LOAN AND SECURITY AGREEMENT
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This LOAN AND SECURITY AGREEMENT, is entered into as of MARCH 1, 2000
between NUTRICOLOGY, INC. DBA ALLERGY RESEARCH GROUP ("Borrower"), having a
place of business at 00000 Xxxxxxx Xxxxxx, Xxxxxxx XX 00000 and AEROFUND
FINANCIAL, INC. having a place of business at 0000 Xxxxxxxx Xxxxxx, Xxx Xxxx,
Xxxxxxxxxx 00000 ("Lender").
RECITALS
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A. The Borrower has requested that Lender provide financial
accommodations to Borrower as more fully set forth herein and in the Loan
Documents.
B. The Borrower has requested that the Guarantor guaranty the
Obligations.
C. This Agreement is entered into and will be performed in the State of
California.
NOW, THEREFORE, in consideration of the premises, and intending to be
legally bound hereby, the Parties hereby agree as follows:
AGREEMENT
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1. CERTAIN DEFINITIONS AND INDEX TO DEFINITIONS
Accounting Terms. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all accounting determinations hereunder
shall be made, and all financial statements required to be delivered hereunder
shall be prepared in accordance with generally accepted accounting principles
and practices consistently applied.
Definitions. The following terms shall have the following respective
meanings:
"Account Debtor" - the obligor on an Account.
"Accounts" - means all currently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods or the rendition of services
by Borrower, irrespective of whether earned by performance, and any and all
credit insurance, guaranties, or security therefor.
"Administrative Fee" -- .5% (One Half Of One Percent) of the
Net Face Amount of each Account created By Borrower. (Essentially equivalent to
.5% (One Half Of One Percent)) of all sales on credit)
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"Advances" - advances made by Lender to Borrower under Section
2.1 hereof
"Agreement" - means this Loan and Security Agreement and any
extensions, riders, supplements, notes, amendments, or modifications to or in
connection with this Loan and Security Agreement.
"Borrower" - see Preamble.
"Borrower's Account" - any general deposit account of
Borrower.
"Borrower's Books" - means all of Borrower's books and records
including ledgers, records indicating, summarizing, or evidencing Borrowers
properties or assets or liabilities, all information relating to Borrower's
business operations or financial condition, and all computer programs, disc or
tape files, printouts, runs, or other computer prepared information, and the
equipment containing such information.
"Borrowing Base" - the sum of: eighty (80%) percent of the Net
Face Amount of Borrower's Eligible Accounts; plus forty (40%) percent of the
value (determined at the lower of cost or market) of Borrower's Eligible
Inventory.
"Borrowing Base Certificate" - a request for an Advance, in
the form annexed hereto.
"Business Day" - means any day which is not a Saturday,
Sunday, or other day on which national banks are authorized or required to
close.
"Clearance Days" - five Business Days.
"Clearance Day Payments" - payments received by Lender, in
whatever form and from whatever source, in reduction of the Obligations.
"Closing Date" - means the date on which this Agreement is
accepted by Lender.
"Collateral" - any collateral now or hereafter described in
any form UCC-l filed against Borrower naming Lender as the secured party, and
all of Borrower's right, title and interest in and to the following property,
now owned and hereafter acquired:
All accounts, interests in goods represented by
accounts, returned, reclaimed or repossessed goods with respect thereto and
rights as an unpaid vendor, contract rights, chattel paper, general intangibles,
including, but not limited to, tax and duty refunds, registered and unregistered
patents, trademarks, service marks, copyrights, trade names, applications for
the foregoing, trade secrets, goodwill, processes, drawings, blueprints,
customer lists, licenses, whether as licensor or licensee, choses in action and
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other claims, and existing and future leasehold interests in equipment, and
fixtures, documents, instruments, letters of credit, deposit accounts,
certificates of deposit, securities, bankers' acceptances or guaranties,
credits, and all other interests in Borrowers property now or hereafter held in
any capacity by Lender or any entity which at any time participates in Lender's
financing of Borrower, and all agreements or other property securing or relating
to any of the items listed above; and
All goods, including, but not limited to the
following:
All Inventory;
All Equipment;
All consumer goods, farm products, crops
growing or to be grown, timber to be cut, minerals or the like (including, but
not limited to, oil and gas), wherever located and of whatever kind, nature or
description; and
All real or other personal property in or upon which
Lender has or may hereafter have a security interest, lien or right of setoff;
and
All Borrower's Books; and
All products and proceeds of the foregoing, in
whatever form and wherever located, including, but not limited to, all insurance
proceeds, all claims against third parties for loss or destruction of or damage
to any of the foregoing, and all income from, the lease or rental of any of the
foregoing. (No filing contemplated to be taken against patents or trademarks.)
"Commitment Fee" - an amount equal to two (2%) percent of the
Maximum Amount.
"Default Rate" - 20% per annum in excess of the Interest Rate.
"Early Termination Premium" - the greater of:
the total amount of all fees and expenses incurred by
Lender under the terms hereof for the immediately preceding six (6) months; or
$20,000.
"Eligible Account" - an Account, excluding the following:
a) Accounts which remain uncollected more than ninety
days from invoice date ("Delinquent Accounts");
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b) Accounts due from an Account Debtor that has
suffered a business failure or the termination of its existence, or as to which
a dissolution, insolvency or bankruptcy proceeding has been commenced, any
assignment for the benefit of Lenders has been made, or a trustee, receiver or
conservator has been appointed for all or any part of the property of such
Account Debtor;
c) Accounts due from an Account Debtor affiliated
with Borrower in any manner, including, without limitation, as stockholder,
owner, officer, director, agent or employee;
d) Accounts with respect to which payment is or may
be conditional;
e) Accounts with respect to which the Account Debtor
is not a resident of the United States, and which are not either (a) covered by
credit insurance in form and amount, and by an insurer, satisfactory to Lender,
or (b} supported by one or more letters of credit that are assignable by their
terms and have been delivered to Lender in an amount, of a tenor, and issued by
a financial institution, acceptable to Lender;
f) Accounts commonly known as "xxxx and hold" or a
similar arrangement;
g) Accounts due from an Account Debtor as to which
25% or more of the aggregate dollar amount of all outstanding Accounts owing
from such Account Debtor are Delinquent Accounts;
h) That portion of Accounts due from an Account
Debtor which is in excess of 15% of Borrower's aggregate dollar amount of all
outstanding Accounts Receivable;
i) Accounts as to which Borrower is or may become
liable to the Account Debtor for any reason;
j) Accounts which are not free of all liens,
encumbrances, charges, tights and interest of any kind, except in favor of
Lender;
k) Accounts which are supported or represented by a
promissory note, post-dated check;
l) Accounts that are payable in other than United
States Dollars;
m) Accounts that represent progress payments or other
advance xxxxxxxx that are due prior to the completion of performance by Borrower
of the subject contract for goods or services.
n) Accounts which are unsuitable as collateral, as
determined by Lender in the exercise of its reasonable sole discretion.
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"Eligible Inventory" - Inventory of Borrower held for sale or
lease in the ordinary course of Borrower's business which is:
(a) Inventory in which Lender has a first, priority,
perfected security interest;
(b) not subject to a security interest, lien or other
encumbrance in favor of any other Person; of good and merchantable quality free
from defects;
(c) owned and in the lawful possession of Borrower;
(d) not owned by Borrower for more than one hundred
twenty (120) days;
(e) not labeled with an expiration date of less than
one year; and
(e) otherwise acceptable to Lender in its reasonable
sole discretion.
"Equipment" - means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, dies,
jigs, goods (other than consumer goods, farm products, or Inventory), wherever
located, and any interest of Borrower in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located.
"Event of Default" - see Section l2.
"FEIN" - means Federal Employer Identification Number.
"GAAP" - means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"Guarantor(s)" - Scottsdale Scientific Inc.
"Interest Rate" - three (3%) percent in excess of the Prime
Rate, computed on a monthly basis. Any change in the Interest Rate shall be
effective as of the date of any change in the Prime Rate.
"Inventory" - means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located, and any documents of title representing any of the
above.
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"Loan Documents" - means this Agreement, any other note or
notes executed by Borrower and payable to Lender, and any other agreement
entered into in connection with this Agreement.
"Maximum Amount" - $1,200,000.
"Minimum Monthly Charge" - $11,000.
"Monetary Collateral" - cash, checks or other proceeds of
Collateral in tangible form.
"Negotiable Collateral" - means all of Borrower's present and
future letters of credit, notes, drafts, instruments, certificated and
uncertificated securities (including the shares of stock of subsidiaries of
Borrower), documents, personal property leases (wherein Borrower is the lessor),
chattel paper, and Borrower's Books relating to any of the foregoing.
"Net Face Amount" - with respect to an Account, the gross face
amount of such Account less all trade discounts or other deductions to which the
Account Debtor is entitled.
"Obligations" - all present and future obligations owing by
Borrower to Lender whether or not for the payment of money, whether or not
evidenced by any note or other instrument, including but not limited to the term
promissory note of essentially even date herewith, whether direct or indirect,
absolute or contingent, due or to become due, joint or several, primary or
secondary, liquidated or unliquidated, secured or unsecured, original or renewed
or extended, whether arising before, during or after the commencement of any
bankruptcy case in which Borrower is a debtor, and all principal, interest,
fees, charges, expenses, attorneys' fees and accountants' fees chargeable to
Borrower or incurred by Lender in connection with this Agreement and/or the
transaction(s) related thereto;
"Overavailability Fee" - an amount equal to the
Overavailability Fee. Percentage multiplied by the amount by which the average
outstanding balance of the Obligations for the preceding month exceeds the
Maximum Amount.
"Overavailability Fee Percentage" - the Default Rate.
"Permitted Liens" - means:
a) liens and security interests held by Lender;
b) liens for unpaid taxes that are not yet due and
payable;
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c) liens and security interests set forth on the
schedule attached hereto;
d) mechanics', materialmen's, warehousemen's, or
similar liens.
"Prime Rate" - the Prime Rate as reflected in The Wall Street
Journal (Western Edition). If such rate is shown as a range, then the Prime Rate
shall be the highest value in such range.
"Renewal Date" - the date which is one year from the Closing
Date.
"Termination Date" - the earlier of the expiration of this
Agreement by its terms, or the date on which the Lender elects to terminate this
Agreement pursuant to the terms herein.
"Wire Fee" $10.00.
2. CREDIT FACILITIES.
2.1. Subject to the terms and conditions of this Agreement, from the
date on which this Agreement becomes effective until the Termination Date,
Lender, upon the request of Borrower, shall from time to time make Advances to
Borrower.
2.2. Each request from Borrower for an Advance shall be accompanied by
Borrowing Base Certificate, completed and signed by Borrower.
2.3. All advances by Lender may be made by transferring funds to
Borrowers Account.
2.4. Lender is authorized to make Advances: (a) upon telephonic,
facsimile or other instructions received from anyone purporting to be an
officer, employee or representative of Borrower; or (b) at the sole discretion
of Lender, and notwithstanding any other provision in this Agreement, if
necessary to meet any Obligations, including but not limited to any interest not
paid when due.
2.5. All conditions of Lender's obligations to make Advances are
imposed solely and exclusively for the benefit of Lender and may be freely
waived or modified in whole or in part by Lender at any time.
2.6. Notwithstanding anything to the contrary contained herein, Lender
shall not be obligated to make an Advance if, before or as a result thereof the
Obligations shall exceed either the Borrowing Base or the Maximum Amount.
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3. PAYMENTS BY BORROWER.
3.1. In General.
3.2. No checks, drafts or other instruments received by Lender
purportedly in satisfaction of any of the Obligations shall constitute payment
thereof unless and until such instruments have actually been collected.
3.3. Borrower shall have the right to make payments at any time in
reduction of the Obligations, in whole or in part, without premium or penalty;
provided, however, that Lender may apply any payments received by Borrower to
any of the Obligations, or portion thereof, in any manner and in any order as
Lender may determine in its sole discretion, notwithstanding contrary
instructions received from the payor.
3.4. Borrower shall promptly make payments, without demand or notice,
in reduction of the Obligations in the amount by which the Obligations exceeds
the lesser of the Borrowing Base or the Maximum Amount.
4. INTEREST AND FEE PAYMENTS.
4.1. Interest.
4.1.1. The interest on the Obligations shall be computed at
the Interest Rate, shall be due on the first day of each month following the
accrual thereof, and shall be computed on the basis of a 360-day year for actual
days elapsed. Until the date on which all Obligations have been fully repaid
(whether or not this Agreement has heretofore been terminated), for any month in
which the interest paid by Borrower to Lender hereunder during such month (the
"Monthly Interest") is less than the Minimum Monthly Charge, the amount of the
difference between the Minimum Monthly Charge and the Monthly Interest shall be
added to the Obligations as of the first day of the following month.
4.1.2. Lender is authorized to debit Borrower's Account on the
first business day of each month for interest accrued hereunder on the daily
Obligations during the preceding month at the Interest Rate;
4.1.3. Any interest not paid when due (whether by acceleration
or otherwise, and before as well as after judgment) shall accrue at the Default
Rate.
4.1.4. Administrative Fee. Borrower shall owe to Lender an
Administrative Fee immediately upon the creation of each Account. In the event
the aggregate amount of all Administrative Fees paid by Borrower to Lender in
any month is less than the Minimum Monthly Charge, Borrower shall pay to Lender
an amount equal to the Minimum Monthly Charge on the first day of the following
month. Payment of Administrative Fee is due at same Time as interest in 4.1.1.
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4.2. Commitment Fee. Borrower shall pay to Lender the Commitment Fee
immediately upon Lender's acceptance of this Agreement.
4.3. Maintenance Fee. Borrower shall pay to Lender the Maintenance Fee
on the first day of each month.
4.4. Overavailability Fee. Borrower shall pay to Lender the
Overavailability Fee on the first day of each month.
4.5. Wire Fee. Borrower shall pay to Lender the Wire Fee for each wire
transfer of funds received by Lender.
4.6. Lender shall, for the purpose of the computation of interest due
hereunder, add the Clearance Days to any Clearance Day Payments, which is
acknowledged by the parties to constitute an integral aspect of the pricing of
Lender's facility to Borrower, and shall apply irrespective of the
characterization of whether receipts are owned by Borrower or Lender. Should any
check or item of payment not be honored when presented for payment, then
Borrower shall be deemed not to have made such payment, and interest shall be
recalculated accordingly.
4.7. Upon the Termination Date, the unpaid balance of the Obligations
shall be due and payable without demand or notice.
5. CONDITIONS PRECEDENT TO ALL ADVANCES.
5.1. The representations and warranties contained in the Loan Documents
shall be true and correct in all respects on and as of the date of such Advance;
5.2. No Event of Default or event which with the giving of notice or
passage of time would constitute an Event of Default shall have occurred and be
continuing on the date of such Advance.
5.3. No injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the making of such Advance shall
have been issued and remain in force by any governmental authority against
Borrower or Lender.
6. TERMINATION: AUTOMATIC RENEWAL; EARLY TERMINATION.
6.1. This Agreement shall become effective upon the execution and
delivery hereof by Borrower and Lender and shall continue in full force and
effect for a term ending on the Renewal Date, and automatically shall be renewed
for successive years thereafter, unless sooner terminated pursuant to the terms
hereof.
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6.2. Either party may terminate this Agreement effective on the Renewal
Date or on the anniversary hereof by giving the other party a written notice of
termination at least ninety (90) days prior to expiration by registered or
certified mail, return receipt requested. The foregoing notwithstanding, Lender
shall have the right to terminate its obligations under this Agreement
immediately and without notice upon the occurrence and during the continuation
of an Event of Default.
6.3. If Borrower has sent a notice of termination under Section 6.2
hereof but has failed to pay all Obligations on the date set forth in said
notice, then Lender may, but shall not be required to, renew this Agreement for
an additional one year period.
6.4. The provisions of this Agreement notwithstanding, Borrower shall
have the option, at any time upon ninety (90) days prior written notice to
Lender, to terminate this Agreement by paying to Lender, in cash the Obligations
and the Early Termination Premium.
6.5. If Lender terminates this Agreement upon the occurrence of an
Event of Default, in view of the impracticability and extreme difficulty of
ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender's lost profits as a result thereof, Borrower
shall pay to Lender upon the effective date of such termination, the Early
Termination Premium. The Early Termination Premium shall be presumed to be the
amount of damages sustained by Lender as the result of the early termination and
Borrower agrees that it is reasonable under the circumstances currently
existing.
7. SECURITY INTEREST.
7.1. Borrower hereby grants to Lender a continuing security interest in
the Collateral to secure prompt repayment of any and all Obligations and in
order to secure prompt performance by Borrower of each of its covenants and
duties under the Loan Documents.
7.2. Borrower shall immediately upon the request of Lender, endorse and
deliver Negotiable Collateral to Lender.
8. COLLECTION AND ADMINISTRATION OF ACCOUNTS.
8.1. Collection.
8.1.1. Borrower shall, at Borrower's expense and in the manner
requested by Lender from time to time, direct that Monetary Collateral be (or,
if received by Borrower, shall cause same to be) (a) sent to a post office box
designated by and/or in the name of Lender, or in the name of Borrower, but as
to which access is limited solely to Lender and/or (b) paid delivered to Lender.
In connection therewith, Borrower shall execute such post office box and/or
blocked bank account agreements as Lender shall specify.
8.1.2. In the event Borrower receives proceeds of Collateral
in the form of wire transfer or other intangible funds transfer mechanism,
Borrower shall immediately pay such proceeds to Lender.
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8.2. Lender may, at any time, irrespective of whether an Event of
Default has occurred, without notice to or the assent of Borrower, (a) notify
any Account Debtor that the underlying Account has been assigned to Lender by
Borrower and that payment thereof is to be made to the order of and directly and
solely to Lender, (b) send, or cause to be sent by its designee, requests (which
may identify the sender by a pseudonym) for verification of any Account directly
to the appropriate Account Debtor or any bailee with respect thereto, and (c)
demand, collect or enforce payment of any Account or other Collateral, but
without any duty to do so, and Lender shall not be liable for any failure to
collect or enforce payment thereof. At Lender's request, all invoices and
statements sent to any Account Debtor or any bailee, shall state that the
relevant Account has been assigned to Lender and that any payments in respect
thereof are payable directly and solely to Lender.
8.3. Borrower hereby irrevocably authorizes Lender and any designee of
Lender, at Borrower's sole expense, until all of the Obligations have been paid
in full, to: (a) receive, take, endorse, assign, deliver, accept and deposit, in
the name of Lender or Borrower, any and all cash, checks, commercial paper,
drafts, remittances and other instruments and documents relating to the
Collateral or the proceeds thereof, (b) take or bring, in the name of Lender or
Borrower, all steps, actions, suits or proceedings deemed by Lender necessary or
desirable to effect collection of or other realization upon any Collateral, (c)
after an Event of Default, change the address for delivery of mail to Borrower
and to receive and open mail addressed to Borrower, (d) after an Event of
Default, upon any terms and conditions, extend the time of payment of,
compromise, or settle for cash, credit, return of merchandise, any and all
Accounts and discharge or release any Account Debtor without affecting any of
the Obligations, (e) execute in the name of Borrower and file against Borrower
in favor of Lender financing statements or amendments with respect to any or all
of the Collateral, and (f) execute in the name of Borrower and file on behalf of
Borrower with such governmental authorities as are appropriate such documents
(including, without limitation, applications, certificates, and tax returns) as
may be required for purposes of having Borrower qualified to transact business
in a particular state or geographic location.
8.4. Borrower hereby releases and exculpates Lender, its officers,
employees, agents, designees, attorneys, and accountants from any liability
arising from any acts under this Agreement or in furtherance thereof, whether as
attorney-in-fact or otherwise, whether of omission or commission, and whether
based upon any error of judgment or mistake of law or fact, except for gross
negligence or willful misconduct. In no event shall Lender have any liability to
Borrower for lost profits or other special or consequential damages.
8.5. After written notice by Lender to Borrower, and automatically,
without notice, after an Event of Default, Borrower shall not, without the prior
written consent of Lender in each instance, (a) grant any extension of time for
payment of any Account, (b) compromise or settle any Account for less than the
full amount thereof, (c) release in whole or in part any Account Debtor, or (d)
grant any credits, discounts, allowances, deductions, return authorizations or
the like with respect to any Account.
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8.6. At such times as Lender may request and in the manner specified by
Lender, Borrower shall deliver to Lender or Lender's representative original
invoices, agreements, proof of rendition of services and delivery of goods and
other documents evidencing or relating to the transactions which gave rise to
any of the Collateral, together with customer statements, schedules describing
the Accounts and/or statements of account and confirmatory assignments to Lender
of the Accounts in form and substance satisfactory to Lender and duly executed
by Borrower. Without limiting the provisions of any other section of this
Agreement, Borrower will promptly notify Lender, in writing, of Borrower's
granting of credits, discounts, allowances, deductions, return authorizations or
the like with respect to any Accounts. In no event shall any such schedule or
confirmatory assignment (or the absence thereof or omission of any Accounts
therefrom) limit or in any way be construed as a waiver, limitation, or
modification of the Liens or rights of Lender or the warranties,
representations, and covenants of Borrower under this Agreement. Any documents,
schedules, invoices or other paper delivered to Lender by Borrower may be
destroyed or otherwise disposed of by Lender six (6) months after receipt by
Lender, unless Borrower requests their return in writing in advance and makes
prior arrangements for their return, at Borrower's expense.
9. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender as
follows:
9.1. Borrower has good and indefeasible title to the Collateral, free
and clear of liens, claims, security interests, or encumbrances, except for
Permitted Liens.
9.2. The Eligible Accounts are and will remain bona fide existing
obligations created by the sale and delivery of Inventory or the rendition of
services to Account Debtors in the ordinary course of Borrower's business,
unconditionally owed to Borrower without defenses, disputes, offsets,
counterclaims, or rights of return or cancellation. At the time of the creation
of an Eligible Account Borrower has not received notice of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of any
applicable Account Debtor regarding such Eligible Account.
9.3. The Inventory and Equipment are not stored with a bailee,
warehouseman, or similar party (without Lender's prior written consent) and are
located only at the locations identified on the attached exhibit.
9.4. Borrower now keeps, and hereafter at all times shall keep, correct
and accurate records itemizing and describing the kind, type, quality, and
quantity of the Inventory, and Borrower's cost therefor.
9.5. The chief executive office of Borrower is located at the address
indicated in the preamble to this Agreement and Borrower's FEIN is ___.
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9.6. There are no actions or proceedings pending by or against Borrower
before any court or administrative agency and Borrower does not have knowledge
or belief of any pending, threatened, or imminent litigation, governmental
investigations, or claims, complaints, actions, or prosecutions involving
Borrower or any guarantor of the Obligations, except for ongoing collection
matters in which Borrower is the plaintiff.
9.7. All financial statements relating to Borrower or any guarantor of
the Obligations that have been delivered by Borrower to Lender have been
prepared in accordance with GAAP and fairly present Borrower's (or such
guarantor's, as applicable) financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not been a
material adverse change in the financial condition of Borrower (or such
guarantor, as applicable) since the date of the latest financial statements
submitted to Lender on or before the Closing Date.
10. AFFIRMATIVE COVENANTS. Until full payment of the Obligations and
termination of this Agreement, Borrower shall:
10.1. Furnish to Lender, in form and substance satisfactory to Lender:
10.1.1. As soon as possible after the end of each fiscal year
of Borrower, and in any event within ninety days thereafter: (a) a complete copy
of Borrower's financial statements, including but not limited to (i) the
management letter, if any, (ii) the balance sheet as of the close of the fiscal
year, and (iii) the income statement for such year, together with a statement of
cash flows, audited by accountants selected by Borrower and satisfactory to
Lender; and (b) a statement certified by the chief financial officer or, if
none, the chief operating officer of Borrower that Borrower is in compliance
with all the terms, conditions, covenants and warranties of this Agreement; and
10.2. No later than fifteen days after the close of each month (an
"Accounting Period"), Borrower's balance sheet as of the close of such
Accounting Period and its income statement for that portion of the then current
fiscal year through the end of such Accounting Period and Borrower's tax
payments and appropriate statements certified by Borrower's chief financial
officer as being complete, correct, and fairly representing its financial
condition and results of operations.
10.2.1. Within fifteen (15) days after the end of each month,
and whenever requested by Lender, certified as accurate by an officer of
Borrower:
10.2.1.1. A listing of all Borrower's Inventory, and
any other Collateral specified by Lender, wherever located, based upon a
physical count taken by Borrower every month and whenever requested by Lender;
10.2.1.2. a detailed aged trial balance of Accounts
Receivable;
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10.2.1.3. a detailed aged trial balance of accounts
payable; and
10.2.1.4. a detailed valuation of Borrower's
inventory;
10.3. Within 10 days after the end of each month, and whenever
requested by Lender, the names and addresses of all Account Debtors, which
listing shall be certified as accurate by Borrower's Chief Financial Officer;
10.4. Within thirty days each is required to be filed, a copy of
Borrower's forms 941 filed with the Internal Revenue Service;
10.5. Contemporaneous with each Advance, a Borrowing Base Certificate;
and
10.6. Such other information concerning the Collateral as Lender may
reasonably request.
10.7. Permit Lender or any representatives thereof, during usual
business hours, without nOtice to Borrower, to periodically (a) inspect
Borrower's tangible assets and (b) inspect, audit, make copies of, and make
extracts from Borrower's Books, and pay Lender the reasonable expenses thereof..
In addition to the foregoing, Borrower hereby permits Lender at any time to
access electronically information concerning any accounts maintained by Borrower
with any bank or other financial institution so long as such access is in
furtherance of, or to monitor compliance with, the terms of this Agreement.
10.8. Expenses.
10.8.1. Pay all reasonable out-of-pocket expenses of Lender
(including, but not limited to, fees and disbursements of Lender's counsel)
incident to (whether by judicial proceedings or otherwise, and whether any
resulting dispute resolution procedure involving tort, contract or other
claims):
10.8.1.1. the preparation, negotiation, execution,
administration and enforcement of the Loan Documents, any amendments, extensions
and renewals thereof, and any other documents prepared in connection with any
transactions between Borrower and Lender, whether or not executed;
10.8.1.2. any expenses incurred by Lender (whether or
not for the benefit of Borrower) under this Agreement, including, without
limitation, all expenses for postage relating to the mailing of statements,
invoices, and verifications, and all expenses relating to any audits of all or
any portion of the Collateral;
10.8.1.3. the protection of Lender's rights under the
Loan Documents;
10.8.1.4. defending against any and all claims
against Lender relating to any of its acts of commission or omission directly or
indirectly relating to the Loan Documents;
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10.8.1.5. or in any way arising out of a bankruptcy
proceeding commenced by or against Borrower, including but not limited to
expenses incurred in enforcing or defending Lender's claims against Borrower or
the Collateral, defending any avoidance actions, and expenses related to the
administration of said proceeding; (subject to court approval)
10.9. Make timely payment or deposit of all taxes, assessments or
contributions required of Borrower. If Borrower fails to make any such payment
or deposit or furnish the required proof, Lender may, in its sole discretion and
without notice to Borrower, (a) make payment of the same or any part thereof, or
(b) set up such reserves against the Obligations as Lender deems necessary to
satisfy the liability therefore, or both. Lender may conclusively rely on
statements of the amount owing or other official statements issued by the
appropriate governmental agency. Any payment made by Lender shall constitute
neither (i) an agreement by Lender to make similar payments in the future, nor
(ii) a waiver by Lender of any default under the Loan Documents. Lender need not
inquire into, nor contest the validity of, any expense, tax, security interest,
encumbrance or lien, and the receipt of the usual official notice requiring the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
10.10. Give Lender written notice immediately upon forming an intention
to change the location of its chief place of business or any of the Collateral.
10.11. Give Lender written notice immediately upon forming an intention
to change its name or form of business organization.
10.12. At all times maintain, with financially sound and reputable
insurers, casualty insurance with respect to the Collateral and other assets.
All such insurance policies shall be in such form, substance, amounts and
coverage as may be satisfactory to Lender and shall provide for thirty (30) days
prior written notice to Lender of cancellation or reduction of coverage.
Borrower hereby irrevocably appoints Lender and any designee of Lender as
attorney-in-fact for Borrower to obtain at Borrower's expense, and, after an
Event of Default, to adjust or settle any claim or other matter under or arising
pursuant to such insurance or to amend or cancel such insurance. Borrower shall
deliver to Lender evidence of such insurance and a Lender's loss payable
endorsement naming Lender as loss payee as to all existing and future insurance
policies relating to the Collateral. Borrower shall deliver to Lender, in kind,
all instruments representing proceeds of insurance received by Borrower. Lender
may apply any and all insurance proceeds received at any time to the cost of
repairs to or replacement of any portion of the Collateral and/or, at Lender's
option, to the payment of or as security for any of the Obligations, whether or
not due, in any order or manner as Lender determines.
10.13. Deliver to Lender copies of each of Borrower's federal income
tax returns, and any amendments thereto, within thirty (30) days of the filing
thereof with the Internal Revenue Service.
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11. NEGATIVE COVENANTS. Until full payment of the Obligations and termination of
this Agreement, Borrower will not:
11.1. Create, incur, assume, or permit to exist, directly or
indirectly, any lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens;
11.2. Enter into any acquisition, merger, consolidation,
reorganization, or recapitalization, or reclassify its capital stock, or
liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or any substantial part of
its business, property, or assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or substantially all of the properties,
assets, stock, or other evidence of beneficial ownership of any entity.
11.3. Enter into any transaction not in the ordinary and usual course
of Borrower's business, including the sale, lease, or other disposition of,
moving, relocation, or transfer, whether by sale or otherwise, of any of
Borrower's properties, assets (other than sales of Inventory to buyers in the
ordinary course of Borrower's business as currently conducted).
11.4. Change Borrower's name, FEIN, business structure, or identity,
or add any new fictitious name.
11.5. Suspend or go out of a substantial portion of its business.
11.6. Without thirty (30) days prior written notification to Lender,
relocate its chief executive office to a new location and so long as, at the
time of such written notification, Borrower provides any financing statements or
fixture filings necessary to perfect and continue perfected Lender's security
interests and also provides to Lender a landlord's waiver in form and substance
satisfactory to Lender. The Inventory and Equipment shall not at any time now or
hereafter be stored with a bailee, warehouseman, or similar party without
Lender's prior written consent.
12. EVENTS OF DEFAULT. Each of the following events or conditions shall
constitute an "Event of Default":
12.1. Borrower defaults in the payment of any Obligations when due,
whether at maturity, upon acceleration, or otherwise;
12.2. Borrower is in default with respect to the Loan Documents;
Page 16 of 20
12.3. Borrower or any Guarantor (i) fails to pay any Indebtedness for
borrowed funds when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), or (ii) fails to perform or observe any
term, covenant, or condition of any agreement relating to any such Indebtedness,
if the effect of such failure to perform or observe is the acceleration of the
maturity of such Indebtedness, whether or not such failure is waived by the
obligee of such Indebtedness; or any such Indebtedness is declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;
12.4. An order for relief is entered against Borrower or any Guarantor
by any United States Bankruptcy Court; or Borrower or any Guarantor does not
generally pay its debts as they become due (within the meaning of 11 U.S.C.
303(h) as at any time amended, or any successor statute thereto); or Borrower or
any Guarantor makes an assignment for the benefit of Lenders; or Borrower any
Guarantor applies for or consents to the appointment of a custodian, receiver,
trustee, or similar officer for it or for all or any substantial part of its
property, or such custodian, receiver, trustee, or similar officer is appointed
without the application or consent of Borrower or any Guarantor; or Borrower or
any Guarantor institutes (by petition, application, answer, consent, or
otherwise) any bankruptcy, insolvency, reorganization, moratorium, arrangement,
readjustment of debt, dissolution, liquidation or similar proceeding relating
to it under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application, or otherwise) against Borrower or any
Guarantor; or any judgment, writ, warrant of attachment, execution, or similar
process shall be issued or levied against a substantial portion of the property
of Borrower or any Guarantor;
12.5. An adverse change occurs with respect to the financial condition
or operations of Borrower which results in a material impairment of the prospect
of repayment of Borrower's Indebtedness;
12.6. A sale, hypothecation or other disposition is made of twenty
percent or more of the beneficial interest in any class of voting stock of
Borrower;
12.7. Any Guarantor fails to perform or observe any of such Guarantor's
obligations under any Guaranty, or shall notify Lender of its intention to
rescind, modify, terminate or revoke the Guaranty with respect to future
transactions, or the Guaranty shall cease to be in full force and effect for any
reason whatever.
12.8. Any provision of this Agreement or any of the Loan Documents
ceases, for any reason, to be valid and binding on Borrower.
13. REMEDIES. Upon the occurrence of any Event of Default, automatically, at
Lenders option:
13.1. Lender's obligation to make any Advance available to Borrower
shall terminate;
Page 17 of 20
13.2. All Obligations shall, without presentment, demand, protest, or
notice of any kind, all of which are hereby expressly waived, be forthwith due
and payable;
13.3. All Obligations shall accrue interest at the Default Rate; and
13.4. Lender may, immediately and without expiration of any period of
grace, enforce payment of all Obligations and exercise any and all other
remedies granted to it under the Loan Documents, at law, in equity, or
otherwise, including but not limited to the placement of Lender's agents or
employees on Borrower's premises to take all actions necessary to preserve the
value of the Collateral.
14. NO LIEN TERMINATION WITHOUT RELEASE. In recognition of Lender's right to
have all its attorneys' fees and other expenses incurred in connection with this
Agreement secured by the Collateral, notwithstanding payment in full of all
Obligations by Borrower, Lender shall not be required to record any terminations
or satisfactions of any of its liens on the Collateral unless and until Borrower
and all Guarantors have executed and delivered to Lender general releases which
conform to California Civil Code ss. 1541-2.
15. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, provided that, this
Agreement shall not become effective until all counterparts hereof have been
executed by all parties hereto.
16. SURVIVAL. All representations, warranties and agreements herein contained
shall be effective so long any portion of this Agreement remains executory.
17. SEVERABILITY. In the event any one or more of the provisions contained in
this Agreement is held to be invalid, illegal or unenforceable in any respect,
then such provision shall be ineffective only to the extent of such prohibition
or invalidity, and the validity, legality, arid enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.
18. AMENDMENT. This Agreement shall not be changed, modified, amended, or
terminated except by a writing duly executed by all parties hereto.
19. WAIVER. No failure to exercise and no delay in exercising any right, power,
or remedy hereunder shall impair any right, power, or remedy which Lender may
have, nor shall any such delay be construed to be a waiver of any of such
rights, powers, or remedies, or any acquiescence in any breach or default
hereunder; nor shall any waiver of any breach or default of Borrower hereunder
be deemed a waiver of any default or breach subsequently occurring. All rights
and remedies granted to Lender hereunder shall remain in full force and effect
notwithstanding any single or partial exercise of, or any discontinuance of
action begun to enforce, any such right or remedy. The rights and remedies
specified herein are cumulative and not exclusive of each other or of any rights
or remedies which Lender would otherwise have. Any waiver, permit, consent or
approval by Lender of any breach or default hereunder must be in writing and
shall be effective only to the extent set forth in such writing and only as to
that specific instance.
Page 18 of 20
20. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
21. CHOICE OF LAW. This Agreement and all transactions contemplated hereunder
and/or evidenced hereby shall be governed by, construed under, and enforced in
accordance with the laws of the State of California.
22. STATUTE OF LIMITATIONS. Borrower waives the pleading of any statute of
limitations with respect to any and all actions in connection herewith.
23. WAIVER OF TRIAL BY JURY. IN RECOGNITION OF THE HIGHER COSTS AND DELAY WHICH
MAY RESULT FROM A JURY TRIAL. THE PARTIES HERETO WAIVE ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING HEREUNDER, OR
(B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT HERETO. IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written
BORROWER: NUTRICOLOGY, INC., DAB ALLERGY
RESEARCH GROUP
By: /S/ Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
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Title: Secretary
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LENDER: AEROFUND FINANCIAL, INC.
By: /S/ Xxxxxx X. Xxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxx
--------------------------------------
Title: Senior Vice President
-------------------------------------
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