AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of
February 27, 1998, by and between NATROL, INC., a Delaware corporation
("Borrower"), and XXXXX FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITALS
This Agreement is entered into with reference to the following
facts:
A. Borrower and Bank previously executed and entered into a Credit
Agreement dated as of December 16, 1996 (as heretofore amended, the "Original
Credit Agreement").
B. Pursuant to the Original Credit Agreement, Borrower executed and
delivered to the order of Bank (i) that certain Revolving Line of Credit Note
dated December 16, 1996, in the original principal amount of up to $2,500,000.00
(the "Prior Line of Credit Note"), (ii) that certain Term Commitment Note A
dated December 16, 1996, in the original principal amount of up to $2,500,000.00
("Term Commitment Note A") and (iii) that certain Term Commitment Note B dated
December 16, 1996, in the original principal amount of up to $1,500,000.00
("Term Commitment Note B" and, together with Term Commitment Note A, the "Prior
Term Commitment Notes").
C. In addition to the Prior Line of Credit Note and the Prior Commitment
Notes, Borrower previously executed and delivered to the order of Bank (i) that
certain Term Note dated June 1, 1996 in the original principal amount of
$550,000.00 (the "$550K Term Note") and (ii) that certain Term Note dated
October 3, 1995 in the original principal amount of $200,000.00 (the "$200K
Note").
D. In connection with the credit accommodations made by Bank pursuant to
the Original Credit Agreement and the Prior Line of Credit Note, Prior Term
Commitment Notes, $550K Note and $200K Note, Borrower has executed and delivered
to Bank from time to time various other documents relating to its credit
relationships with Bank, including without limitation security agreements,
financing statements, letter of credit agreements and the like. Such documents,
together with the Original Credit Agreement and the various notes described
above, are collectively referred to herein as the "Original Loan Documents."
E. Borrower desires to acquire certain assets (the "Pure-Gar Assets") of
Pure-Gar, L.P., a Delaware limited partnership ("Pure-Gar."). In connection with
such asset purchase
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transaction, Borrower, as "Buyer," Pure-Gar, as "Seller," and BVP, Inc., a
Delaware corporation, and Basic Vegetable Products, L.P., a Delaware limited
partnership, as the general partner and limited partner of Pure-Gar,
respectively, have executed and entered into an Asset Purchase Agreement dated
as of February 27, 1998 (the "Asset Purchase Agreement").
F. To facilitate Borrower's purchase of the Pure-Gar Assets, Borrower has
requested a restructuring of the indebtedness evidenced by the Original Loan
Documents, as well as additional financing for such asset purchase.
G. This Agreement is intended by Borrower and Bank as an amendment and
restatement of the Original Credit Agreement as of the "Closing Date" (as
defined below). Amounts outstanding and committed under the Original Credit
Agreement and evidenced by the Prior Line of Credit Note, the Prior Term
Commitment Notes, the $550K Term Note and the $200K Term Note shall, upon the
effectiveness of this Agreement, be deemed outstanding and committed hereunder,
and evidenced by the "Line of Credit Note" (as defined below) and the "$9MM Term
Note" (as defined below), as applicable, subject, however, to all terms and
conditions hereunder and under the other "Loan Documents" (as defined below).
ARTICLE I
THE CREDITS
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including April 30, 2001, not to exceed at any time the aggregate
principal amount of Eight Million Dollars ($8,000,000.00) ("Line of Credit"),
the proceeds of which shall be used (i) to assist in the acquisition of the
Pure-Gar Assets and (ii) for other working capital purposes not otherwise
prohibited by this Agreement. Borrower's obligation to repay advances under the
Line of Credit shall be evidenced by a promissory note substantially in the form
of Exhibit A attached hereto ("Line of Credit Note"), all terms of which are
incorporated herein by this reference. The Line of Credit Note replaces and
supersedes in its entirety (without novation, however) the Prior Line of Credit
Note.
(b) Sight Commercial and Standby Letter of Credit Subfeature. As a
subfeature under the Line of Credit, Bank agrees from time to time during the
term thereof
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to issue sight commercial and standby letters of credit for the account of
Borrower to finance working capital requirements (each, a "Letter of Credit" and
collectively, "Letters of Credit"); provided however, that the form and
substance of each Letter of Credit shall be subject to approval by Bank, in its
sole discretion; and provided further, that the aggregate undrawn amount of all
outstanding Letters of Credit shall not at any time exceed Two Hundred Fifty
Thousand Dollars ($250,000.00). Each Letter of Credit shall be issued for a term
not to exceed ninety (90) days, as designated by Borrower; provided however,
that no Letter of Credit shall have an expiration date more than ninety (90)
days beyond the maturity date of the Line of Credit. The undrawn amount of all
Letters of Credit shall be reserved under the Line of Credit and shall not be
available for borrowings thereunder. Each Letter of Credit shall be subject to
the additional terms and conditions of the Letter of Credit Agreement and
related documents, if any, required by Bank in connection with the issuance
thereof (each, a "Letter of Credit Agreement" and collectively, "Letter of
Credit Agreements"). Each draft paid by Bank under a Letter of Credit shall be
deemed an advance under the Line of Credit and shall be repaid by Borrower in
accordance with the terms and conditions of this Agreement applicable to such
advances; provided however, that if advances under the Line of Credit are not
available, for any reason, at the time any draft is paid by Bank, then Borrower
shall immediately pay to Bank the full amount of such draft, together with
interest thereon from the date such amount is paid by Bank to the date such
amount is fully repaid by Borrower, at the rate of interest applicable to
advances under the Line of Credit. In such event Borrower agrees that Bank, in
its sole discretion, may debit any demand deposit account maintained by Borrower
with Bank for the amount of any such draft. As of the Closing Date, there are no
Letters of Credit outstanding.
Borrowing and Repayment. Borrower may from time to time during the term of
the Line of Credit borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions contained
herein or in the Line of Credit Note; provided however, that the total
outstanding borrowings under the Line of Credit shall not at any time exceed the
maximum principal amount available thereunder, as set forth above.
SECTION 1.2. $9MM TERM LOAN.
(a) $9MM Term Loan. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make a loan to Borrower in the principal amount
of Nine Million Dollars ($9,000,000.00) ("$9MM Term Loan"), the proceeds of
which shall be used by Borrower (i) to refinance the Prior Term Commitment
Notes, $550K Term Note and $200K Term Note (collectively, the "Prior Term
Notes") and (ii) to assist in the acquisition
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of the Pure-Gar Assets. Borrower's obligation to repay the $9MM Term Loan shall
be evidenced by a promissory note substantially in the form of Exhibit B
attached hereto ("$9MM Term Note"), all terms of which are incorporated herein
by this reference. The $9MM Term Note consolidates, replaces and supersedes in
their entirety (without novation, however) the Prior Term Notes.
(b) Repayment. The principal amount of the $9MM Term Loan shall be
repaid in accordance with the provisions of the $9MM Term Note.
(c) Prepayment. Borrower may prepay principal on the $9MM Term Loan
solely in accordance with the provisions of the $9MM Term Note.
SECTION 1.3. INTEREST/FEES.
(a) Interest. The outstanding principal balances of the Line of
Credit and the $9MM Term Loan shall bear interest at the rates of interest set
forth in the Line of Credit Note and the $9MM Term Note (collectively, the
"Notes"), respectively.
(b) Computation and Payment. Interest shall be computed on the basis
of a 360-day year, actual days elapsed. Interest shall be payable at the times
and place set forth in the Notes.
(c) Commitment Fee. Borrower shall pay to Bank a non-refundable
commitment fee for the Line of Credit and the $9MM Term Loan equal to Twenty
Thousand Dollars ($20,000.00) which fee shall be due and payable in full upon
the Closing Date.
(d) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to
one-quarter of one percent (0.25%) per annum (computed on the basis of a 360-day
year, actual days elapsed) on the average daily unused amount of the Line of
Credit, which fee shall be calculated on a calendar quarter basis by Bank and
shall be due and payable by Borrower in arrears within ten (10) days after each
billing is sent by Bank.
(e) Letter of Credit Fees. Borrower shall pay to Bank fees upon the
issuance of each Letter of Credit, upon the payment or negotiation by Bank of
each draft under any Letter of Credit and upon the occurrence of any other
activity with respect to any Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank's standard fees and charges then in effect for such
activity.
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SECTION 1.4. COLLECTION OF PAYMENTS. Borrower authorizes Bank to
collect all principal, interest and fees due under any of the Loan Documents
by charging Borrower's demand deposit account number 4600-593230 with Bank,
or any other demand deposit account maintained by Borrower with Bank, for the
full amount thereof. Should there be insufficient funds in any such demand
deposit account to pay all such sums when due, the full amount of such
deficiency shall be immediately due and payable by Borrower.
SECTION 1.5. COLLATERAL.
As security for all indebtedness of Borrower to Bank subject hereto,
Borrower hereby grants to Bank security interests of first priority (except for
liens permitted hereunder) in all Borrower's accounts, accounts receivable,
rights to payment, general intangibles, investment property, chattel paper,
deposit accounts, instruments (including without limitation the Pure- Gar
Assets), documents, inventory, equipment, fixtures, trade fixtures and all
products and proceeds of the foregoing.
In addition to the foregoing, as security for all indebtedness of Borrower
to Bank subject hereto, Borrower shall cause each present and future
"Subsidiary" (as defined below) to grant to Bank security interests of first
priority (except for liens permitted hereunder) in all of such Subsidiary's
accounts, accounts receivable, rights to payment, general intangibles,
investment property, chattel paper, deposit accounts, instruments, documents,
inventory, equipment and all products and proceeds of the foregoing.
All of the foregoing shall be evidenced by and subject to the terms of
such security agreements, financing statements, deeds of trust and other
documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for
all costs and expenses incurred by Bank in connection with any of the foregoing
security, including without limitation, filing and recording fees and costs of
audits.
SECTION 1.6. GUARANTIES. All indebtedness of Borrower to Bank shall be
guaranteed by each Subsidiary of Borrower, in principal amounts as may be
required by Bank, as evidenced by and subject to the terms of guaranties (each,
a "Guaranty") in form and substance satisfactory to Bank.
SECTION 1.7. MANDATORY PREPAYMENTS. Not less than 150 days following the
fiscal year end of the Borrower, Borrower shall pay to the Bank, for the purpose
of reducing the outstanding principal amount of the loans hereunder, an amount
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equal to twenty-five percent (25%) of the annual Excess Cash Flow. "Excess Cash
Flow" is defined as net income after tax, plus depreciation expense and
amortization expense, minus any unfinanced portion of capital expenditures,
scheduled principal debt payments and scheduled capital lease payments. Payments
made to the Bank pursuant to this Section shall be applied first to payments due
under the $9MM Term Loan, in inverse order of maturity, second to accrued but
unpaid interest on the Line of Credit and third to the outstanding principal
balance on the Line of Credit; provided, that any such prepayments to be applied
in respect of amounts due and owing under the Notes which bear interest in
relation to LIBOR, shall be held by the Bank and applied at the end of the
applicable Fixed Rate Term (as defined in the Notes).
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the state of Delaware, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
would be reasonably likely to have a material adverse effect on the business,
operations or condition (financial or otherwise) of Borrower or on Borrower's
ability to perform its obligations under the Loan Documents (any such effect
being referred to herein as a Material Adverse Effect). Set forth on Schedule
2.1 attached hereto, is a complete and accurate list of all the Subsidiaries of
Borrower as of the date of this Agreement, together with the ownership interest
of Borrower in each such Subsidiary as of the date of this Agreement. Each such
Subsidiary is duly organized and existing and in good standing under the laws of
the state of its formation (as set forth on Schedule 2.1), and is qualified or
licensed to do business, and is in good standing as a foreign entity, if
applicable, in all jurisdictions in which the failure to so qualify or to be so
licensed would be reasonably likely to have a Material Adverse Effect on such
Subsidiary. For purposes of this Agreement, "Subsidiary" shall mean, as of any
date of determination and with respect to Borrower, any corporation, partnership
or limited liability company (whether or not, in any such case, characterized as
such or as a "joint venture"), whether now existing or hereafter organized or
acquired: (a) in the case of a corporation, of which a majority of the
securities having ordinary voting power for the election of directors or other
governing body (other
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than securities having such power only by reason of a happening of a
contingency) are at the time beneficially owned by Borrower and/or one or more
Subsidiaries of Borrower, or (b) in the case of a partnership or limited
liability company, of which a majority of the partnership or other ownership
interests are at the time beneficially owned by Borrower and/or one or more
Subsidiaries of Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Notes, and
each other document, contract and instrument required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound, except as would not be reasonably likely to have a
Material Adverse Effect. The execution, delivery and performance by each other
party (including, without limitation, the Subsidiaries) of each of the Loan
Documents to which it is a party do not violate any provision of any law or
regulation, or contravene any provision of any formation document of any such
party, or result in a breach of or constitute a default under any contract,
obligation, indenture, or other instrument to which any such party is a party or
by which any party may be bound except as would not be reasonably likely to have
a Material Adverse Effect.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which would be reasonably likely to have a Material
Adverse Effect on the Borrower or any Subsidiary other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement
of Borrower dated December 31, 1997, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the financial condition of Borrower prior to its acquisition of
the Pure-Gar Assets, (b) discloses all liabilities of Borrower that are required
to be reflected or reserved against under generally accepted accounting
principles, whether liquidated or unliquidated,
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fixed or contingent, and (c) has been prepared in accordance with generally
accepted accounting principles consistently applied. Since the date of such
financial statement there has been no material adverse change in the financial
condition of Borrower, nor has Borrower or any of the Subsidiaries mortgaged,
pledged, granted a security interest in or otherwise encumbered any of its
assets or properties except in favor of Bank or as otherwise permitted
hereunder.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its or any Subsidiary's income tax payable with
respect to any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which Borrower or any Subsidiary is a party or by which
Borrower or any Subsidiary may be bound that requires the subordination in right
of payment of any of Borrower's or any Subsidiary's obligations subject to this
Agreement to any other obligation of Borrower or any such Subsidiary.
SECTION 2.8. PERMITS, FRANCHISES. Borrower and the Subsidiaries possess,
and will hereafter possess, all permits, consents, approvals, franchises and
licenses required and rights to all trademarks, trade names, patents, and
fictitious names, if any, necessary to enable them to conduct the businesses in
which they are now engaged in compliance with applicable law.
SECTION 2.9. ERISA. Borrower and the Subsidiaries are in compliance in all
material respects with all applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended or recodified from time to time
("ERISA"); neither Borrower nor any Subsidiary has violated any provision of any
defined employee pension benefit plan (as defined in ERISA) maintained or
contributed to by Borrower and the Subsidiaries (each, a "Plan"); no Reportable
Event as defined in ERISA has occurred and is continuing with respect to any
Plan initiated by Borrower or any Subsidiary; Borrower and the Subsidiaries have
met their minimum funding requirements under ERISA with respect to each Plan;
and each Plan will be able to fulfill its benefit obligations as they come due
in accordance with the Plan documents and under generally accepted accounting
principles.
SECTION 2.10 OTHER OBLIGATIONS. Other than as would not be reasonably
likely to have a Material Adverse Effect on the Borrower or any Subsidiary,
neither Borrower nor any Subsidiary is in default on any obligation for borrowed
money, any purchase money obligation or any other material lease, commitment,
contract, instrument or obligation.
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SECTION 2.11 ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower and the Subsidiaries are in
compliance in all material respects with all applicable federal or state
environmental, hazardous waste, health and safety statutes, and any rules or
regulations adopted pursuant thereto, which govern or affect any of Borrower's
or any such Subsidiary's operations and/or properties, including without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the
Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic
Substances Control Act, as any of the same may be amended, modified or
supplemented from time to time. None of the operations of Borrower or any of the
Subsidiaries is the subject of any federal or state investigation evaluating
whether any remedial action involving a material expenditure is needed to
respond to a release of any toxic or hazardous waste or substance into the
environment. Neither Borrower nor any of the Subsidiaries has any material
contingent liability in connection with any release of any toxic or hazardous
waste or substance into the environment.
ARTICLE III
CONDITIONS
SECTION 3.1.CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to make any loans or extend any credit hereunder is subject to the
fulfillment to Bank's satisfaction of all of the following conditions (the date
upon which all such conditions are satisfied or waived in writing by the Bank
being referred to herein as the "Closing Date"):
(a) Approval of Bank Counsel. All legal matters incidental to the
extension of credit by Bank shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Notes.
(ii) A General Pledge Agreement from Borrower together
with the Collateral (as defined therein) accompanied by appropriate
stock powers and note endorsements executed in blank;
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(iii) Trademark Collateral Assignment Agreements from
Borrower and each currently existing Subsidiary.
(iv) Third Party Security Agreements covering Rights to
Payment, Inventory, Equipment and Fixtures from each currently
existing Subsidiary.
(v) Financing statements (Form UCC-1) or amendments to
financing statements from Borrower and each currently existing
Subsidiary as Bank may request.
(vi) A Guaranty from each currently existing Subsidiary.
(vii) A favorable written legal opinion of Xxxxxxx,
Procter & Xxxx LLP, counsel to Borrower and the Subsidiaries,
together with copies of all factual certificates and legal opinions
upon which its counsel has relied.
(viii) With respect to each of Borrower and the
Subsidiaries, such documentation as Bank may reasonably require to
establish the due organization, valid existence and good standing of
Borrower and each such Subsidiary, its qualification to engage in
business in each material jurisdiction in which it is engaged in
business or required to be so qualified, its authority to execute,
deliver and perform the Loan Documents to which it is a party, the
identity, authority and capacity of each responsible official
thereof authorized to act on its behalf, including, without
limitation, copies of its certificates or articles of incorporation
and amendments thereto certified by the applicable Secretary of
State (or equivalent government official), bylaws and amendments
thereto certified by a responsible official of such party,
certificates of good standing and/or qualifications to engage in
business, certified copies of corporate resolutions, incumbency
certificates, certificates of responsible officials and the like.
(ix) Such other documents as Bank may require under any
other Section of this Agreement.
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(c) Pure-Gar Asset Acquisition.
(i) Borrower shall have delivered to Bank a
fully-executed copy of the Asset Purchase Agreement, together with
all schedules, exhibits, amendments and modifications thereto and
all material agreements, instruments and other documents relating to
the Asset Purchase Agreement (collectively, together with the Asset
Purchase Agreement, the "Acquisition Documents").
(ii) The transactions described in the Acquisition
Documents shall be in a position to close and become effective
concurrently with the Closing Date, without waiver of any provisions
of the Acquisition Documents, except with the approval (exercised
reasonably) of Bank.
(d) Financial Condition. There shall have been no material adverse
change, as determined by Bank, in the consolidated financial condition or
business of Borrower and the Subsidiaries, nor any material decline, as
determined by Bank, in the market value of any collateral required hereunder or
a substantial or material portion of the assets of Borrower or any of its
Subsidiaries.
(e) Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks (including, without limitation, those described in Section 4.5
hereof) and issued by companies satisfactory to Bank, and where required by
Bank, with loss payable endorsements in favor of Bank.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) Compliance. Except for representations and warranties which
expressly relate to a particular date or are no longer true and correct as a
result of a change which is permitted by this Agreement, the representations and
warranties contained herein and in each of the other Loan Documents shall be
true on and as of the date of the signing of this Agreement and on the date of
each extension of credit by Bank pursuant hereto, with the same effect as though
such representations and warranties had been made on and as of each such date
and on each such date, no Event of Default as defined herein, and no condition,
event or act which with the giving of notice or the passage of time or both
would constitute such an Event of Default, shall have occurred and be continuing
or shall exist.
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(b) Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein.
SECTION 4.2. ACCOUNTING RECORDS. Maintain, and cause each of the
Subsidiaries to maintain, adequate books and records in accordance with
generally accepted accounting principles consistently applied, and permit any
representative of Bank, at any reasonable time and upon reasonable notice
(provided, that such notice shall not be required during the continuation of an
Event of Default), to inspect, audit and examine such books and records, to make
copies of the same, and to inspect the properties of Borrower and the
Subsidiaries.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following,
in form and detail satisfactory to Bank:
(a) Not later than 120 days after and as of the end of each fiscal
year, (i) a consolidated balance sheet of Borrower and its Subsidiaries as at
the end of such fiscal year and the consolidated statements of income and cash
flows, in each case of Borrower and its Subsidiaries for such fiscal year, and
(ii) consolidating balance sheets and statements of income and cash flows, in
each case as at the end of and for the fiscal year, all in reasonable detail.
Such consolidated balance sheet and consolidated statements shall be accompanied
by a report of independent public accountants of recognized standing selected by
Borrower and reasonably satisfactory to Bank, which report shall be prepared in
accordance with generally acceptable auditing standards as at such date, and
shall not be subject to any
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qualifications or exceptions as to the scope of the audit nor to any other
qualification or exception which are materially adverse to the interests of
Bank;
(b) Not later than 45 days after and as of the end of each fiscal
quarter, consolidated and consolidating financial statements of Borrower and its
Subsidiaries, prepared by Borrower or a certified public accountant reasonably
acceptable to Bank, in accordance with generally accepting accounting principles
consistently applied and otherwise consistent with Borrower's prior practices,
to include balance sheets and statements of income and cash flows;
(c) As soon as practicable and in any event within sixty days after
the last day of each fiscal year of Borrower, a plan and financial forecast for
Borrower's next succeeding two (2) fiscal years, including without limitation
(i) forecasted balance sheets and statements of income and cash flows for each
such fiscal year and (ii) forecasted balance sheets and statements of income and
cash flows for each fiscal month of each such fiscal year it being understood
that the projections provided pursuant to this Section 4.3(c) are estimates and
not guarantees of actual results;
(d) contemporaneously with each annual and quarterly financial
statement of Borrower required hereby, a certificate of the president or chief
financial officer of Borrower that said financial statements are accurate in all
material respects and that there exists no Event of Default nor any condition,
act or event which with the giving of notice or the passage of time or both
would constitute an Event of Default; and
(e) from time to time such other information as Bank may reasonably
request.
SECTION 4.4. COMPLIANCE. Except as would not be reasonably likely to have
a Material Adverse Effect, preserve and maintain, and cause each of the
Subsidiaries to preserve and maintain, all licenses, permits, governmental
approvals, rights, privileges and franchises necessary for the conduct of their
respective businesses; and comply with the provisions of all documents pursuant
to which Borrower or any Subsidiary is organized and/or which govern Borrower's
or such Subsidiary's continued existence and with the requirements of all laws,
rules, regulations and orders of any governmental authority applicable to
Borrower and/or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force, and cause each of the
Subsidiaries to maintain and keep in force, insurance of the types and in
amounts customarily carried in lines of business similar to that of Borrower or
such Subsidiary,
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including but not limited to products liability (in an amount not less than
$15,000,000), fire, extended coverage, public liability, flood, property damage
and workers' compensation, with all such insurance carried with companies and in
amounts satisfactory to Bank, and deliver to Bank from time to time at Bank's
request schedules setting forth all insurance then in effect.
SECTION 4.6. FACILITIES. Keep, and cause each of the Subsidiaries to keep,
all properties useful or necessary to Borrower's or such Subsidiary's business
in generally good repair and condition, and from time to time make necessary
repairs, renewals and replacements thereto so that such properties shall be
fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge, and cause
each of the Subsidiaries to pay and discharge, when due any and all
indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower or any such
Subsidiary may in good faith contest or as to which a bona fide dispute may
arise, and (b) for which Borrower or any such Subsidiary has made provision for
eventual payment thereof in the event Borrower or any such Subsidiary is
obligated to make such payment.
SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened in writing against Borrower or any Subsidiary
with a claim in excess of $50,000.
SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's consolidated
financial condition as follows using generally accepted accounting principles
consistently applied and used consistently with prior practices (except to the
extent modified by the definitions herein), with compliance determined
commencing with Borrower's consolidated financial statements for the period
ending December 31, 1997:
(a) Tangible Net Worth (i) as of the Closing Date, not less than
$1,600,000 and (ii) subsequent to the Closing Date, not less than $1,600,000.00
plus an amount equal to one hundred percent (100%) of Borrower's consolidated
net income (after taxes and dividends) earned in each fiscal quarter ending
after December 31, 1997 (with no deduction for a net loss in any such fiscal
quarter), with "Tangible Net Worth" defined as the aggregate of total
stockholders' equity plus subordinated debt less any intangible assets of
Borrower and its Subsidiaries.
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(b) Free Cashflow Coverage Ratio not less than (i) 2.50 to 1.00 as
of the end of each fiscal quarter ending on or prior to December 30, 1999 and
(ii) 3.00:1.00 as of the end of each fiscal quarter thereafter, with "Free
Cashflow" defined as net profit before tax plus interest expense (net of
capitalized interest expense), depreciation expense and amortization expense,
minus, to the extent not subtracted for purposes of determining net income, (i)
capital expenditures (excluding the purchase of the Pure-Gar Assets in 1998),
(ii) dividends paid and (iii) and non-cash or extraordinary income statement
items) and with "Free Cashflow Coverage Ratio" defined as Free Cashflow for the
four fiscal quarter period ending as of the date of determination (the "Test
Period") divided by the aggregate of total interest expense paid during the Test
Period plus the current maturity of long-term debt and the current maturity of
subordinated debt paid during the Test Period.
(c) Annualized Funded Debt Ratio not at any time (i) greater than
2.00 to 1.00 from and after the Closing Date to and including December 30, 1999
and (ii) greater than 1.00 to 1.00 as of December 31, 1999 and any date
thereafter, with "Annualized Funded Debt Ratio" calculated as of the end of each
fiscal quarter and defined as the ratio of "Funded Debt" (as defined below) as
of such determination date, divided by EBITDA (as defined below) for the Test
Period ending as of such date. For purposes hereof, "Funded Debt" shall mean, as
of any date of determination, (i) all obligations of Borrower and the
Subsidiaries for borrowed money or for the deferred purchase price of property
or services and all obligations of Borrower and the Subsidiaries evidenced by
bonds, debentures, notes or other similar instruments, (ii) all obligations of
Borrower and its Subsidiaries under any conditional sale or other title
retention agreement relating to property purchased by Borrower or any
Subsidiary, (iii) all indebtedness secured by (or for which the holder of such
indebtedness has an existing right, contingent or otherwise, to be secured by)
any lien on any property owned by Borrower or any Subsidiary, whether or not
such indebtedness has been assumed by Borrower or such Subsidiary or is limited
in recourse, (iv) all capital and synthetic lease obligations of Borrower and
the Subsidiaries, (v) all obligations of Borrower and the Subsidiaries under
letters of credit issued for the account of Borrower or any such Subsidiary,
whether or not drawn, (vi) all obligations of Borrower and the Subsidiaries
under direct or indirect guaranties in respect of, and obligations (contingent
or otherwise) to purchase or otherwise acquire, or otherwise to ensure a
creditor against loss in respect of indebtedness or obligations of others of the
kinds referred to in clauses (i) through (v) above, and (vii) all current or
past due liabilities of Borrower and the Subsidiaries in respect of unfunded
vested benefits under Plans covered by Title IV of ERISA; and "EBITDA" shall
mean net profit before tax plus interest expense (net of capitalized interest
expense), depreciation expense and amortization expanse.
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SECTION 4.10 LANDLORD'S WAIVERS. Use commercially reasonable efforts to
deliver or cause to be delivered to Bank within sixty (60) days following the
Closing Date (and from time to time thereafter with respect to future premises),
a landlord waiver and consent substantially in the form of Exhibit C (each, a
"Landlord's Waiver") from each owner/lessor of any premises not owned by
Borrower or any Subsidiary at which collateral is now or hereafter located, for
the purpose of perfecting Bank's security interests as first priority security
interest in, and of providing access to, such collateral. In the event that,
after using commercially reasonable efforts, Borrower is unable to provide Bank
a Landlord's Waiver for any such location, Bank shall have the right, but not
the obligation, at Borrower's cost and expense, to attempt to obtain such
Landlord's Waiver from the applicable party and Borrower shall cooperate with
Bank in connection with any such attempt to obtain a Landlord's Waiver.
SECTION 4.11 NEW SUBSIDIARIES. Cause each entity that hereafter becomes a
Subsidiary to execute and deliver to Bank a Guaranty, Third Party Security
Agreement, Trademark Collateral Assignment Agreement and related financing
statements (Form UCC-1) as may be required by Bank and deliver to Bank
documents of the type described in Section 3.1(b)(x).
SECTION 4.12 ADDITIONAL SECURITY DOCUMENTATION. Borrower shall cause such
documents and instruments as may be requested by Bank from time to time to be
executed and delivered and do such further acts and things as reasonably may be
required in order for Bank to obtain a fully perfected lien on all collateral to
be provided hereunder. Without in any way limiting the foregoing, Borrower shall
pledge and deliver to Bank any and all future promissory notes executed by any
Subsidiary to the order of Borrower and deliver the same to Bank, with an
endorsement in blank, as pledged collateral.
SECTION 4.13 NOTICE TO BANK. Promptly (but in no event more than five (5)
days after the occurrence of each such event or matter) give written notice to
Bank in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property in
excess of an aggregate of $50,000.
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ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower, without Bank's prior written consent, will
not, and will not permit or cause any of the Subsidiaries to:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.
SECTION 5.2. CAPITAL EXPENDITURES. Make any additional investment in fixed
assets (a "Capital Expenditure") (other than Capital Expenditures made in
connection with the purchase of the Pure-Gar Assets) in excess of an aggregate
of $1,500,000 in any fiscal year; provided, that such amount for the fiscal year
commencing January 1, 1999 and each subsequent fiscal year shall be adjusted
upward as of the commencement of any such fiscal year by an amount equal to the
amount, if any, by which $1,500,000 (without giving effect to any adjustment
previously made in accordance with this proviso) exceeds Capital Expenditures
permitted by this Section 5.2 actually made by Borrower and its Subsidiaries
during the immediately preceding fiscal year.
SECTION 5.3. LEASE EXPENDITURES. Permit rentals due under leases of real
or personal property, other than capital lease obligations subject to Section
5.2 (collectively, "Lease Expenditures"), to exceed, in the aggregate, $250,000
in any fiscal year; provided, that such amount for the fiscal year commencing
January 1, 1999 and each subsequent fiscal year shall be adjusted upward as of
the commencement of any such fiscal year by an amount equal to the aggregate of
all Lease Expenditures permitted by this Section 5.3 which are due and owing
during such fiscal year as of such date.
SECTION 5.4. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Bank, (b)
indebtedness for personal property leases in accordance with the limitations,
terms and conditions set forth in Section 5.3, (c) indebtedness secured by liens
permitted under Section 5.8, (d) indebtedness in respect of final judgments for
the payments of money not in excess of $100,000 in the aggregate at any one time
outstanding (excluding same covered by insurance) which have been in force less
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than the applicable appeal period or sixty (60) days, whichever is sooner,
provided that such indebtedness may remain outstanding beyond such time period
if the Borrower shall in good faith be prosecuting an appeal or proceeding for
review and in respect of which, a stay shall have been issued pending such
appeal or review, and (d) any other liabilities of Borrower and the Subsidiaries
existing as of, and disclosed to Bank prior to, the date hereof.
SECTION 5.5. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity (other than the merger of any Subsidiary into
and with Borrower, with Borrower as the surviving corporation); make any
substantial change in the nature of Borrower's or any Subsidiary's business as
conducted as of the date hereof; acquire all or substantially all of the assets
of any other entity (other than the purchase of the Pure-Gar Assets); nor sell,
lease, transfer or otherwise dispose of all or a substantial or material portion
of Borrower's or any Subsidiary's assets except in the ordinary course of its
business.
SECTION 5.6. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower or any
Subsidiary as security for, any liabilities or obligations of any other person
or entity, except any of the foregoing in favor of Bank.
SECTION 5.7. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to
or investments in any person or entity, except (a) any of the foregoing existing
as of, and disclosed to Bank prior to, the date hereof, (b) loans or advances to
Subsidiaries, or investments in Subsidiaries, made by Borrower in the normal
course of business, provided that the aggregate amount of such loans, advances
or investments do not exceed $500,000 at any time outstanding, (c) loans or
advances made to employees of the Borrower or its Subsidiaries for travel
expenses in the normal course of business, provided that the aggregate amount of
such loans or advances does not exceed $250,000 at any time outstanding, and (d)
loans to employees of the Borrower and its Subsidiaries with respect to the
purchase of the capital stock of the Borrower or its Subsidiaries, provided that
the aggregate amount of such loans or advances does not exceed $250,000 at any
time outstanding.
SECTION 5.8. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist
a security interest in, or lien upon, all or any portion of Borrower's or any
Subsidiary's assets now owned or hereafter acquired, except any of the foregoing
in favor of Bank or which is existing as of, and disclosed to Bank in writing
prior to, the date hereof or any of the following:
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(a) zoning restrictions, subleases, easements, licenses,
reservations, restrictions on the use of real property or minor irregularities
incident thereto which do not in the aggregate materially detract from (i) the
value of the property or assets of, or (ii) the use of such property for the
purposes for which such property is held by, the Borrower or any of its
Subsidiaries taken as a whole;
(b) liens for taxes, assessments of governmental charges or levies
the payment of which is not at the time required or which are being contested in
good faith by appropriate proceedings provided adequate reserves are established
and provided enforcement of such liens has been stayed;
(c) liens of carriers, warehousemen, mechanics and materialmen and
other similar inchoate liens incurred in the ordinary course of business for
sums not yet due or being contested in good faith by appropriate proceedings;
(d) liens incurred or deposits made in the ordinary course of
business in connection with workmen's compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, performance and return of money
bonds and other similar obligations (exclusive of obligations for the payment of
borrowed money);
(e) liens securing permitted indebtedness outstanding on the date of
this Agreement as described on Schedule 5.8;
(f) any attachment or judgement lien, unless such attachment or
judgment shall not, within sixty (60) days after the issue or entry thereof,
have been released or discharged or execution thereof stayed pending appeal, or
shall not have been discharged within sixty (60) days after the expiration of
any such stay; and
(g) liens securing indebtedness incurred solely for the purpose of
acquiring personal property, other than inventory; provided, however, that no
such purchase money security interest shall extend to any property other than
the particular property so acquired and provided further that the amount of any
such purchase money indebtedness shall not exceed $250,000, nor the fair value
of such property at the time of acquisition, without the Bank's written consent.
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest,
fees or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections (a) and (b) above), and
with respect to any such default which by its nature can be cured, such default
shall continue for a period of thirty (30) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or
any defined event of default, under the terms of any contract or instrument
(other than any of the Loan Documents) pursuant to which Borrower or any
Subsidiary has incurred any debt or other liability to any person or entity in
excess of $250,000, including Bank.
(e) The filing of a notice of judgment lien against Borrower or any
Subsidiary; or the recording of any abstract of judgment against Borrower or any
Subsidiary in any county in which Borrower or such Subsidiary has an interest in
real property; or the service of a notice of levy and/or of a writ of attachment
or execution, or other like process, against the assets of Borrower or any
Subsidiary; or the entry of a judgment against Borrower or any Subsidiary which
is not vacated or discharged within sixty (60) days.
(f) Borrower or any Subsidiary shall become insolvent, or shall
suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any Subsidiary shall file a voluntary
petition in bankruptcy, or seeking reorganization, in order to effect a plan or
other arrangement with creditors or any other relief under the Bankruptcy Reform
Act, Title 11 of the United States Code, as amended or recodified from time to
time ("Bankruptcy Code"),
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or under any state or federal law granting relief to debtors, whether now or
hereafter in effect and any such petition or appointment shall remain unstayed
or undischarged for a period of sixty (60) days; or any involuntary petition or
proceeding pursuant to the Bankruptcy Code or any other applicable state or
federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against Borrower or any Subsidiary, or Borrower or any
such Subsidiary shall file an answer admitting the jurisdiction of the court and
the material allegations of any involuntary petition; or Borrower or any such
Subsidiary shall be adjudicated a bankrupt, or an order for relief shall be
entered against Borrower or any such Subsidiary by any court of competent
jurisdiction under the Bankruptcy Code or any other applicable state or federal
law relating to bankruptcy, reorganization or other relief for debtors and any
such proceeding shall remain undismissed or unstayed for a period of sixty (60)
days.
(g) There shall exist or occur any event or condition which Bank in
good faith believes impairs, or is substantially likely to impair, the prospect
of payment or performance by Borrower of its obligations under any of the Loan
Documents.
(h) The dissolution or liquidation of Borrower or any Subsidiary; or
Borrower or any such Subsidiary, or any of their directors, stockholders or
members, shall take action seeking to effect the dissolution or liquidation of
Borrower or such Subsidiary.
(i) Any change in ownership during the term of this Agreement which
has the effect of reducing the combined equity ownership of The Balbert Family
Trust, Xxxxxx Xxxxxxxxx, Advent VII L.P., Advent Atlantic and Pacific III L.P.,
Advent New York L.P. and TA Venture Investors L.P. or their affiliates below
fifty percent (50%).
(j) (i) The occurrence of an Event of Default under any document or
instrument relating to any indebtedness of Borrower or any Subsidiary that is
subordinated to the obligations of Borrower or such Subsidiary to Bank (any such
indebtedness being referred to as "Subordinated Debt"), or the occurrence of any
event which requires, or permits the holder of any such Subordinated Debt to
require, the redemption or purchase of such Subordinated Debt, (ii) any
determination is made by a court of competent jurisdiction that payment of
principal or interest or both is due to the holder of any Subordinated Debt that
would not be permitted by the terms of the subordination agreement entered into
with Bank, or (iii) a final judgment is entered by a court of competent
jurisdiction that any Subordinated Debt is not subordinated in accordance with
its terms to the obligations of Borrower and the Subsidiaries to Bank, or any
subordinated creditor purports to revoke, terminate or rescind any applicable
subordination agreement.
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SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a)
all indebtedness of Borrower under each of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Bank's option and without notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by each Borrower;
(b) the obligation, if any, of Bank to extend any further credit under any of
the Loan Documents shall immediately cease and terminate; and (c) Bank shall
have all rights, powers and remedies available under each of the Loan Documents,
or accorded by law, including without limitation the right to resort to any or
all security for any credit accommodation from Bank subject hereto and to
exercise any or all of the rights of a beneficiary or secured party pursuant to
applicable law. All rights, powers and remedies of Bank may be exercised at any
time by Bank and from time to time after the occurrence of an Event of Default,
are cumulative and not exclusive, and shall be in addition to any other rights,
powers or remedies provided by law or equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: NATROL, INC.
00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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BANK: XXXXX FARGO BANK, NATIONAL ASSOCIATION
000 Xxxxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Natrol Account Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents (which costs shall not exceed $5,000) and
the preparation of any amendments and waivers hereto and thereto, (b) the
enforcement of Bank's rights and/or the collection of any amounts which become
due to Bank under any of the Loan Documents, and (c) the prosecution or defense
of any action in any way related to any of the Loan Documents, including without
limitation, any action for declaratory relief, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise, and including any of
the foregoing incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or motion brought
by Bank or any other person) relating to any Borrower or any other person or
entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit extended by Bank to Borrower, Borrower or its
business, any Subsidiary or the business of such Subsidiary, or any collateral
required hereunder.
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SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to any extension of credit by Bank subject hereto and supersede all
prior negotiations, communications, discussions and correspondence concerning
the subject matter hereof. This Agreement may be amended or modified only in
writing signed by each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
SECTION 7.11. INDEMNITY BY BORROWER. Borrower agrees to indemnify, save
and hold harmless Bank and its directors, officers, agents, attorneys and
employees (collectively, the "Indemnitees") from and against: (a) Any and all
claims, demands, actions or causes of action that are asserted against any
Indemnitee if the claim, demand, action or cause of action arises out of or
relates to the relationship between Borrower and Bank under any of the Loan
Documents or the transactions contemplated thereby; (b) Any and all
administrative or investigative proceedings by any governmental agency or
authority arising out of or related to any claim, demand, action or cause of
action described in clause (a) above; and (c) Any and all liabilities, losses,
costs or expenses (including reasonable attorneys' fees and disbursements and
other professional services) that any Indemnitee suffers
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or incurs as a result of the assertion of any of the foregoing; provided that no
Indemnitee shall be entitled to indemnification for any loss caused by its own
or its employees' or agents' gross negligence or willful misconduct. Each
Indemnitee is authorized to employ counsel in enforcing its rights hereunder and
in defending against any claim, demand, action, cause of action or
administrative or investigative proceeding covered by this Section 7.11;
provided that the Indemnitees as a group may retain only one law firm to
represent them with respect to any such matter unless there is, under applicable
standards of professional conduct, conflict on any significant issue between the
positions of any two or more Indemnitees. Any obligation or liability of
Borrower to any Indemnitee under this Section 7.11 shall be and hereby is
covered and secured by the Loan Documents and the collateral referred to in
Section 1.5 and shall survive the expiration or termination of this Agreement
and the repayment of the Line of Credit and the payment and performance of all
other obligations owed to Bank.
SECTION 7.12. NONLIABILITY OF BANK. Borrower acknowledges and agrees that:
(a) Any inspections of collateral made by Bank are for purposes of
administration of the Line of Credit only and Borrower is not entitled to rely
upon the same;
(b) By accepting or approving anything required to be observed,
performed, fulfilled or given to Bank pursuant to the Loan Documents, including
any certificate, financial statement, insurance policy or other document, Bank
shall not be deemed to have warranted or represented the sufficiency, legality,
effectiveness or legal effect of the same, or of any term, provision or
condition thereof, and such acceptance or approval thereof shall not constitute
a warranty or representation to anyone with respect thereto by Bank;
(c) The relationship between Borrower and Bank in connection with
this Agreement and the other Loan Documents is, and shall at all times remain,
solely that of a borrower and lender; Bank shall not under any circumstance be
construed to be a partner or joint venturer of Borrower; Bank shall not under
any circumstances be deemed to be in a relationship of confidence or trust or a
fiduciary relationship with Borrower, or to owe any fiduciary duty to Borrower
as a result of the transactions arising under this Agreement and the other Loan
Documents; Bank does not undertake or assume any responsibility or duty to
Borrower to select, review, inspect, supervise, pass judgment upon or inform
Borrower of any matter in connection with its property, any collateral held by
Bank or the operations of Borrower; Borrower shall rely entirely upon its own
judgment with respect to such matters; and any review, inspection, supervision,
exercise of judgment or supply of information
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undertaken or assumed by Bank in connection with such matters is solely for the
protection of Bank and neither Borrower nor any other person or entity is
entitled to rely thereon; and
(d) Bank shall not be responsible or liable to any person or entity
for any loss, damage, liability or claim of any kind relating to injury or death
to persons or damage to property caused by the actions, inaction or negligence
of Borrower and Borrower hereby indemnifies and holds Bank harmless from any
such loss, damage, liability or claim; provided that the Bank shall not be
entitled to indemnification for any loss caused by its own gross negligence or
willful misconduct.
SECTION 7.13. FURTHER ASSURANCES. Borrower shall, at its expense and
without expense to Bank, do, execute and deliver such further acts and documents
as Bank from time to time reasonably requires for the assuring and confirming
unto Bank of the rights hereby created or intended now or hereafter so to be, or
for carrying out the intention or facilitating the performance of the terms of
any Loan Document, or for assuring the validity, perfection, priority or
enforceability of any lien or security interest under any Loan Document.
SECTION 7.14. CREDIT AGREEMENT GOVERNS. In the event of any actual
irreconcilable conflict between the provisions of this Agreement and those of
any other Loan Document, the provisions of this Agreement shall control and
govern; provided that the inclusion of supplemental rights or remedies in favor
of Bank in any other Loan Document shall not be deemed a conflict with this
Agreement.
SECTION 7.15. CONTINUED EFFECTIVENESS OF CERTAIN ORIGINAL LOAN DOCUMENTS.
Each of the Original Loan Documents (other than the Original Credit Agreement,
Prior Line of Credit Note, Prior Term Notes and any other Original Loan Document
that has been (or will be) expressly superseded, replaced or otherwise restated
by a "Loan Document" in connection herewith) shall continue in full force and
effect and shall, as of the Closing Date, be deemed to be a "Loan Document" as
such term is used and defined in this Agreement.
SECTION 7.16. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan
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Documents, or any past, present or future extensions of credit and other
activities, transactions or obligations of any kind related directly or
indirectly to any of the Loan Documents, including without limitation, any of
the foregoing arising in connection with the exercise of any self-help,
ancillary or other remedies pursuant to any of the Loan Documents. Any party may
by summary proceedings bring an action in court to compel arbitration of a
Dispute. Any party who fails or refuses to submit to arbitration following a
lawful demand by any other party shall bear all costs and expenses incurred by
such other party in compelling arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered
by the American Arbitration Association ("AAA") or such other administrator as
the parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in California
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. section 91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must
be active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy
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or relief that a court of the state of California could order or grant within
the scope hereof and such ancillary relief as is necessary to make effective any
award, and (iii) shall have the power to award recovery of all costs and fees,
to impose sanctions and to take such other actions as they deem necessary to the
same extent a judge could pursuant to the Federal Rules of Civil Procedure, the
California Rules of Civil Procedure or other applicable law. Any Dispute in
which the amount in controversy is $5,000,000 or less shall be decided by a
single arbitrator who shall not render an award of greater than $5,000,000
(including damages, costs, fees and expenses). By submission to a single
arbitrator, each party expressly waives any right or claim to recover more than
$5,000,000. Any Dispute in which the amount in controversy exceeds $5,000,000
shall be decided by majority vote of a panel of three arbitrators; provided
however, that all three arbitrators must actively participate in all hearings
and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the
contrary, in any arbitration in which the amount in controversy exceeds
$25,000,000, the arbitrators shall be required to make specific, written
findings of fact and conclusions of law. In such arbitrations (i) the
arbitrators shall not have the power to make any award which is not supported by
substantial evidence or which is based on legal error, (ii) an award shall not
be binding upon the parties unless the findings of fact are supported by
substantial evidence and the conclusions of law are not erroneous under the
substantive law of the state of California, and (iii) the parties shall have in
addition to the grounds referred to in the Federal Arbitration Act for vacating,
modifying or correcting an award the right to judicial review of (A) whether the
findings of fact rendered by the arbitrators are supported by substantial
evidence, and (B) whether the conclusions of law are erroneous under the
substantive law of the state of California. Judgment confirming an award in such
a proceeding may be entered only if a court determines the award is supported by
substantial evidence and not based on legal error under the substantive law of
the state of California.
(f) Real Property Collateral; Judicial Reference. Notwithstanding
anything herein to the contrary, no Dispute shall be submitted to arbitration if
the Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said
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Section 638. A referee with the qualifications required herein for arbitrators
shall be selected pursuant to the AAA's selection procedures. Judgment upon the
decision rendered by a referee shall be entered in the court in which such
proceeding was commenced in accordance with California Code of Civil Procedure
Sections 644 and 645.
(g) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
NATROL, INC., a Delaware corporation XXXXX FARGO BANK,
NATIONAL ASSOCIATION
By /s/ Xxxxxxx Xxxxxxx By /s/ Xxx Xxxxxxxx
-------------------------------- --------------------------------
Title President Title Vice President
---------------------------- ----------------------------
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SCHEDULE 2.1
SUBSIDIARIES
State Borrower's
Name Address Formation Interest
---- ------- --------- --------
Xxxx XxXxxx, Inc. 00000 Xxxxxxx Xxxxxx Xxxxxxxx 000%
Xxxxxxxxxx, XX 00000
Natrol Products, Inc. 00000 Xxxxxxx Xxxxxx Xxxxxxxx 000%
Xxxxxxxxxx, XX 00000
Upon consummation of the Pur-Gar acquisition, Borrower and its
Subsidiaries will hold assets in the following locations:
1. 00000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
2 10029 South Tacoma Way, Suites E-5 and E-6
Xxxxxx, XX 00000
3. 000 Xxxxxxx Xxxxx
Xxxx Xxxx, XX 00000
4. 000 Xxx Xxxxx Xxx
Xxxx Xxxxx Xxxxxxxxx
Xxxx Xxxx, XX 00000
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SCHEDULE 5.8
EXISTING LIENS
None
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