiveness. This Amendment shall
become effective when Agent shall have received (i) three
(3) copies of this Amendment executed by Borrowers and
consented and agreed to by each Guarantor, (ii) payment of an
amendment fee of $50,000 (which amount shall be charged to
Borrowers' Account), (iii) a limited guaranty executed by
Xxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxx in form and substance
satisfactory to Agent, (iv) a pledge by Xxxxxx and Xxxxx
Xxxxxxx of certain investment property consisting of marketable
securities, cash or cash equivalents valued at not less than
$710,000 (the "Xxxxxxx Collateral") pledged pursuant to a
pledge and security agreement in form and substance
satisfactory to Agent, (v) account control agreement in form
and substance satisfactory to Agent executed by each of the
Bank, Xxxxxx and Xxxxx Xxxxxxx and Agent with respect to the
Xxxxxxx Collateral, (vi) UCC-1 financing statements executed
by Xxxxxx X. Xxxxxxx and Xxxxx X. Xxxxxxx with respect to the
Xxxxxxx Collateral and (vii) an appraisal of Borrowers'
machinery, equipment and real property.
5. Representations and Warranties. Each Borrower hereby
represents and warrants as follows:
(a) This Amendment and the Loan Agreement, as
amended hereby, constitute legal, valid and binding obligations
of such Borrower and are enforceable against such Borrower in
accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, each
Borrower hereby reaffirms all covenants, representations and
warranties made in the Loan Agreement to the extent the same
are not amended hereby and agree that all such covenants,
representations and warranties shall be deemed to have been
remade as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and
is continuing or would exist after giving effect to this
Amendment.
(d) No Borrower has any defense, counterclaim or
offset with respect to the Loan Agreement.
6. Effect on the Loan Agreement.
(a) Upon the effectiveness of Section 2 hereof, each
reference in the Loan Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import shall
mean and be a reference to the Loan Agreement as amended
hereby.
(b) Except as specifically amended herein, the Loan
Agreement, and all other documents, instruments and agreements
executed and/or delivered in connection therewith, shall remain
in full force and effect, and are hereby ratified and
confirmed.
(c) The execution, delivery and effectiveness of
this Amendment shall not, except as set forth in Section 3
hereof, operate as a waiver of any right, power or remedy of
Agent or any Lender, nor constitute a waiver of any provision
of the Loan Agreement, or any other documents, instruments or
agreements executed and/or delivered under or in connection
therewith.
7. Governing Law. This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their
respective successors and assigns and shall be governed by and
construed in accordance with the laws of the State of New York.
8. Headings. Section headings in this Amendment are
included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.
9. Counterparts; Telecopies Signature. This Amendment
may be executed in any number of and by different parties
hereto, on separate counterparts, all of which when so executed
shall be deemed an original, but all such counterparts shall
constitute one and the same agreement. Any signature delivered
by a party by facsimile transmission shall be deemed to be an
original signature hereto.
IN WITNESS WHEREOF, this Amendment has been duly executed
as of the day and year first written above.
HEALTH-CHEM CORPORATION
HERCULITE PRODUCTS, INC.
PACIFIC COMBINING CORPORATION
HERCON LABORATORIES CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Chairman of the Board of
each the foregoing
corporations
TRANSDERM LABORATORIES
CORPORATION
By: Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: President
HERCON ENVIRONMENTAL
CORPORATION
By: Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Chairman of the Board
IBJ WHITEHALL BUSINESS CREDIT
CORPORATION, as Agent and
Lender
By: Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: Senior Vice President
CONSENT AND REAFFIRMATION BY GUARANTORS
Each of the undersigned consents to the execution of the
Second Amendment and acknowledges and agrees that each Guaranty
by each of the undersigned with respect to the Obligations is,
and will remain, in full force and effect in accordance with
its terms and that the undersigned has no defense, counterclaim
or offset with respect to the Guaranty.
January 11, 1999
MEDALLION GROUP, INC.
HEALTH-CHEM INDUSTRIES, INC.
H.S. PROTECTIVE FABRICS
CORPORATION
H.S. DEVELOPMENT, INC.
YORK AEROSOL DELIVERY SYSTEM
CORPORATION
SPRINGS DEVELOPMENT
CORPORATION
RESEARCH DEVELOPMENT
CORPORATION
HEALTH-MED CORPORATION
CAPCO DELAWARE, INC.
ABERDEEN RESEARCH CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: President or Chairman
of the Board of each
of the foregoing
corporations
