Exhibit 10.1
CHASE Credit Agreement
This agreement dated as of March 27, 2006 between JPMorgan Chase Bank, N.A.
(together with its successors and assigns, the "Bank"), whose address is 000
Xxxxxx, 0xx Xxxxx, Xxxxxxx, XX 00000, and SHARPS COMPLIANCE CORP. (whether one
or more, and if more than one, individually and collectively, the "Borrower"),
whose address is 0000 Xxxxx Xxxxx, Xxxxxxx, XX 00000.
1. Credit Facilities.
1.1 Scope. This agreement governs Facility A, and, unless
otherwise agreed to in writing by the Bank and the Borrower or
prohibited by applicable law, governs the Credit Facilities as
defined below.
1.2 Facility A (Line of Credit). The Bank has approved a credit
facility to the Borrower in the principal sum not to exceed
$1,500,000.00 in the aggregate at any one time outstanding
("Facility A"). Credit under Facility A shall be repayable as
set forth in a Line of Credit Note executed concurrently with
this agreement, and any renewals, modifications, extensions,
rearrangements, restatements thereof and replacements or
substitutions thereof. The proceeds of Facility A shall be
used for the following purpose: support working capital needs,
small acquisitions and general corporate purposes.
Letter of Credit Sub-Limit. At any time the Borrower is
entitled to an advance under Facility A, the Bank agrees to
issue letters of credit (all letters of credit issued for the
account of the Borrower which are outstanding on the date of
the Line of Credit Note and any letter of credit issued under
this agreement, together with any and all amendments,
modifications, renewals, extensions, increases, restatements
and rearrangements of and substitutions and replacements for,
any of the foregoing, a "Letter of Credit" or "Letters of
Credit") for the account of the Borrower in an amount not in
excess of the maximum advance that the Borrower would then be
entitled to obtain under Facility A, provided that (a) the
aggregate maximum amount which is drawn and remains
unreimbursed under all Letters of Credit plus the aggregate
maximum available amount which may be drawn under all Letters
of Credit which are outstanding at any time (the "L/C
Obligations"), shall not exceed $200,000.00, (b) the issuance
of any Letter of Credit with an expiration date beyond the
maturity date of the Line of Credit Note shall be entirely at
the discretion of the Bank, (c) any Letter of Credit shall be
a standby or commercial letter of credit and the form of the
requested Letter of Credit shall be satisfactory to the Bank,
in the Bank's sole discretion, and (d) the Borrower shall have
executed an application and reimbursement agreement for any
Letter of Credit in the Bank's standard form. While any Letter
of Credit is outstanding, the maximum amount of advances that
may be outstanding under the Line of Credit Note shall be
automatically reduced by the L/C Obligations. The Borrower
shall pay the Bank a $500.00 issuance fee and a 1.25%
commission fee for each standby letter of credit and each
commercial letter of credit that is issued. No credit shall be
given for fees paid due to early termination of any Letter of
Credit. The Borrower shall also pay the Bank's standard
transaction fees with respect to any transactions occurring on
an account of any Letter of Credit. Each fee shall be payable
when the related letter of credit is issued, and transaction
fees shall be payable upon completion of the transaction as to
which they are charged. All fees may be debited by the Bank to
any deposit account of the Borrower carried with the Bank
without further authority and, in any event, shall be paid by
the Borrower within ten (10) days following billing. The Bank
is authorized, but not obligated to make an advance under the
Line of Credit Note without notice to the Borrower, to make
payment on a drawing under any Letter of Credit.
1.3 Borrowing Base. The aggregate principal amount of advances
outstanding at any one time under Facility A, plus L/C
Obligations (the "Aggregate Outstanding Amount") shall not
exceed the Borrowing Base or the maximum principal amount then
available under the Line of Credit Note (and any and all
renewals, modifications, extensions, rearrangements,
restatements thereof and replacements or substitutions
thereof) evidencing Facility A, whichever is less (the
"Maximum Available Amount"). If at any time the Aggregate
Outstanding Amount exceeds the Maximum Available Amount, the
Borrower shall immediately pay the Bank an amount equal to
such excess. "Borrowing Base" means the aggregate of:
A. 80% of the book value of all Eligible Accounts; plus
B. 50% of the lower of cost (determined using the first-in,
first-out method of inventory accounting) or wholesale market
value, as determined by the Bank in its sole discretion, of
all Eligible Inventory, not to exceed the aggregate of
$1,000,000.00 or 50% of loans plus letters of credit
outstanding.
2. Definitions. As used in this agreement, the following terms have the
following respective meanings:
2.1 "Credit Facilities" means all extensions of credit from the
Bank to the Borrower, whether now existing or hereafter
arising, including but not limited to those described in
Section 1 and those extended contemporaneously with this
agreement.
2.2 "Liabilities" means all debts, obligations, indebtedness and
liabilities of every kind and character of the Borrower to the
Bank, whether individual, joint and several, contingent or
otherwise, now or hereafter existing in favor of the Bank,
including, without limitation, all liabilities, interest,
costs and fees, arising under or from any note, open account,
overdraft, credit card, lease, Rate Management Transaction,
letter of credit application, endorsement, surety agreement,
guaranty, acceptance, foreign exchange contract or depository
service contract, whether payable to the Bank or to a third
party and subsequently acquired by the Bank, any monetary
obligations (including interest) incurred or accrued during
the pendency of any bankruptcy, insolvency, receivership or
other similar proceedings, regardless of whether allowed or
allowable in such proceeding, and all renewals, extensions,
modifications, consolidations, rearrangements, restatements,
replacements or substitutions of any of the foregoing. The
term "Rate Management Transaction" in this agreement means any
transaction (including an agreement with respect thereto) that
is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate
option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency
swap transaction, cross-currency rate swap transaction,
currency option, derivative transaction or any other similar
transaction (including any option with respect to any of these
transactions) or any combination thereof, whether linked to
one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.
2.3 "Notes" means all promissory notes, instruments and/or
contracts evidencing the terms and conditions of any of the
Credit Facilities.
2.4 "Account" means a trade account, account receivable, other
receivable, or other right to payment for goods sold or leased
or services rendered owing to the Borrower (or to a third
party grantor acceptable to the Bank).
2.5 "Account Debtor" means the person or entity obligated upon an
Account.
2.6 "Affiliate" means any person, corporation or other entity
directly or indirectly controlling, controlled by or under
common control with the Borrower and any director or officer
of the Borrower or any Subsidiary of the Borrower.
2.7 "Distributions" means all dividends and other distributions
made by the Borrower to its shareholders, partners, owners or
members, as the case may be, other than salary, bonuses, and
other compensation for services expended in the current
accounting period.
2.8 "Eligible Accounts" means, at any time, all of the Borrower's
Accounts in which the Bank has a first priority perfected
continuing security interest and which are earned and invoiced
within thirty (30) days of being earned and which contain
selling terms and conditions acceptable to the Bank, are
payable on ordinary trade terms, and are not evidenced by a
promissory note, other instrument or chattel paper. The net
amount of any Eligible Account against which the Borrower may
borrow shall exclude all returns, discounts, credits, and
offsets of any nature. Unless otherwise agreed to by the Bank
in writing, Eligible Accounts do not include Accounts: (1)
which are not owned by the Borrower free and clear of all
security interests, liens, encumbrances, constructive trust,
statutory priorities not in favor of the Bank, and claims of
third parties, except the Bank; (2) with respect to which the
Account Debtor is an Affiliate, an employee or agent of the
Borrower; (3) with respect to which the Account Debtor is an
Affiliate or otherwise affiliated with or related to the
Borrower; (4) with respect to which goods are placed on
consignment, guaranteed sale, xxxx-and-hold, sale-and-return,
sale on approval, cash-on-delivery or other terms by reason of
which the payment by the Account Debtor may be conditional;
(5) with respect to which the Account Debtor is not a resident
of the United States, except to the extent such Accounts are
otherwise Eligible Accounts and are supported by insurance,
bonds or other assurances satisfactory to the Bank; (6)
subject to the U.S. Office of Foreign Asset Control Special
Designated Nationals and Blocked Person's List, or with
respect to which the Account Debtor is otherwise a person or
entity with whom the Borrower or the Bank is prohibited from
doing business by any applicable law, regulation, executive
order or other legal directive; (7) which are not payable in
U.S. Dollars; (8) with respect to which the Borrower is or may
become liable to the Account Debtor for goods sold or services
rendered by the Account Debtor to the Borrower; (9) which are
subject to dispute, counterclaim, deduction, withholding,
defense, or setoff; (10) with respect to which the goods have
not been shipped or delivered, or the services have not been
rendered, to the Account Debtor, or which otherwise constitute
pre-billed Accounts; (11) which constitute retainage, or are
bonded Accounts; (12) with respect to which the Bank, in its
sole discretion, deems the creditworthiness, financial or
business condition of the Account Debtor to be unsatisfactory;
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(13) of any Account Debtor who has filed or has had filed
against it a petition in bankruptcy or an application for
relief under any provision of any state or federal bankruptcy,
insolvency, or debtor-in-relief acts, or who has had appointed
a trustee, custodian, or receiver for the assets of such
Account Debtor, or who has made an assignment for the benefit
of creditors or has become insolvent or fails generally to pay
its debts (including its payrolls) as such debts become due;
(14) with respect to which the Account Debtor is the United
States government or any department or agency of the United
States; and any other Accounts deemed ineligible by the Bank
in its sole discretion (15) which have not been paid in full
within ninety (90) days from the invoice date; and (16) due
from any one Enumerated Account Debtor to the extent such
Accounts constitute more than 30% of all Eligible Accounts. In
no event will the balance of any Account of any single Account
Debtor be eligible whenever the portion of the Accounts of
such Account Debtor which have not been paid within ninety
(90) days from the invoice date is in excess of 25% of the
total amount outstanding on all Accounts of such Account
Debtor.
2.9 "Eligible Inventory" means, at any time, all of the Borrower's
Inventory in which the Bank has a first priority perfected
continuing security interest except Inventory which is: (1)
not owned by the Borrower free and clear of all security
interests, liens, encumbrances, and claims of third parties,
except the Bank; (2) slow moving, obsolete, unsalable,
damaged, defective, perishable, or unfit for further
processing; (3) work in process; (4) subject to consignment or
otherwise in the possession of a third party, unless otherwise
agreed to by the Bank in writing; (5) in transit or located
outside of the United States; (6) identified to be purchased
under a contract under which the Borrower has received, or is
entitled to receive, an advance payment; (7) determined by the
Bank in its sole discretion to be ineligible due to licensing,
intellectual property, or legal or regulatory issues which
exist making it difficult to resell such Inventory; and (8)
comprised of samples, returns, rejected items, re-work items,
non-standard items, odd-lots, or repossessed goods; (9)
produced in violation of applicable law including the Fair
Labor Standards Act and the regulations and order of the
Department of Labor; or (10) otherwise deemed ineligible by
the Bank in its sole discretion; provided, however, that
transportation and storage charges shall be excluded from
amounts otherwise included in Eligible Inventory.
2.10 "Enumerated Account Debtor" means any one of the following
entities obligated upon an Account: Invacare Corporation;
Medical Specialties Distributors, LLC; Apria Healthcare Group,
Inc.; or Monsanto Company.
2.11 "Inventory" means all of the Borrower's raw materials, work in
process, finished goods, merchandise, parts and supplies, of
every kind and description, and goods held for sale or lease
or furnished under contracts of service in which the Borrower
now has or hereafter acquires any right, whether held by the
Borrower or others, and all documents of title, warehouse
receipts, bills of lading, and all other documents of every
type covering all or any part of the foregoing. Inventory
includes inventory temporarily out of the Borrower's custody
or possession and all returns on Accounts.
2.12 "Intangible Assets" means the aggregate amount of: (1) all
assets classified as intangible assets under generally
accepted accounting principles, including, without limitation,
goodwill, trademarks, patents, copyrights, organization
expenses, franchises, licenses, trade names, brand names,
mailing lists, catalogs, excess of cost over book value of
assets acquired, and bond discount and underwriting expenses;
and (2) loans or advances to, investments in, or receivables
from (i) Affiliates, officers, directors, employees or
shareholders of the Borrower or (ii) any person or entity if
such loan, advance, investment or receivable is outside the
Borrower's normal course of business.
2.13 "Subsidiary" means, as to a particular person, any entity of
which fifty (50%) or more of the indicia of equity rights is
at the time of determination directly or indirectly owned by
the person or by one or more persons controlled by,
controlling or under common control with the person.
2.14 "Tangible Net Worth" means total assets less the sum of
Intangible Assets and total liabilities.
2.15 "Related Documents" means the Notes, Letters of Credit, all
loan agreements, credit agreements, reimbursement agreements,
security agreements, mortgages, deeds of trust, pledge
agreements, assignments, guaranties, and any other instrument
or document executed in connection with this agreement or in
connection with any of the Liabilities.
3. Conditions Precedent.
3.1 Conditions Precedent to Initial Extension of Credit. Before
the first extension of credit governed by this agreement,
whether by disbursement of a loan, issuance of a letter of
credit, or otherwise, the Borrower shall deliver to the Bank,
in form and substance satisfactory to the Bank:
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A. Loan Documents. The Notes, and as applicable, the letter of
credit applications, reimbursement agreements, the security
agreements, the pledge agreements, financing statements,
mortgages or deeds of trust, the guaranties, the subordination
agreements, and any other loan documents which the Bank may
reasonably require to give effect to the transactions
described in this agreement;
B. Evidence of Due Organization and Good Standing. Evidence,
satisfactory to the Bank, of the due organization and good
standing of the Borrower and every other business entity that
is a party to this agreement or any other loan document
required by this agreement; and
C. Evidence of Authority to Enter into Loan Documents.
Evidence that (i) each party to this agreement and any other
loan document required by this agreement is authorized to
enter into the transactions described in this agreement and
the other loan documents, and (ii) the person signing on
behalf of each such party is authorized to do.
3.2 Conditions Precedent to Each Extension of Credit. Before any
extension of credit governed by this agreement, whether by
disbursement of a loan, issuance of a letter of credit or
otherwise, the following conditions must be satisfied:
A. Representations. The representations of the Borrower are
true on and as of the date of the extension of credit;
B. No Event of Default. No default has occurred in any
provision of this agreement, the Notes or any other Related
Documents and is continuing or would result from the extension
of credit, and no event has occurred which would constitute
the occurrence of any default but for the lapse of time until
the end of any grace or cure period; and
C. Additional Approvals, Opinions, and Documents. The Bank has
received any other approvals, opinions and documents as it may
reasonably request.
4. Affirmative Covenants. The Borrower agrees to do, and cause each of its
Subsidiaries to do, each of the following:
4.1 Insurance. Maintain insurance with financially sound and
reputable insurers, with such insurance and insurers to be
acceptable to the Bank, covering its properties and business
against those casualties and contingencies and in the types
and amounts as are in accordance with sound business and
industry practices.
4.2 Existence. Maintain its existence and business operations as
presently in effect in accordance with all applicable laws and
regulations, pay its debts and obligations when due under
normal terms, and pay on or before their due date, all taxes,
assessments, fees and other governmental monetary obligations,
except as they may be contested in good faith if they have
been properly reflected on its books and, at the Bank's
request, adequate funds or security has been pledged to insure
payment.
4.3 Financial Records. Maintain proper books and records of
account, in accordance with generally accepted accounting
principles, and consistent with financial statements
previously submitted to the Bank.
4.4 Inspection. Permit the Bank to inspect and copy the Borrower's
business records at such times and at such intervals as the
Bank may reasonably require, and to discuss the Borrower's
business, operations, and financial condition with the
Borrower's officers and accountants.
4.5 Financial Reports. Furnish to the Bank whatever information,
books and records the Bank may from time to time reasonably
request, including at a minimum:
A. Within thirty (30) days after each quarterly period, the
consolidated, if applicable, balance sheet as of the end of
that period and statements of income, cash flow and retained
earnings, from the beginning of that fiscal year to the end of
that period, certified as correct by one of its authorized
agents.
B. Within 150 days after and as of the end of each of its
fiscal years, a detailed consolidated, if applicable,
financial statement including a balance sheet and statements
of income, cash flow and retained earnings, such financial
statement, to be audited by an independent certified public
accountant of recognized standing acceptable to the Bank in
the Bank's sole discretion.
C. Within thirty (30) days after and as of the end of each
calendar month, a list of accounts receivable, aged from date
of invoice and certified as correct by one of its authorized
agents.
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D. Within thirty (30) days after and as of the end of each
calendar month, a borrowing base certificate, in form and
detail satisfactory to the Bank, along with such supporting
documentation as the Bank may request.
4.6 Notices of Claims, Litigation, Defaults, etc. Promptly inform
the Bank in writing of (1) all existing and all threatened
litigation, claims, investigations, administrative proceedings
and similar actions affecting the Borrower which could
materially affect its business, assets, affairs, prospects or
financial condition of the Borrower or its Subsidiaries; (2)
the occurrence of any event which gives rise to the Bank's
option to terminate the Credit Facilities; (3) the institution
of steps by the Borrower to withdraw from, or the institution
of any steps to terminate, any employee benefit plan as to
which the Borrower may have liability; (4) any reportable
event or any prohibited transaction in connection with any
employee benefit plan; (5) any additions to or changes in the
locations of the Borrower's or any of the Borrower's or
Subsidiary's businesses; and (6) any alleged breach of any
provision of this agreement or of any other agreement related
to the Credit Facilities by the Bank.
4.7 Additional Information. Furnish such additional information
and statements, as the Bank may request, from time to time.
4.8 Insurance Reports. Furnish to the Bank, upon request of the
Bank, reports on each existing insurance policy showing such
information as the Bank may reasonably request.
4.9 Other Agreements. Comply with all terms and conditions of all
other agreements, whether now or hereafter existing, between
the Borrower and any other party.
4.10 Title to Assets and Property. Maintain good and marketable
title to all of the Borrower's assets and properties.
4.11 Additional Assurances. Promptly make, execute and deliver any
and all agreements, documents, instruments and other records
that the Bank may request to evidence any of the Credit
Facilities, cure any defect in the execution and delivery of
any of the Related Documents, perfect any lien, comply with
legal requirements applicable to the Bank or the Credit
Facilities or more fully to describe particular aspects of the
agreements set forth or intended to be set forth in any of the
Related Documents.
4.12 Employee Benefit Plans. Maintain each employee benefit plan
as to which the Borrower may have any liability, in compliance
with all applicable requirements of law and regulations.
4.13 Management. Maintain Xx. Xxxxxx X. Xxxxx as President and CEO.
4.14 Banking Relationship. Establish and maintain its primary
banking depository and disbursement relationship with the
Bank.
4.15 Compliance Certificates. Provide the Bank, within thirty (30)
days after the end of each fiscal quarter, with a certificate
executed by the Borrower's chief financial officer, or other
officer or a person acceptable to the Bank, certifying that,
as of the date of the certificate, no default exists under any
provision of this agreement.
5. Negative Covenants.
5.1 Unless otherwise noted, the financial requirements set forth
in this section will be computed in accordance with generally
accepted accounting principles applied on a basis consistent
with financial statements previously submitted by the Borrower
to the Bank.
5.2 Without the written consent of the Bank, the Borrower will
not:
A. Dividends. Acquire or retire any of its shares of capital
stock, or, other than dividends in its capital stock, declare
or pay dividends or make any other distributions upon any of
its shares of capital stock; provided, however, that following
any fiscal year with respect to which the Borrower maintained
status as an "S" corporation under the Internal Revenue Code,
if there is no existing default under this agreement or any
agreement related to the Liabilities and to do so will not
cause a default under any of such agreements, the Borrower may
pay dividends to its shareholders sufficient in amount to pay
their income tax obligation attributable to the Borrower's
taxable income.
B. Sale of Shares. Issue, sell or otherwise dispose of any
shares of its capital stock or other securities, or rights,
warrants or options to purchase or acquire those shares or
securities.
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C. Debt. Incur, contract for, assume, or permit to remain
outstanding, indebtedness for borrowed money, installment
obligations, or obligations under capital leases or operating
leases, other than (1) unsecured trade debt incurred in the
ordinary course of business, (2) indebtedness owing to the
Bank, (3) indebtedness reflected in the latest financial
statement of the Borrower furnished to the Bank prior to
execution of this agreement and that is not to be paid with
proceeds of borrowings under the Credit Facilities, and (4)
indebtedness outstanding as of the date hereof that has been
disclosed to the Bank in writing and that is not to be paid
with proceeds of borrowings under the Credit Facilities.
D. Guaranties. Guarantee or otherwise become or remain
secondarily liable on the undertaking of another, except for
endorsement of drafts for deposit and collection in the
ordinary course of business.
E. Liens. Create or permit to exist any lien on any of its
property, real or personal, except: existing liens known to
the Bank; liens to the Bank; liens incurred in the ordinary
course of business securing current non-delinquent liabilities
for taxes, worker's compensation, unemployment insurance,
social security and pension liabilities.
F. Use of Proceeds. Use, or permit any proceeds of the Credit
Facilities to be used, directly or indirectly, for the purpose
of "purchasing or carrying any margin stock" within the
meaning of Federal Reserve Board Regulation U. At the Bank's
request, the Borrower will furnish a completed Federal Reserve
Board Form U-1.
G. Continuity of Operations. (1) Engage in any business
activities substantially different from those in which the
Borrower is presently engaged; (2) cease operations,
liquidate, merge, transfer or consolidate with any other
entity, change its name, dissolve, or sell any assets out of
the ordinary course of business; or (3) enter into any
arrangement with any person providing for the leasing by the
Borrower or any Subsidiary of real or personal property which
has been sold or transferred by the Borrower or Subsidiary to
such person.
H. Limitation on Negative Pledge Clauses. Enter into any
agreement with any person other than the Bank which prohibits
or limits the ability of the Borrower or any of its
subsidiaries to create or permit to exist any lien on any of
its property, assets or revenues, whether now owned or
hereafter acquired.
I. Conflicting Agreements. Enter into any agreement containing
any provision which would be violated or breached by the
performance of the Borrower's obligations under this agreement
or any of the other Related Documents.
J. Transfer of Ownership. Permit any pledge of any ownership
interest in the Borrower, or any sale or other transfer of any
ownership interest in the Borrower; provided, however, Xx.
Xxxxxx X. Xxxxx may sell or transfer up to 25% of the common
stock in the Borrower owned by him as of the date of this
agreement.
K. Loans, Advances to and Investments in Others and
Receivables from Others. Make any loans or advances to,
investments in, or incur any receivables from any person,
except (A) loans, advances, investments or receivables, made
or incurred in the ordinary course of business, to, in or from
any person that is not (i) an Affiliate, (ii) an employee of
the Borrower, or (iii) an equity holder of the Borrower, and
(B) loans, advances, investments and receivables existing as
of the date of this agreement that have been disclosed to the
Bank in writing and that are not to be paid with proceeds of
borrowings under the Credit Facilities.
L. Tangible Net Worth. Permit as of any fiscal quarter end,
its Tangible Net Worth to be less than the following amounts
for the following periods: for the period June 30, 2006 to
June 30, 2007, $1.00, increasing by 90% of net income annually
thereafter.
M. Debt Service Coverage Ratio. Permit at any time, its ratio
of earnings before interest, taxes, depreciation and
amortization minus non-financed capital expenditures, minus
any Distributions, to principal payments on long term debt
plus capitalized lease payments plus interest plus scheduled
principal and interest on subordinated debt (whether made or
not made) for the same such period to be less than 1.25 to
1.00.
N. Government Regulation. (1) Be or become subject at any time
to any law, regulation, or list of any government agency
(including, without limitation, the U.S. Office of Foreign
Asset Control list) that prohibits or limits Bank from making
any advance or extension of credit to Borrower or from
otherwise conducting business with Borrower, or (2) fail to
provide documentary and other evidence of Borrower's identity
as may be requested by Bank at any time to enable Bank to
verify Borrower's identity or to comply with any applicable
law or regulation, including, without limitation, Section 326
of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.
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O. Subsidiaries and Acquisitions. Form, create or acquire any
Subsidiary without prior consent of the Bank; provided,
however, the Borrower may expend sums not to exceed
$500,000.00 in the aggregate for the cash acquisition of other
entities without prior consent of the Bank.
6. Representations.
6.1 Representations and Warranties by the Borrower. To induce the
Bank to enter into this agreement and to extend credit or
other financial accommodations under the Credit Facilities,
the Borrower represents and warrants as of the date of this
agreement and as of the date of each request for credit under
the Credit Facilities that each of the following statements is
and shall remain true and correct throughout the term of this
agreement and until all Credit Facilities and all amounts
owing under the Notes and other Related Documents are paid in
full. The Borrower represents that: (a) the execution and
delivery of this agreement and the Notes, and the performance
of the obligations they impose, do not violate any law,
conflict with any agreement by which it is bound, or require
the consent or approval of any governmental authority or other
third party, (b) this agreement and the Notes are valid and
binding agreements, enforceable according to their terms, (c)
all balance sheets, profit and loss statements, and other
financial statements and other information furnished to the
Bank in connection with the Liabilities are accurate and
fairly reflect the financial condition of the organizations
and persons to which they apply on their effective dates,
including contingent liabilities of every type, which
financial condition has not changed materially and adversely
since those dates, (d) no litigation, claim, investigation,
administrative proceeding or similar action (including those
for unpaid taxes) against the Borrower is pending or
threatened, and no other event has occurred which may in any
one case or in the aggregate materially adversely affect the
Borrower's financial condition and properties, other than
litigation, claims, or other events, if any, that have been
disclosed to and acknowledged by the Bank in writing, (e) all
of the Borrower's tax returns and reports that are or were
required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in
full, except those presently being contested by the Borrower
in good faith and for which adequate reserves have been
provided, (f) the Borrower is not an "investment company" or a
company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended, (g)
the Borrower is not a "holding company", or a "subsidiary
company" of a "holding company" or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding
company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended, (h) there are no defenses or
counterclaims, offsets or adverse claims, demands or actions
of any kind, personal or otherwise, that the Borrower could
assert with respect to this agreement or the Credit
Facilities, (i) the Borrower owns, or is licensed to use, all
trademarks, trade names, copyrights, technology, know-how and
processes necessary for the conduct of its business as
currently conducted, and (j) no part of the proceeds of the
Credit Facilities will be used for "purchasing" or "carrying"
any "margin stock" within the respective meanings of each of
the quoted terms under Regulation U of the Board of Governors
of the Federal Reserve System of the United States (the
"Board") as now and from time to time hereafter in effect or
for any purpose which violates the provisions of any
regulations of the Board. The Borrower, other than a natural
person, further represents that: (a) it is duly organized and
validly existing under the laws of the state where it is
organized and is in good standing in each state where it is
doing business, and (b) the execution and delivery of this
agreement and the Notes and the performance of the obligations
they impose (i) are within its powers, (ii) have been duly
authorized by all necessary action of its governing body, and
(iii) do not contravene the terms of its articles of
incorporation or organization, its by-laws, or any
partnership, operating or other agreement governing its
affairs.
6.2 Representations and Warranties Regarding Assets. To induce the
Bank to enter into this agreement and to extend credit or
other financial accommodations under the Credit Facilities,
the Borrower represents and warrants as of the date of this
agreement and as of the date of each request for credit under
the Credit Facilities that each of the following statements is
and shall remain true and correct throughout the term of this
agreement and until all Credit Facilities and all amounts
owing under the Notes and other Related Documents are paid in
full. With respect to any asset of the Borrower utilized in
the calculation of the Borrowing Base set forth in this
agreement, the Borrower represents and warrants to the Bank:
(1) each asset represented by the Borrower to be eligible for
Borrowing Base purposes of this agreement conforms to the
eligibility definitions set forth in this agreement (2) all
asset values delivered to the Bank will be true and correct,
subject to immaterial variance; and be determined on a
consistent accounting basis; (3) except as agreed to the
contrary by the Bank in writing, each asset is now and at all
times hereafter will be in the Borrower's physical possession
and shall not be held by others on consignment, sale or
approval, or sale or return; (4) except as reflected in
schedules delivered to the Bank, each asset is now and at all
times hereafter will be of good and merchantable quality, free
from defects; (5) each asset is not now and will not at any
time hereafter be stored with a bailee, warehouseman, or
similar party without the Bank's prior written consent, and in
such event, the Borrower will concurrently at the time of
bailment cause any such bailee, warehouseman, or similar party
to issue and deliver to the Bank, warehouseman receipts in the
Bank's name evidencing the storage of the assets; and (6) the
Bank, its assigns, or agents shall have the right at any time
and at the Borrower's expense to inspect, examine and audit
the Borrower's records, and if Accounts are included in the
calculation of Borrowing Base, confirm with Account Debtors
the accuracy of such Accounts, and inspect and examine the
assets and to check and test the same as to quality, quantity,
value, and condition.
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7. Default/Remedies. If any of the Credit Facilities are not paid at
maturity, whether by acceleration or otherwise, or if a default by
anyone occurs under the terms of this agreement, the Notes or any other
Related Documents, then the Bank shall have all of the rights and
remedies provided by any law, equity or agreement.
8. Miscellaneous.
8.1 Notice. Any notices and demands under or related to this
document shall be in writing and delivered to the intended
party at its address stated herein, and if to the Bank, at its
main office if no other address of the Bank is specified
herein, by one of the following means: (a) by hand, (b) by a
nationally recognized overnight courier service, or (c) by
certified mail, postage prepaid, with return receipt
requested. Notice shall be deemed given: (a) upon receipt if
delivered by hand, (b) on the Delivery Day after the day of
deposit with a nationally recognized courier service, or (c)
on the third Delivery Day after the notice is deposited in the
mail. "Delivery Day" means a day other than a Saturday, a
Sunday or any other day on which national banking associations
are authorized to be closed. Any party may change its address
for purposes of the receipt of notices and demands by giving
notice of such change in the manner provided in this
provision.
8.2 No Waiver. No delay on the part of the Bank in the exercise of
any right or remedy waives that right or remedy. No single or
partial exercise by the Bank of any right or remedy precludes
any other future exercise of it or the exercise of any other
right or remedy. No waiver or indulgence by the Bank of any
default is effective unless it is in writing and signed by the
Bank, nor shall a waiver on one occasion bar or waive that
right on any future occasion.
8.3 Integration. This agreement, the Notes, and the other Related
Documents to the Credit Facilities embody the entire agreement
and understanding between the Borrower and the Bank and
supersede all prior agreements and understandings relating to
their subject matter. If any one or more of the obligations of
the Borrower under this agreement or the Notes is invalid,
illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining obligations of
the Borrower shall not in any way be affected or impaired, and
the invalidity, illegality or unenforceability in one
jurisdiction shall not affect the validity, legality or
enforceability of the obligations of the Borrower under this
agreement, the Notes and the other Related Documents in any
other jurisdiction.
8.4 Joint and Several Liability. Each party executing this
agreement as the Borrower is individually, jointly and
severally liable under this agreement.
8.5 Governing Law and Venue. This agreement shall be governed by
and construed in accordance with the laws of the State of
Texas (without giving effect to its laws of conflicts). The
Borrower agrees that any legal action or proceeding with
respect to any of its obligations under this agreement may be
brought by the Bank in any state or federal court located in
the State of Texas, as the Bank in its sole discretion may
elect. By the execution and delivery of this agreement, the
Borrower submits to and accepts, for itself and in respect of
its property, generally and unconditionally, the non-exclusive
jurisdiction of those courts. The Borrower waives any claim
that the State of Texas is not a convenient forum or the
proper venue for any such suit, action or proceeding.
8.6 Captions. Section headings are for convenience of reference
only and do not affect the interpretation of this agreement.
8.7 Survival of Representations and Warranties. The Borrower
understands and agrees that in extending the Credit
Facilities, the Bank is relying on all representations,
warranties, and covenants made by the Borrower in this
agreement or in any certificate or other instrument delivered
by the Borrower to the Bank under this agreement. The Borrower
further agrees that regardless of any investigation made by
the Bank, all such representations, warranties and covenants
will survive the making of the Credit Facilities and delivery
to the Bank of this agreement, shall be continuing in nature,
and shall remain in full force and effect until such time as
the Borrower's indebtedness to the Bank shall be paid in full.
8.8 Non-Liability of the Bank. The relationship between the
Borrower and the Bank created by this agreement is strictly a
debtor and creditor relationship and not fiduciary in nature,
nor is the relationship to be construed as creating any
partnership or joint venture between the Bank and the
Borrower. The Borrower is exercising the Borrower's own
judgement with respect to the Borrower's business. All
information supplied to the Bank is for the Bank's protection
only and no other party is entitled to rely on such
information. There is no duty for Bank to review, inspect,
supervise or inform the Borrower of any matter with respect to
the Borrower's business. The Bank and the Borrower intend that
the Bank may reasonably rely on all information supplied by
the Borrower to the Bank, together with all representations
and warranties given by the Borrower to the Bank, without
investigation or confirmation by the Bank and that any
investigation or failure to investigate will not diminish the
Bank's right to so rely.
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8.9 Indemnification of the Bank. The Borrower agrees to indemnify,
defend and hold the Bank, its parent companies, subsidiaries,
affiliates, their respective successors and assigns and each
of their respective shareholders, directors, officers,
employees and agents (collectively, the "Indemnified Persons")
harmless from any and against any and all loss, liability,
obligation, damage, penalty, judgment, claim, deficiency,
expense, interest, penalties, attorneys' fees (including the
fees and expenses of attorneys engaged by the Indemnified
Person at the Indemnified Person's reasonable discretion) and
amounts paid in settlement ("Claims") to which any Indemnified
Person may become subject arising out of or relating to this
agreement or the Collateral, including any Claims resulting
from any Indemnified Person's own negligence, except to the
limited extent that the Claims are proximately caused by the
Indemnified Person's gross negligence or willful misconduct.
The indemnification provided for in this paragraph shall
survive the termination of this agreement and shall not be
affected by the presence, absence or amount of or the payment
or nonpayment of any claim under, any insurance.
8.10 Counterparts. This agreement may be executed in multiple
counterparts, each of which, when so executed, shall be deemed
an original, but all such counterparts, taken together, shall
constitute one and the same agreement.
8.11 Sole Discretion of the Bank. Whenever the Bank's consent or
approval is required under this agreement, the decision as to
whether or not to consent or approve shall be in the sole and
exclusive discretion of the Bank and the Bank's decision shall
be final and conclusive.
8.12 Advice of Counsel. The Borrower acknowledges that it has been
advised by counsel, or had the opportunity to be advised by
counsel, in the negotiation, execution and delivery of this
agreement and any Related Documents.
8.13 Recovery of Additional Costs. If the imposition of or any
change in any law, rule, regulation, or guideline, or the
interpretation or application of any thereof by any court or
administrative or governmental authority (including any
request or policy not having the force of law) shall impose,
modify, or make applicable any taxes (except federal, state,
or local income or franchise taxes imposed on the Bank),
reserve requirements, capital adequacy requirements, or other
obligations which would (A) increase the cost to the Bank for
extending or maintaining the Credit Facilities, (B) reduce the
amounts payable to the Bank under the Credit Facilities, or
(C) reduce the rate of return on the Bank's capital as a
consequence of the Bank's obligations with respect to the
Credit Facilities, then the Borrower agrees to pay the Bank
such additional amounts as will compensate the Bank therefor,
within five (5) days after the Bank's written demand for such
payment. The Bank's demand shall be accompanied by an
explanation of such imposition or charge and a calculation in
reasonable detail of the additional amounts payable by the
Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.
8.14 Conflicting Terms. If this agreement is inconsistent with any
provision in any other Related Documents, the Bank shall
determine, in the Bank's sole and absolute discretion, which
of the provisions shall control any such inconsistency.
8.15 Expenses. The Borrower agrees to pay or reimburse the Bank for
all its out-of-pocket costs and expenses and reasonable
attorneys' fees incurred in connection with the development,
preparation and execution of, and in connection with the
enforcement or preservation of any rights under, this
agreement, any amendment, supplement, or modification thereto,
and any other documents prepared in connection herewith or
therewith. These costs and expenses include without limitation
any costs or expenses incurred by the Bank in any bankruptcy,
reorganization, insolvency or other similar proceeding.
9. USA PATRIOT ACT NOTIFICATION. The following notification is provided
to Borrower pursuant to Section 326 of the USA Patriot Act of 2001,
31 U.S.C. Section 5318:
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To
help the government fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain,
verify, and record information that identifies each person or entity
that opens an account, including any deposit account, treasury
management account, loan, other extension of credit, or other financial
services product. What this means for Borrower: When Borrower opens an
account, if Borrower is an individual Bank will ask for Borrower's
name, taxpayer identification number, residential address, date of
birth, and other information that will allow Bank to identify Borrower,
and if Borrower is not an individual Bank will ask for Borrower's name,
taxpayer identification number, business address, and other information
that will allow Bank to identify Borrower. Bank may also ask, if
Borrower is an individual to see Borrower's driver's license or other
identifying documents, and if Borrower is not an individual to see
Borrower's legal organizational documents or other identifying
documents.
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10. WAIVER OF SPECIAL DAMAGES. THE BORROWER WAIVES, TO THE MAXIMUM EXTENT
NOT PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR
RECOVER FROM THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
11. JURY WAIVER. THE BORROWER AND THE BANK HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT,
OR OTHERWISE) BETWEEN THE BORROWER AND THE BANK ARISING OUT OF OR IN
ANY WAY RELATED TO THIS DOCUMENT. THIS PROVISION IS A MATERIAL
INDUCEMENT TO THE BANK TO PROVIDE THE FINANCING DESCRIBED HEREIN.
THIS AGREEMENT AND THE OTHER WRITTEN RELATED DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Address(es) for Notices: Borrower:
0000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000 SHARPS COMPLIANCE CORP.
Attn: By:
-------------------------------------------------------- --------------------------------------------------------
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Printed Name Title
Date Signed:
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Address for Notices: Bank:
707 Xxxxxx, 9th Floor JPMorgan Chase Bank, N.A.
Xxxxxxx, XX 00000
Attn: By:
-------------------------------------------------------- --------------------------------------------------------
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Printed Name Title
Date Signed:
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