EXHIBIT 99.1
LOAN AND SECURITY AGREEMENT
(DATED AS OF SEPTEMBER 9, 2004)
BETWEEN
GREENFIELD COMMERCIAL CREDIT, L.L.C.
AND
AHPC HOLDINGS, INC.
AMERICAN HEALTH PRODUCTS CORPORATION
TABLE OF CONTENTS
PAGE
1. DEFINITIONS................................................. 1
2. REVOLVING CREDIT LOAN/lETTERS OF CREDIT .................... 3
3. COLLATERAL.................................................. 4
4. CHARGES AND INSURANCE....................................... 5
5. EXAMINATION OF RECORDS; REPORTING........................... 5
6. OTHER LIENS................................................. 5
7. GENERAL WARRANTIES AND REPRESENTATIONS...................... 6
8. CONDITIONS TO OBLIGATIONS OF LENDER......................... 7
9. AFFIRMATIVE COVENANTS....................................... 9
10. NEGATIVE COVENANTS.......................................... 11
11. TERMINATION................................................. 11
12. DEFAULT..................................................... 11
13. YOUR RIGHTS AND REMEDIES.................................... 12
14. WAIVER; AMENDMENTS; SUCCESSORS AND ASSIGNS.................. 12
15. BANKRUPTCY PROVISIONS....................................... 13
16. MISCELLANEOUS............................................... 14
17. WAIVER OF JURY TRIAL........................................ 16
18. NO ORAL AGREEMENTS.......................................... 16
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LOAN AND SECURITY AGREEMENT
GREENFIELD COMMERCIAL CREDIT, L.L.C.
Gentlemen:
This Agreement, effective as of the date accepted by you, sets forth the
terms and conditions upon which you will make loans and advances and extend
other financial accommodations to the undersigned (whether one or more in
number, referred to herein as "we," "us" or "our" and which, if two or more in
number, shall be jointly and severally bound):
1. DEFINITIONS. As used herein:
(A) "ADVANCES" means loans to us under this Agreement and the
Revolving Credit Loan Rider, and for which our obligation to repay is evidenced
by the Revolving Credit Note.
(B) "COLLATERAL" means all of our presently owned and hereafter
acquired or arising:
(i) accounts (whether or not earned by performance), letter
of credit rights, chattel paper, contracts, contract
rights, instruments, documents and supporting
obligations (individually and collectively referred to
as "RECEIVABLES");
(ii) general intangibles (including, without limitation, tax
refunds, tax refund claims, trade names, goodwill,
trademarks, copyrights, processes, patents, patent
rights, patent applications, licenses, inventories,
royalties, and/or commissions and permits,
choses-in-action, judgments and tort claims)
(individually and collectively referred to as
"INTANGIBLES");
(iii) goods, inventory, merchandise and other personal
property, wherever located, to be furnished under any
contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials
and supplies of any kind, nature or description which
are or might be used or consumed in our business or used
in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods,
merchandise and other personal property including
without limitation such goods which give rise to any
Receivables and which goods have been returned to or
repossessed or stopped in transit by us ("INVENTORY");
(iv) tangible goods (other than Inventory), machinery,
equipment and fixtures including without limitation
office machines, tools, dies, furniture, and vehicles
together with all accessions, parts and appurtenances
thereto appertaining or attached or kept or used or
intended for use in connection therewith, and all
substitutions, renewals, improvements and replacements
of and additions thereto (sometimes hereinafter
individually and collectively referred to as
"EQUIPMENT");
(v) property now or at any time hereafter in your
possession (including monies, deposit accounts, claims
and credit balances);
(vi) all deposit accounts and investment property;
(vii) all interests in any lease of real property or personal
property, whether as a lessor or lessee, including all
options to purchase any leased property, and all
leasehold improvements;
(viii) books, blueprints, drawings and records related to any
of the foregoing as described in subsection (i) through
(vii) above;
and all proceeds (including proceeds of any insurance policies, including
business interruption or business income insurance policies) and products of and
accessions to all the foregoing described property in which we may have any
right, title or interest.
(C) "DEFAULT" shall have the meaning set forth in Paragraph 12 of
this Agreement.
(D) "INDEBTEDNESS" means all of our present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred acquired, owing or arising, whether under
written or oral agreement, operation of law, or otherwise, and includes, without
limiting the foregoing (i) Obligations, (ii) obligations and liabilities of any
Person secured by a lien, claim, encumbrance, or security interest upon property
owned by us, even though we have not assumed or become liable therefor, (iii)
obligations and liabilities created or arising under any lease (including
capitalized leases) or conditional sales contract or other title retention
agreement with respect to property used or acquired by us, even though the
rights and remedies of the lessor, seller or lender are limited to repossession,
(iv) all unfunded pension fund obligations and liabilities, and (v) deferred
taxes.
(E) "LOAN ACCOUNT" means an account maintained by you for the Loan.
(F) "LOAN" means the Revolving Credit Loan.
(G) "NOTE" means the Revolving Credit Note.
(H) "OBLIGATIONS" means all present and future loans, advances,
debts, liabilities, obligations, covenants, duties and Indebtedness owing by us
to you, whether evidenced by any note, or other instrument or document, whether
arising from an extension of credit, opening of a letter of credit, loan,
guaranty, indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment and any participation by you in
our debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorneys'
fees and any other sums chargeable to us hereunder or under any other agreement
with you.
(I) "OBLIGOR" means us or any guarantor of the Obligations,
individually or collectively.
(J) "PERSON" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
(K) "PRIME RATE" means the rate published from day to day in the
WALL STREET JOURNAL in its "Money Rates" column as the "Prime Rate." Should such
publication not continue to
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publish the Prime Rate or a substitute rate, then Lender will select a
comparable announced rate. The Prime Rate will change at any time the published
"Prime Rate" changes.
(L) "TERM SHEET" means any document attached to this Agreement and
to any Rider which contains other terms and conditions of this transaction.
(M) Any accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings customarily given to them in accordance with
generally accepted accounting principles.
(N) All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Uniform Commercial Code of
the state set forth in Paragraph 16(B) ("CODE") to the extent the same are
defined therein.
2. REVOLVING CREDIT LOAN/LETTERS OF CREDIT.
(A) REVOLVING CREDIT LOAN/LETTERS OF CREDIT; LOAN ADVANCES. You will
establish a revolving credit loan and letter of credit facility (the "Revolving
Credit Loan" [or the "Loan"]) in the amount of the Maximum Loan Amount as set
forth on the Term Sheet, and, subject to the terms of this Agreement, you may,
upon our request, but at all times in your sole discretion, make Advances to us
from time to time, pursuant to the Revolving Credit Loan Rider attached hereto
and made a part hereof (the "RIDER"). You may, in your sole discretion and
without notice to us, disburse any or all of the proceeds of any or all of the
Advances made by you to such person or persons as you deem necessary to insure
that the security interest in or lien upon the Collateral shall at all times
have the priority represented by us in this Agreement. You may, in your sole
discretion, at any time reduce the Percentage Advance Rate or the Advance
amounts set forth in any Rider. You may, from time to time, reimburse yourself
for any loan, interest due, fees or expenses, or any third party for any of our
Obligations by charging our Loan Account. You may deduct from the Advances under
this Agreement reserves for accrued interest and such other reserves as you deem
proper and necessary.
(B) REVOLVING CREDIT LOAN NOTE. Our obligation to repay Advances
under the Revolving Credit Loan shall be evidenced by a Revolving Credit Loan
Note (the "Note") executed by us, in form satisfactory to you executed
simultaneously herewith, the terms of which are incorporated herein by this
reference.
(C) INTEREST AND OTHER CHARGES. We shall pay you interest on the
daily outstanding balance of the Note(s) at the rates as set forth in the
applicable Rider. In addition, we shall also pay you on the first day of each
month, with respect to the prior calendar month or portion thereof 1/12 of three
percent (3.0%) of the average amount of the Maximum Loan Amount not utilized
during the prior month. In no event whatsoever shall the interest rate and other
charges charged hereunder exceed the highest rate permissible under any law
which a court of competent jurisdiction shall, in the final determination, deem
applicable hereto. In the event that a court determines that you have received
interest or other charges hereunder in excess of the highest rate applicable
hereto, you shall promptly, in your sole discretion, either apply such amount to
the Obligations or refund such amount to us and the provisions herein shall be
deemed amended to provide for such permissible rate.
TERMINATION; PREPAYMENT. We shall have the right at any time or from time to
time upon three (3) business days' written notice to you to prepay the Note in
whole or in part provided that if we prepay the Revolving Credit Loan Note in
full and terminate the Revolving Credit Loan then we shall pay, in addition to
such prepayment, a prepayment penalty equal to three percent (3.0%) of the
Maximum Loan
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Amount if prepayment occurs prior to maturity. Provided, however, that no such
prepayment penalty shall be payable if prepayment is made by Bank One.
(D) TERM. The Term of this Agreement and of the Loan shall be on
demand, but if demand is not made, then no later than the date set forth on the
Term Sheet (the "Maturity Date").
(E) MONTHLY ACCOUNTING. You will provide us, monthly, with an
accounting of Advances, charges and payments made pursuant to this Agreement.
Such accounting shall be deemed correct, accurate and binding upon us and an
account stated (except for reverses and reapplications of payments made as
provided in Paragraph 16(G) hereof, and corrections or errors discovered by
you), unless we notify you in writing to the contrary within thirty (30) days
after each accounting is rendered.
3. COLLATERAL.
(A) GRANT OF SECURITY INTEREST. As security for the Obligations, we
hereby grant you a continuing security interest in and lien upon, and a right of
setoff against and we hereby pledge and assign to you, all of the Collateral,
including any Collateral not deemed eligible for Advances. We acknowledge that
nothing contained in this Agreement or in any Rider shall be (i) construed as
your agreement to resort or look to a particular type of Collateral as security
for any loan to us, or limit in any way your right to resort to any or all of
the Collateral as security for any of the Obligations, or (ii) deemed to limit
or reduce any security interest in or lien upon any portion of the Collateral
for the Obligations.
(B) PERFECTION AND PROTECTION OF SECURITY INTEREST. We shall, at our
expense, perform all steps requested by you at any time to perfect, maintain,
protect, and enforce your security interest in the Collateral, including,
without limitation, executing and filing financing, continuation statements and
amendments thereof, and searches to confirm the priority of your security
interests, in form and substance satisfactory to you, placing notations on our
books of account to disclose your security interest therein, and taking such
other steps as are deemed necessary by you to maintain your control of and
security interest in the Collateral. You may file, without our signature, one or
more financing statements disclosing your security interest under this
Agreement. We agree that a carbon, photographic, photostatic, or other
reproduction of this Agreement or of a financing statement is sufficient as a
financing statement. If any Collateral is at any time in the possession or
control of any warehouseman, bailee or any of our agents or processors, we shall
notify such person of your security interest in such Collateral and, upon your
request, instruct them to hold all such Collateral for your account subject to
your instructions. From time to time, we shall, upon your request, execute and
deliver confirmatory written instruments pledging to you the Collateral, but our
failure to do so shall not affect or limit your security interest or other
rights in and to the Collateral. Until all Obligations have been fully
satisfied, your security interest in the Collateral shall continue in full force
and effect.
(C) ATTORNEY-IN-FACT. We hereby appoint you and any designee of
yours as our attorney-in-fact and authorize you or such designee, at our sole
expense, to exercise at any times in your or such designee's discretion all or
any of the following powers, which powers of attorney, being coupled with an
interest, shall be irrevocable until all Obligations have been paid in full: (a)
receive, take, endorse, assign, deliver, accept and deposit, in your name or our
name, any and all cash, checks, commercial paper, drafts, remittances and other
instruments and documents relating to the Collateral or the proceeds thereof,
(b) transmit to account debtors, other obligors or any bailees notice of your
interest in the Collateral or request from account debtors or such other
obligors or bailees at any time, in our name or your name or any designee,
information concerning the Collateral and any amounts owing with respect
thereto, (c) notify account debtors or other obligors to make payment directly
to you, or notify bailees as to the disposition of Collateral, (d) take or
bring, in your name or our name, all steps, actions, suits or proceedings deemed
by you necessary or desirable to effect collection of or other realization upon
the
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accounts and other Collateral, (e) after a Default, change the address for
delivery of mail to us and to receive and open mail addressed to us, (f) extend
the time of payment of, compromise or settle for cash, credit, return of
merchandise, and upon any terms or conditions, any and all accounts or other
Collateral which includes a monetary obligation and discharge or release the
account debtor or other obligor, without affecting any of the Obligations, and
(g) execute in our name and file against us in your favor financing statements
or amendments with respect to the Collateral.
4. CHARGES AND INSURANCE.
(A) You may, in your discretion, at any time discharge any lien or
encumbrance or bond the same, pay any insurance, maintain guards, pay any
service bureau, or obtain any record and charge the cost thereof to our Loan
Account.
(B) We shall at all times insure the Collateral in your name against
loss or damage by fire, theft, burglary, pilferage, loss in transit, business
interruption and such other hazards as you shall specify in amounts, under
policies and by insurers acceptable to you. Each policy shall include a
provision for thirty (30) days prior written notice to you of any cancellation
or substantial modification and shall show you as mortgagee/secured party, loss
payee and additional insured in a manner acceptable to you. We shall execute and
deliver to you simultaneously herewith and at any other time hereafter such
assignments of policies of insurance, including business interruption insurance,
as you shall require. All premiums shall be paid by us and the policies shall be
delivered to you. If we fail to do so, you may (but shall not be required to)
procure such insurance at our expense.
5. EXAMINATION OF RECORDS; REPORTING.
(A) You may at all reasonable times have access to, examine, audit,
make extracts from and inspect our records, files, books of account and the
Collateral. We will deliver to you any instrument necessary for you to obtain
records from any service bureau maintaining records for us. All instruments and
certificates prepared by us showing the value of any of the Collateral shall be
accompanied, upon request, by copies of related purchase orders and invoices.
You may, at any time after default, remove from our premises our books and
records or require us to deliver them to you and you may, without expense to
you, use such of our personnel, supplies and premises as may be reasonably
necessary for maintaining or enforcing your security interest.
(B) We shall furnish you, upon request, information and statements
showing our business affairs, financial condition and the results of our
operations. We will provide you with (i) original sales invoices, customer
statements and credit memos issued, remittance advices and reports and copies of
deposit slips, each time we xxxx our customer, (ii) copies of shipping and
delivery documents, upon request, (iii) within thirty (30) days after the end of
each Interim Financial Statement Period set forth on the Term Sheet, our
internally prepared income statement and balance sheet prepared on a basis
consistent with such statement prepared in prior months and in accordance with
generally accepted accounting principles, and within ninety (90) days after the
end of each of our fiscal years, our financial statements prepared by our
independent, certified public accountants acceptable to you prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior year-end statements (said interim and year-end financial
statements hereinafter referred to as "Financials") (the scope of the CPA's
engagement is set forth on the Term Sheet), (iv) complete copies of all tax
returns when filed, and (v) certificates relating to the foregoing as you may
request.
6. OTHER LIENS. We represent and warrant that all Collateral is and will
continue to be owned by us free and clear of all liens, claims and encumbrances
whatsoever, whether prior or subordinate to the liens we have granted you,
except for Permitted Liens (which Lender acknowledges
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disclosure of without prejudice to its right to challenge priority) , if any, as
set forth on the Term Sheet; and that we will not, without your prior written
approval, which may be withheld in your sole discretion, sell, encumber or
dispose of or permit the sale, encumbrance or disposal of any Collateral, except
for sales of Inventory and collection of accounts receivable in the ordinary
course of business, with proceeds of the collections being deposited into the
lockbox identified on the Term Sheet.
7. GENERAL WARRANTIES AND REPRESENTATIONS. We warrant and represent that:
(A) We are duly organized and existing in good standing under the
laws of the Formation State set forth on the Term Sheet, are qualified to do
business and are in good standing in all states in which qualification and good
standing are necessary in order for us to conduct our business and own our
property and have all requisite power and authority to conduct our business, to
own our property and to execute, deliver and perform all of our Obligations;
(B) We have not, during the preceding five (5) years, been known by
or used any other Assumed Names or Trade Names other than as set forth on the
Term Sheet;
(C) The execution, delivery and performance by us of this Agreement
will not constitute a violation of any applicable law or of our Articles or
Certificate of Incorporation, By-Laws or any agreement, or document to which we
are a party or bound;
(D) We possess adequate assets, licenses, patents, patent
applications, copyrights, trademarks, trademark applications, and tradenames for
the conduct of our business;
(E) Except as previously disclosed to you, we have capital
sufficient to conduct our business, are solvent and able to pay our debts as
they mature and own property having a fair value greater than the amount
required to pay our debts;
(F) Except for trade payables arising in the ordinary course of our
business and except as heretofore disclosed to you in writing, we have (i) no
pending or threatened litigation, actions or proceedings which would materially
and adversely affect our business assets, operations or condition, financial or
otherwise, or the Collateral and (ii) no Indebtedness;
(G) We have good, indefeasible, and merchantable title to the
Collateral, and there is no lien or encumbrance thereon other than the security
interest granted to you and Permitted Liens as set forth on the Term Sheet;
(H) We are not a party to any contract, or subject to any charge,
corporate restriction, judgment, decree or order materially and adversely
affecting our business, assets, operations or condition, financial or otherwise,
and are not subject to any labor dispute; and, no labor contract is scheduled to
expire during the term of this Agreement, except as heretofore disclosed to you
in writing;
(I) We are not in violation of any applicable statute, regulation or
ordinance, in any respect materially and adversely affecting the Collateral or
our business, assets, operations or condition, financial or otherwise;
(J) Except for the indebtedness which has been previously disclosed
to you, we are not in default with respect to any note, indenture, loan
agreement, mortgage, lease, deed or other agreement to which we are a party or
bound;
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(K) The financial statements delivered to you fairly present our
financial condition and results of operations and those of such other Persons
described therein as of the date thereof; and there has been no material and
adverse change in such financial condition or operations since the date of the
statements;
(L) We have received no notice that we are not in full compliance
with any of the requirements of the Employee Retirement Income Security Act of
1974, as amended, ("ERISA") and its regulations and, to the best of our
knowledge, there exists no event described in Section 4043 of ERISA, excluding
subsections 4043(b)(2) and 4043(b)(3) thereof, with respect to us;
(M) We have filed all tax returns and other reports we are required
by law to file and have paid all taxes and similar charges that are due and
payable;
(N) Our Chief Executive Office, Principal Place of Business and the
Location of Collateral Records is at the location set forth on the Term Sheet;
(O) We have not received any notice alleging and are not aware of
any facts indicating any material noncompliance with any State or Federal law
governing the use, generation, storage or release of any hazardous waste or
substance;
(P) We have no Subsidiaries or Affiliates other than as set forth on
the Term Sheet. To the extent any subsidiary or affiliate is shown on the Term
Sheet, neither the assets or chief executive office of such subsidiary or
affiliate is located at one or more of our locations specified in Paragraph 7(N)
hereof;
(Q) We do not own any properties on which Collateral is located; and
(R) All Collateral which is tangible personal property is kept only
at the Collateral Locations set forth on the Term Sheet.
8. CONDITIONS TO OBLIGATIONS OF LENDER.
(A) CONDITIONS FOR CLOSING. Your obligation to close the Loan
hereunder is subject to receipt by you of the following documents, fully
executed, and completion of the following matters, all in form and substance
satisfactory to you:
(i) CHARTER DOCUMENTS. Certificates of recent date of the
appropriate authority or official of our state of incorporation (listing all of
our charter documents on file in that office if such listing is available)
certifying as to our good standing and corporate existence together with copies
of such charter documents, certified as of a recent date by such authority or
official and certified as true and correct as of the date hereof by us by a duly
authorized officer;
(ii) CERTIFICATION OF GOOD STANDING. Certificates of recent
date of the appropriate authority or official of each state in which we are
legally qualified to do business, each certifying as to our good standing, to be
provided within thirty days of Closing;
(iii) BY-LAWS AND CORPORATE AUTHORIZATIONS. Copies of our
By-Laws together with all authorizing resolutions and evidence of other
corporate action taken by us to authorize the execution, delivery and
performance by us of this Agreement and all documents and instruments executed
in connection therewith (the "Loan Documents"), and the consummation by us of
the
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transactions contemplated hereby, certified as true and correct as of the date
hereof by us by a duly authorized officer;
(iv) INCUMBENCY CERTIFICATES. A certificate of incumbency for
us containing, and attesting to the genuineness of, the signatures of those
officers authorized to act on our behalf in connection with the Loan Documents
to which we and the consummation by us of the transactions contemplated hereby,
certified as true and correct as of the date hereof by us by a duly authorized
officer;
(v) NOTE. The Revolving Credit Note duly executed by us;
(vi) SECURITY DOCUMENTS. This Loan and Security Agreement duly
executed on our behalf granting to you, as collateral security for the
Obligations, the Collateral intended to be provided pursuant to Section 3,
together with the following in fully executed form:
a. RECORDING, FILING, ETC. Evidence of the
recordation, filing and other action (including
payment of any applicable taxes or fees) in such
jurisdictions as you may deem necessary or
appropriate with respect to any security interest,
including the filing of financing statements and
similar documents which you may deem necessary or
appropriate to create, preserve or perfect the
liens, security interests and other rights
intended to be granted to you thereunder, together
with Uniform Commercial Code record searches in
such offices as you may request;
b. GUARANTOR SECURITY DOCUMENTS.
(1) A Guaranty constituting the Validity Guaranty
of Xxxx X. Xxxxxx ("Guarantor");
c. CASUALTY AND OTHER INSURANCE. Evidence that the
casualty and other insurance required pursuant to
Section 4 of this Agreement is in full force and
effect and assignments of policies of insurance as
you shall require;
(vii) CLOSING CERTIFICATE; BORROWING AUTHORIZATION. A Closing
Certificate and a Borrowing Authorization in form satisfactory to you duly
executed by us by a duly authorized officer;
(viii) GUARANTOR FINANCIAL STATEMENT. Receipt and review by
you of a current personal financial statement of Guarantor which is satisfactory
in all respects to you;
(ix) CONSENTS, APPROVALS, ETC. Copies of all governmental and
nongovernmental consents, approvals, authorizations, declarations, registrations
or filings, if any, required on our part in connection with the execution,
delivery and performance of the Loan Documents or the transactions contemplated
hereby or as a condition to the legality, validity or enforceability of the Loan
Documents, certified as true and correct and in full force and effect as of the
date hereof by us by a duly authorized officer of Borrower, or, if none is
required, a certificate of such officer to that effect;
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(x) FEE. The balance of the Commitment Fee in the amount of
One Hundred Twenty Thousand and 00/100 Dollars ($120,000.00) shall be payable at
closing. The Commitment Fee shall be deemed fully earned at closing;
(xi) OTHER MATTERS. Such other documents, and completion of
such other matters, as you may reasonably request.
(B) FURTHER CONDITIONS FOR DISBURSEMENT. Your obligation to make any
Advance (including the first Advance) is further subject to the satisfaction of
the following conditions precedent:
(i) The representations and warranties contained in Section 7
hereof and in any of the Loan Documents shall be materially true and correct on
and as of the date such Advance is made (both before and after such Advance is
made) as if such representations and warranties were made on and as of such
date;
(ii) No Default shall exist or shall have occurred and be
continuing on the date such Advance is made (whether before or after such
Advance is made); and
(iii) In the case of any Advance under the Revolving Credit
Loan, you shall have received, when due, all Reports required pursuant to
Section 5(B) as of the close of business on the last business day of the week
next preceding the date such Advance is made.
We shall be deemed to have made a representation and warranty to you at the time
of the making of, and the continuation or conversion of, each Advance to the
effects set forth in clauses (A) and (B) of this Section 8. For purposes of this
Section 8(B), the representations and warranties contained in Section 7 hereof
shall be deemed made with respect to both the financial statements referred to
therein and the most recent financial statements delivered pursuant to Section
5(B).
(C) POST-CLOSING CONDITIONS. After the date hereof, we agree to
provide you with the following:
(i) UCC SEARCHES. Uniform Commercial Code searches in all
jurisdictions in which you have filed UCC Financing Statements or in which we
conduct business;
(ii) EVIDENCE OF USE OF LOAN PROCEEDS. All documents you
require to evidence the use by us of the proceeds of the Loan;
(iii) GOOD STANDING CERTIFICATES. Good standing certificates
for jurisdictions in which we are qualified to do business as a foreign
corporation;
9. AFFIRMATIVE COVENANTS. We covenant that, so long as any Obligations
remain outstanding and this Agreement is in effect, we shall:
(A) Pay to you on demand all fees and expenses which you incur in
connection with (i) the forwarding of loan proceeds, (ii) the processing of loan
advances, (iii) the establishment and maintenance of the lock box and of all
other accounts created in connection with the transaction contemplated hereby,
and (iv) examination of the Collateral;
(B) Promptly file all tax returns and other reports which we are
required to file and promptly pay all taxes, assessments and other charges;
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(C) Promptly notify you in writing of any litigation affecting us,
whether or not the claim is covered by insurance, and of any suit or
administrative proceeding which may materially and adversely affect the
Collateral or our business, assets, operations or condition, financial or
otherwise;
(D) Notify you in writing (i) promptly upon the occurrence of any
event described in Section 4043 of ERISA, other than a termination, partial
termination or merger of a "Plan" (as defined in ERISA) or a transfer of a
Plan's assets, and (ii) prior to any termination, partial termination or merger
of a Plan or a transfer of a Plan's assets;
(E) Give you thirty (30) days prior written notice of our opening or
closing any place of business;
(F) Maintain our corporate existence and our qualification and good
standing in all states necessary to conduct our business and own our property
and maintain adequate assets, licenses, patents, copyrights, trademarks and
tradenames to conduct our business;
(G) Promptly notify you in writing of any labor dispute to which we
are or may become subject and the expiration of any labor contract to which we
are a party or bound;
(H) Promptly notify you in writing of any violation of any law,
statute, regulation or ordinance of any governmental entity, or of any agency
thereof, applicable to us which may materially and adversely affect the
Collateral or our business, assets, operations or condition, financial or
otherwise;
(I) Notify you in writing within five (5) business days of our
default under any note, indenture, loan agreement, mortgage, lease, or other
agreement to which we are a party or bound;
(J) Promptly notify you in writing of any default under any
Indebtedness owing to us;
(K) Promptly notify you in writing of the making of any capital
expenditures materially affecting our business, assets, operations or
conditions, financial or otherwise;
(L) Execute and deliver to you, upon request, such documents and
agreements as you may, from time to time, reasonably request to carry out the
terms and conditions of this Agreement;
(M) Promptly, and in any event within five (5) days of the receipt
thereof, deliver any communication in any way concerning any act or omission on
our part regarding the use, generation, storage or release of a hazardous waste
or substance. We agree to indemnify and hold you harmless from any and all loss,
damage, cost, liability or expense (including reasonable attorney fees) arising
out of our use, generation, storage or release of any hazardous waste or
substance;
(N) Promptly, and in any event within five (5) days of the receipt
thereof, deliver to you a copy of any communication from the Federal Department
of Labor concerning any alleged act or omission on our part in connection with
the payment of minimum and/or overtime wages to an employee;
(O) Promptly, and in any event within five (5) days of the receipt
thereof, deliver to you a copy of any communication concerning any violation of
a state or Federal law which could result in the forfeiture of the Collateral;
and
(P) Maintain the liens and security interests granted to you as
first, prior and only liens upon the Collateral, except for Permitted Liens.
10
10. NEGATIVE COVENANTS. Without your prior written consent, we covenant
that, so long as any Obligations remain outstanding and this Agreement is in
effect, we shall not:
(A) Merge or consolidate with or acquire any other Person;
(B) Except for cash distributions to our shareholders in amounts
sufficient for them to pay income taxes arising from their ownership of our
stock, declare or pay cash dividends upon any of our stock or distribute any of
our property or make (except in the ordinary course of business) any loans or
extensions of credit, or investments in, any Person, or redeem, retire, purchase
or acquire, directly or indirectly any of our stock, or make any material change
in our capital structure or in our business or operations which might adversely
affect the repayment of the Obligations;
(C) Enter into any transaction which materially and adversely
affects the Collateral or our ability to repay the Obligations, including any
secondary liens thereon except for the Permitted Liens;
(D) Become liable for the indebtedness of any Person, except by
endorsement of instruments for deposit;
(E) Incur Indebtedness, other than Permitted Indebtedness and trade
payables arising in the ordinary course of our business, and the Obligations;
(F) Make a sale to any customer on a xxxx-and-hold, guaranteed sale,
sale and return, sale on approval, consignment, or any other repurchase or
return basis;
(G) Except for sales in the ordinary course of business, remove the
Collateral which is tangible personal property from the Collateral Locations
set forth on the Term Sheet unless we give you thirty (30) days prior written
notice and the same is removed to a location within the continental United
States of America;
(H) Use any other corporate or fictitious name;
(I) Prepay any Indebtedness, except the Loan;
(J) If applicable, pay salaries, bonuses or commissions to any
principal named on the Term Sheet in excess of the amounts set forth thereon; or
(K) Pay any Indebtedness to any of the persons named on the Term
Sheet.
11. TERMINATION. Either party shall have the right to terminate this
Agreement at the end of the Term of this Agreement or at any time thereafter
by giving the other party written notice by registered or certified mail not
less than sixty (60) days prior to the effective date of such termination. Upon
the effective date of termination, all Obligations shall become immediately
due and payable.
12. DEFAULT. Any one or more of the following events shall constitute a
default ("Default") under this Agreement: (a) we shall fail to pay when due, or
breach, any Obligations, or (b) Obligor shall (i) become insolvent, (ii)
generally not pay its respective debts as they become due, (iii) make an
assignment for the benefit of creditors, (iv) attempt to enter into a
composition of debts, or (v) make any misrepresentation to you or fail to
observe or perform any covenants or conditions in connection with this
Agreement, any Rider or any other instrument related to the Loan hereto, or (c)
there shall be filed by or against any Obligor a petition in bankruptcy for
liquidation or for reorganization, or a
11
custodian, receiver or agent is appointed or authorized to take charge of its
properties, or any Obligor authorizes any such action, or (d) there hereafter
occur any material and adverse change in the business, assets, operations and
condition, financial or otherwise, of any Obligor, or (e) any Obligor shall be
in default under any agreement to which it is a party, or (f) any guaranty of
the Obligations shall be terminated or revoked, or (g) you in good faith believe
that either (i) the prospect of payment or performance of the Obligations is
impaired or (ii) the Collateral is not sufficient to secure fully the
Obligations.
OBLIGOR ACKNOWLEDGES THAT WHILE THERE ARE EVENTS OF DEFAULT SET FORTH,
THE OBLIGATIONS ARE DUE UPON DEMAND, AND IF DEMAND IS NOT MADE, THEN UPON THE
MATURITY DATE SET FORTH IN THE TERM SHEET. DEMAND MAY OCCUR WITH OR WITHOUT
THERE BEING AN EVENT OF DEFAULT.
13. YOUR RIGHTS AND REMEDIES.
(A) If a Default has occurred under this Agreement and is continuing
or you have made demand, you may, at your election, without notice of your
election and without demand, do any one or more of the following: (a) declare
our Obligations, whether evidenced by a revolving credit note, a term note or
otherwise, to be immediately due and payable; (b) stop advancing money or
extending credit to or for our benefit under the Agreement or any Rider; (c)
exercise any and all of the rights accruing to a secured party under the Code
and any other applicable law; (d) take possession of the Collateral and keep it
on our premises, at no cost to you, or remove any part of it to such other
place(s) as you may desire or we shall, upon your demand, at our cost, assemble
the Collateral and make it available to you at a place reasonably convenient to
you; (e) seek the appointment of a receiver or trustee under the laws of any
court having jurisdiction for such appointment (to which appointment we consent
to in advance and waive any rights to object to or oppose).
(B) In the event of a Default hereunder, you may sell and deliver
any Collateral at public or private sales, for cash, upon credit or otherwise,
at such prices and upon such terms as you deem advisable, at your discretion,
and may, if you deem it reasonable, postpone or adjourn any sale of the
Collateral by an announcement at the time and place of sale of such postponed or
adjourned sale without giving a new notice of sale. We agree that you have no
obligation to preserve rights to the Collateral or xxxxxxxx any Collateral for
the benefit of any Person. You are hereby granted a license or other right to
use, without charge, our labels, patents, copyrights, name, trade secrets, trade
names, trademarks and advertising matter, or any similar property, in completing
production, advertising or selling any Collateral and our rights under all
licenses and all franchise agreements shall inure to your benefit. Any
requirement of reasonable notice shall be met if such notice is mailed by
certified mail, return receipt requested,postage prepaid to us at our address
set forth below at least ten (10) days before sale or other disposition. The
proceeds of sale shall be applied first to all expenses of sale, including
attorneys' fees, and second to (in whatever order you elect) all Obligations.
You will return any excess to us and we shall remain liable for any deficiency.
(C) IN THE EVENT OF A DEFAULT HEREUNDER, WE HEREBY WAIVE ALL RIGHTS
TO NOTICE AND HEARING PRIOR TO THE EXERCISE BY YOU OF YOUR RIGHTS TO REPOSSESS
THE COLLATERAL WITHOUT JUDICIAL PROCESS OR TO REPLEVY, ATTACH OR LEVY UPON SUCH
COLLATERAL WITHOUT NOTICE OR HEARING AND ALL RIGHTS OF SET-OFF AND COUNTERCLAIM
AGAINST YOU.
14. WAIVER; AMENDMENTS; SUCCESSORS AND ASSIGNS. Your failure to exercise
any right, remedy or option under this Agreement or any Rider or other agreement
between you and us or delay by you in exercising the same will not operate as a
waiver. No waiver by you will be
12
effective unless in writing and then only to the extent stated. No waiver by you
shall affect your right to require strict performance of this Agreement. Your
rights and remedies will be cumulative and not exclusive. This Agreement cannot
be changed or terminated orally. All terms, conditions, promises, covenants,
provisions and warranties shall inure to the benefit of and bind your and our
respective representatives, successors and assigns.
15. BANKRUPTCY PROVISIONS. In consideration of your agreements hereunder
and under the Loan Documents, we agree that, in the event any one or more of us
(as a "Debtor" or "Debtors") files for relief under Title 11 of the United
States Code ("Bankruptcy Code") or is otherwise subject to an order for relief
under the Bankruptcy Code, that as to each Debtor:
(A) RELIEF FROM STAY. You shall be entitled to relief from the
automatic stay imposed by Bankruptcy Code Section 362 on or against the exercise
of any and all rights and remedies available to you under this Agreement, the
Loan Documents or applicable law, if Debtor fails to file a Plan of
Reorganization within 120 days (unless otherwise extended) or fails to obtain
confirmation of a Plan of Reorganization within 180 (unless otherwise
extended)days, after entry of the order for relief. We specifically acknowledge
that "cause" exists for such relief within the meaning of Section 362(d) of the
Bankruptcy Code.
(B) CASH COLLATERAL. Any attempt by Debtor to use "Cash Collateral"
(as defined in Section 363 of the Bankruptcy Code) shall be subject to the prior
entry of an order pursuant to Section 363 of the Bankruptcy Code ("Cash
Collateral Order") specifically incorporating the principal terms set forth on
Schedule 15(B) attached hereto and the Debtor shall under no circumstances seek
to use Cash Collateral other than on the terms provided in this Agreement. Any
such Cash Collateral Order shall permit the use of Cash Collateral only until
the earliest to occur of: (i) a Default under any of the provisions of this
Agreement or the Loan Documents (other than a Default occasioned solely by the
bankruptcy of Debtor), (ii) the appointment of a Chapter 11 trustee or examiner
in Debtor's case, (iii) the dismissal of Debtor's case or its conversion to a
case under Chapter 7 of the Bankruptcy Code, or (iv) the entry of an order
modifying or terminating the automatic stay or prohibiting the further use of
cash collateral. Upon the occurrence of any of the events described in (i)
through (iv) of the preceding sentence, Debtor's ability to use Cash Collateral
shall terminate immediately and automatically; such termination shall not,
however, affect or impair the rights, interests or liens granted to you under
this Agreement or the other Loan Documents.
All existing and future revenue and cash shall constitute Cash Collateral,
subject to your xxxxxx, fully perfected and presently enforceable liens and
security interests, and, to the extent they are used and consumed by Debtor
after filing of the petition or entry of the order for relief, Debtor
specifically agrees that they are collateral for your secured claims under
Section 506 of the Bankruptcy Code in the amount so used.
To the extent it is determined that Section 552(a) of the Bankruptcy
Code applies to limit your interest under the Loan Documents and this Agreement
you shall be deemed to have, as adequate protection for the use of Cash
Collateral, a continuing perfected protection for the use of Cash Collateral, a
continuing perfected post-bankruptcy lien and security interest in all
Collateral, and all revenue and cash, whether derived from operations prior to
or subsequent to or the filing of a voluntary of involuntary petition for relief
with respect to Debtor. As further adequate protection for Debtor's use of Cash
Collateral, Debtor shall maintain at all times an adequate and appropriate
amount and type of coverage of insurance, including endorsements issued
therewith covering the Collateral in amounts not less than that required under
the Loan Documents. To the extent that the collateral securing your claims in
Debtor's bankruptcy case is deemed or proves to be insufficient to pay your
claims in full, your secured claims shall be deemed to have been inadequately
protected by the provisions of the Cash Collateral Order, and
13
they shall therefore have administrative expenses of the kind specified in
Sections 503(b) and 507(b) of the Bankruptcy Code, which superpriority shall be
equal to the priority provided under the provisions of Section 364(c)(1) of the
Bankruptcy Code over all other costs and administrative expenses incurred in the
case of the kind specified in, or ordered pursuant to, Sections 105, 326, 327,
330, 331, 503(b), 506(c), 507(a), 507(b) or 726 of the Bankruptcy Code and shall
at all times be senior to the rights of Debtor or any successor trustee in the
resulting bankruptcy proceeding or any subsequent proceeding under the
Bankruptcy Code.
During the pendency of Debtor's bankruptcy, if it is determined that
any of the rights granted hereunder or by any of the Loan Documents are security
interests or liens, they shall be deemed perfected without the necessity of the
filing of any documents or commencement of proceedings otherwise required under
non-bankruptcy law for the perfection of security interests, with such
perfection being binding upon any subsequently appointed trustee, either in
Chapter 11 or under any other Chapter of the Bankruptcy Code, and upon other
creditors of Debtor who have or may hereafter extend secured or unsecured credit
to Debtor.
(C) SURCHARGE WAIVER. Debtor and/or any other representative of
Debtor's bankruptcy estate waives any right to seek a surcharge of your
collateral under 11 U.S.C. Section 506(c) or any other provision of applicable
law.
(D) OTHER WAIVERS. Debtor waives any right to seek an order under 11
U.S.C. Sections 363, 364, 1129 or any other provision of the Bankruptcy Code,
imposing liens or security interests of senior or equal priority with your liens
and security interests in the Collateral or the Cash Collateral.
(E) OTHER ACTIONS NOT PROHIBITED. Nothing contained in this Section
15 shall be deemed to limit or restrict your rights to seek in the bankruptcy
court any relief that you may deem appropriate in the event of a bankruptcy
commenced by or against Debtor, and in particular, you shall be free to seek the
dismissal or conversion of any case filed by Debtor, the appointment of a
trustee or examiner, and relief from the automatic stay.
16. MISCELLANEOUS.
(A) If any provision of this Agreement shall be prohibited or
invalid, under applicable law, it shall be ineffective only to such extent,
without invalidating the remainder of this Agreement.
(B) This Agreement shall be interpreted in accordance with the
Governing Law of the state set forth on the Term Sheet.
(C) All of our representations and warranties contained in this
Agreement shall survive the execution, delivery and acceptance thereof by the
parties.
(D) No termination of this Agreement or of any guaranty of the
Obligations shall affect or impair the powers, obligations, duties, rights,
warranties, representations or liabilities of the parties hereto and all shall
survive such termination.
(E) Each Obligation may, in your discretion, be evidenced by notes
or other instruments issued or made by us to you. If not so evidenced, such
Obligation shall be evidenced solely by entries upon your books and records.
14
(F) All Obligations shall constitute one loan secured by the
Collateral. You may, in your sole discretion: (i) exchange, enforce, waive or
release any of the Collateral or (ii) apply Collateral and direct the order or
manner without affecting your right to take any other action with respect to any
other Collateral.
(G) You shall have the continuing and exclusive right to apply or
reverse and re-apply any and all payments to any portion of the Obligations. To
the extent that we make a payment or you receive any payment or proceeds of the
Collateral for our benefit, which are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or any other party under any bankruptcy law,
common law or equitable cause, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by you.
(H) We shall reimburse you for all reasonable expenses incurred or
to be incurred by you in connection with (a) the negotiation, preparation and
closing of this Agreement; (b) the protection, perfection or preservation of
your security interest in or lien upon the Collateral; (c) your inspection or
verification of the Collateral; (d) any court or bankruptcy proceeding relating
to the Agreement or any claim or action by any Person against you which would
not have been asserted were it not for your relationship with us hereunder or
otherwise; (e) actions taken with respect to the Collateral and your security
interest or lien therein; and (f) enforcement of any of your rights and remedies
with respect to the Obligations or Collateral. The foregoing expenses shall
include, without limitation: (i) reasonable fees, costs and expenses of your
attorneys and paralegals; (ii) interest on the foregoing at the highest
applicable interest rate provided under this Agreement, which shall be part of
the Obligations, payable on demand and secured by the Collateral. In addition,
we shall pay those fees set forth on the Term Sheet at the times specified
therein. In recognition of your right to have all your expenses incurred or to
be incurred in connection with this Agreement and the fees due you secured by
the Collateral, you shall not be required to record any discharge of your lien
or termination of your security interest unless and until we deliver to you a
general release acceptable to you.
(I) We agree to give you written notice of any action or omission by
you or your agents in connection with this Agreement that may be actionable
against you or that may be a defense to payment of the Obligations for any
reasons. We further agree that unless such a notice specifically describing the
action or omission is given by us within thirty (30) days after we have
knowledge or with the exercise of reasonable diligence should have had knowledge
of the occurrence of said action or omission we shall not assert, and we shall
be deemed to have waived, any claim or defense arising therefrom.
(J) If you shall breach your obligation under this Agreement to make
an advance under the terms of this Agreement, notwithstanding our conformance
with the provisions thereof, we agree that our sole remedy on account thereof
shall be to recover liquidated damages on account of such breach, computed as
hereinafter provided, in recognition of the fact that the damages which we might
incur are uncertain and speculative. Liquidated damages to which we shall be
entitled shall be equal to sixty (60) times the interest payable for one day on
the loans outstanding as of the day that you are deemed to have failed to fund.
In any event, you shall never be liable to us for special, indirect and
consequential damages, whatever the nature of your breach hereunder.
(K) We authorize and direct you to disburse, for our account, the
proceeds of loans made by you to us to such Person as any of our officers or
directors shall direct, whether in writing or orally.
15
(L) Any notice required hereunder shall be in writing, and addressed
to the party to be notified as follows:
IF TO YOU: Xxxxxx X. Xxxxx, Vice President
Greenfield Commercial Credit, L.L.C.
000 Xxxx Xxxx Xxxx Xxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, XX 00000
IF TO US: The Borrower's Address set forth
on the Term Sheet.
or to such other address as each party may designate for itself by like notice.
(M) We represent and warrant to you that, with respect to the
financing transaction herein contemplated, no Person is entitled to any
brokerage fee or other commission and we agree to indemnify and hold you
harmless against any and all such claims.
(N) The paragraph titles contained in this Agreement are without
substantive meaning and are not part of the Agreement.
(O) We hereby release and exculpate you, your officers, employees
and designee, 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 willful misconduct. In no event will you have any
liability to us for lost profits or other special or consequential damages.
(P) You may, at your option, cure any default by us under any
agreement with a third party or pay or bond on appeal any judgment entered
against us, discharge taxes, liens, security interests or other encumbrances at
any time levied on or existing with respect to the Collateral and pay any
amount, incur any expense or perform any act which, in your sole judgment, is
necessary or appropriate to preserve, protect, insure, maintain, or realize upon
the Collateral. You may charge our Loan Account for any amounts so expended,
such amounts to be repayable by us on demand. You shall be under no obligation
to effect such cure, payment, bonding or discharge, and shall not, by doing so,
be deemed to have assumed any obligation or liability of ours.
(Q) All representations and warranties by us contained in this
Agreement or any of the other agreements contemplated herein shall survive the
execution and delivery of this Agreement until the termination hereof and the
indefeasible satisfaction in full of all Obligations.
17. WAIVER OF JURY TRIAL. Our legal counsel has advised us that (i) there
may be a constitutional right to a jury trial in connection with any claim,
dispute or lawsuit arising out of this Agreement or any Rider and (ii) such
constitutional right may be waived. After consultation with our counsel (which
has included our counsel's review of this Agreement), we believe that it is in
our best interest in this commercial transaction to waive such right.
Accordingly, we hereby waive our right to a jury trial, and further agree that
the best forum for hearing any claim, dispute or lawsuit, if any, arising in
connection with this Agreement or any Rider or our relationship with you, shall
be a court of competent jurisdiction sitting without a jury.
18. NO ORAL AGREEMENTS. We acknowledge that this Agreement and each Rider
represents the final agreement between you and us and the terms of such
documents may not be
16
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements that may have or will be exchanged between you (including your
officers, employees and agents) and us.
AHPC HOLDINGS, INC.
a Maryland corporation
By:_________________________________
Xxxx Xxxxxx
Its: President
And
AMERICAN HEALTH PRODUCTS
CORPORATION
a Texas corporation
By:_________________________________
Xxxx Xxxxxx
Its: President
Accepted on September 9, 2004
GREENFIELD COMMERCIAL CREDIT, L.L.C.,
a Michigan limited liability company
By: GCC Management, Inc.
Its: Manager
By:_________________________________
Xxxxxx X. Xxxxx
Its: Vice President
17
SCHEDULE 15(B)
CASH COLLATERAL ORDER PRINCIPAL TERMS
In addition to such terms and conditions as Debtor and you shall mutually
agree, the Cash Collateral Order shall contain the following principal terms:
1. An acknowledgment by Debtor that the indebtedness owed to you
constitutes the valid and binding obligation of Debtor and is secured by liens
and security interests granted by Debtor to you in Debtor's tangible and
intangible personal property as described in the Loan Documents; and your
security interests and liens in the Collateral are valid, properly perfected and
recorded and are unavoidable and indefeasible in the pending bankruptcy
proceeding; nor are they subject to avoidance, defeasance, offset, defense or
counterclaim of any kind.
2. Debtor may use Cash Collateral only for "necessary operating expenses."
The term "necessary operating expenses" shall be limited to the payment of
current taxes incurred after the petition date, unpaid withholding taxes for the
last pay period before and pay periods after the petition date, wages and
salaries, property insurance, necessary repairs and maintenance, utilities,
purchase of inventory and other ordinary charges necessary for Debtor's
operations. The term "necessary operating expenses" does not include payments to
pay or cure any prepetition obligations of Debtor including any arrearages under
any lease, equipment or a statutory contract obligation, except that such
expenses may be paid with your prior written consent.
3. All principal, interest, costs and expenses, including reasonable
attorneys' fees heretofore, now or hereafter incurred by you in connection with
the indebtedness or in the administration of this bankruptcy proceeding, and all
sums at any time owing by Debtor under this Cash Collateral Order, the Notes or
any other notes or other agreements with you, is and shall continue to be
secured by a post-petition first and senior security interest in and lien upon
all property of Debtor and property of the estate of whatever kind or nature,
acquired by Debtor or the estate on or after the petition date.
4. You shall continue to receive all reports as provided under the Loan
Documents. You shall continue to have access to Debtor's books and records for
the purpose of conducting audits of the Collateral. All of the provisions of the
Loan Documents shall remain in full force and effect and Debtor shall continue
to provide to you all other documents and information required to be provided to
you under the Loan Documents.
5. Interest will continue to accrue and be paid at the non-default rate or
the default rate of interest, whichever is in effect as of the petition date and
shall continue to accrue under the Notes.
6. Until the indebtedness to you is repaid in full, Debtor will not
without your prior written consent engage in any transaction which is not in the
ordinary course of its business, including the dispositions of any assets,
engaging in any new or different business activities, increase its investment in
fixed or capital assets, or create, assume or suffer to exist any lien or
security interest in favor of any person other than you in any of the collateral
(except for Permitted Liens).
7. Such other reasonable and ordinary terms and conditions as you shall
require subject to approval of the bankruptcy court.
Schedule-1
LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 9, 2004
TERM SHEET
PARAGRAPH PROVISIONS TERMS
2(A) Maximum Loan Amount: $3,000,000.00
2(C) Interest Rate: Prime Rate plus 8%
Default Rate Prime Rate plus 12%
2(D) Maturity Date: Earlier of Demand or one (1)
year from closing
5(B) Interim Financial Statement Period Monthly
5(B) Scope of CPA Engagement: Audited
7(A) Formation State: Maryland as to AHPC Holdings,
Inc.
Texas as to American Health
Products Corporation
7(B) Assumed Names or Trade Names: None
7(G) Permitted Liens As to American Health Products
Corporation-FPC Funding II, LLC;
Dell Financial Services, L.P.;
Crown Credit Company.
As to AHPC Holdings, Inc.-None.
7(N) Chief Executive Office, Principal Place of 000 Xxxx Xxxxxxxxx, Xxx 0000,
Business and Location of Collateral Records: Xxxxxx, Xxxxxxxx 00000
7(P) Subsidiaries or Affiliates: Co-Borrowers are parent and
subsidiary
7(Q) Leased Properties:
Term Sheet-1
7(R) Collateral Locations:
10(B) Permitted Indebtedness As to American Health Products
Corporation-FPC Funding II, LLC;
Dell Financial Services, L.P.;
Crown Credit Company.
As to AHPC Holdings, Inc.-None.
10(J) Salary Limitation: n/a
10(K) Limitation on Indebtedness: n/a
16(B) Governing Law: Michigan
16(H) Fees:
(i) Commitment Fee: $120,000.00 payable at Closing.
(ii) Under Utilization Fee: 1/12 of 3% of Loan Amount of
Loan not drawn - payable monthly;
(iii) Loan Processing Fee: $1,000.00 per month, payable
monthly;
(iv) Collateral Evaluation Fee: $1,000.00 per day for
examination of collateral -
payable as incurred. All
monthly fees are payable with
interest payment; and
(v) Fees for Lockbox and Other Accounts: As specified by depository
institutions.
(vi) Letter of Credit Fees one percent (1%) of face amount
of each letter of credit per
annum, payable upon issuance,
plus all fees and costs from the
issuing bank.
16(L) Borrower's Address: 000 Xxxx Xxxxxxxxx, Xxx 0000,
Xxxxxx, Xxxxxxxx 00000
Term Sheet-2
We understand that this Term Sheet defines certain terms used in the
attached Loan and Security Agreement ("Attachment"). We have read the Attachment
and this Term Sheet and fully understand their relationship. By executing both
documents, we acknowledge the foregoing.
LENDER: BORROWER:
GREENFIELD COMMERCIAL CREDIT, L.L.C., AHPC HOLDINGS, INC.
a Michigan limited liability company a Maryland corporation
By: GCC Management, Inc.
Its: Manager
By:_____________________________________ By:________________________________
Xxxxxx X. Xxxxx Xxxx Xxxxxx
Its: Vice President Its: President
AMERICAN HEALTH PRODUCTS
CORPORATION
a Texas corporation
By:______________________________
Xxxx Xxxxxx
Its: President
Term Sheet-3
REVOLVING CREDIT LOAN RIDER #1
(TO LOAN AND SECURITY AGREEMENT DATED AS OF SEPTEMBER 9, 2004)
GREENFIELD COMMERCIAL CREDIT, L.L.C.
This Revolving Credit Loan Rider and the attached Term Sheet
(collectively, the "Rider") sets forth the terms upon which you will make
certain Advances to us under the Revolving Credit Loan and is a supplement to
and is hereby incorporated into that Loan and Security Agreement between you and
us, as amended (the "Agreement").
1. DEFINITIONS. As used herein:
A. "ELIGIBLE RECEIVABLE" is a Receivable arising in the
ordinary course of Borrower's business from the sale or lease of goods which
have been delivered to and accepted by the Receivable Debtor. The following are
not Eligible Receivables:
(i) sales by Borrower to any affiliate, to any
person controlled by an affiliate or any
subsidiary of Borrower;
(ii) an account which is due or unpaid more than
ninety (90) days after the original invoice
date;
(iii) if ten (10%) percent or more of the accounts
of a single Receivable Debtor are not deemed
to be eligible hereunder;
(iv) the Receivable Debtor is also a creditor or
supplier of Borrower or has disputed
liability with respect to such account or
such account is subject to any right of set
off by the Receivable Debtor;
(v) the Receivable Debtor is a debtor under
Federal Bankruptcy Laws or has filed or
filed against it an application for relief
under such laws;
(vi) the Receivable Debtor has suspended
business;
(vii) a receiver, trustee, liquidator or custodian
has been appointed for the Receivable Debtor
or a significant part of its assets;
(viii) the account arises from a sale outside of
the United States or relates to any
Receivable Debtor located in any state
requiring the filing of a Notice Of Business
Activities Report or similar document in
order to bring suit or otherwise enforce its
remedies against such Receivable Debtor in
the courts or through any judicial process
of such state, unless Borrower has qualified
to do business in such states, has properly
filed a Notice of Business Activities Report
as appropriate for the then applicable year,
or is exempt from such filing requirement;
TS-1
(ix) the account arises from a xxxx and hold,
guaranteed sale, sell or return, sale on
approval, consignment or any other
repurchase or return basis;
(x) the Receivable Debtor is the United States
of America or any department thereof and the
aggregate exceeds the limit described on the
attached Rider;
(xi) the goods giving rise to such account have
not been delivered to or accepted by the
receivable Debtor;
(xii) the total unpaid accounts of a Receivable
Debtor exceeds a credit limit determined by
you in your discretion;
(xiii) there is an agreement with the Receivable
Debtor for any deduction beyond those shown
on the face of the invoice related to such
account;
(xiv) You, in your sole and absolute discretion,
believe that the collection of the account
is doubtful or will be delayed.
B. "ELIGIBLE INVENTORY" means Inventory (net of freight
and container costs) which you, in your sole judgment, shall deem Eligible
Inventory, based on such considerations as you may, from time to time, deem
appropriate. Without limiting your discretion, we understand the following
Inventory is not Eligible Inventory:
(i) Inventory which is work-in-process;
(ii) Inventory which is obsolete or damaged, or
not useful;
(iii) Inventory in which you do not have a first
perfected security interest or in which any
other Person claims a security interest or
lien;
(iv) Inventory which is in transit or in
locations other than described in Paragraph
6 of this Rider;
(v) Inventory which is uninsured or
under-insured;
(vi) Inventory which is held on consignment for
or is subject to a bailment arrangement with
any other Person;
(vii) Inventory which is trade-in Inventory or
returned goods;
(viii) Inventory which is used in packaging or
shipping of Inventory; and
(ix) Inventory which is nonconforming to
standards imposed by any governmental agency
regulating such Inventory or the sale or use
thereof.
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C. "RECEIVABLE(S)" means an account(s) as defined in
Article 9 of the Uniform Commercial Code.
D. "RECEIVABLE DEBTOR" means an account debtor of ours.
E. All terms defined in the Agreement which are used
herein shall have the meanings as defined in the Agreement, unless specifically
defined otherwise herein.
2. REVOLVING CREDIT LOAN ADVANCES.
A. ADVANCES. Subject to the terms of the Agreement, you
may, in your sole discretion and upon our request, make Advances to us in an
amount (hereinafter referred to as the "Gross Availability") which is the lesser
of (i) the MAXIMUM LOAN AMOUNT as set forth on the Term Sheet or (ii) an amount
up to the sum of (x) the applicable PERCENTAGE ADVANCE RATE as set forth on the
Term Sheet times the face amount (less maximum discounts, credits and allowances
which may be taken by or granted to account debtors in connection therewith) of
Eligible Receivables; plus (y) the applicable Percentage Advance Rate as set
forth on the Term Sheet times the value of our Eligible Inventory (less freight
and container costs) calculated at the lower of cost or market value; which
Advances we may borrow, repay and reborrow during the term of the Agreement. All
Advances and amounts payable pursuant to this Rider shall constitute part of the
Obligations.
B. RESERVES. You shall have a continuing right to deduct
reserves in determining the Gross Availability ("RESERVES"), and to increase and
decrease such Reserves from time to time, if and to the extent that, in your
sole judgment, such Reserves are necessary to protect you against any state of
facts which does, or would, with notice or passage of time or both, constitute
an Event of Default or have an adverse effect on any Collateral. You may, at
your option, implement Reserves by designating as ineligible a sufficient amount
of accounts or inventory which would otherwise be Eligible Receivables or
Eligible Inventory so as to reduce Gross Availability by the amount of the
intended Reserve.
C. BORROWING PROCEDURE. With each request for an
Advance, we will submit to you, if requested, original invoices, an inventory
certification and such other documents and information as you shall request, all
of which shall be satisfactory to you.
D. INTEREST RATE. We shall pay you interest on the daily
outstanding balance of our Revolving Credit Loan account at a per annum rate
equal to the EFFECTIVE RATE as set forth on the Term Sheet. In the event any
payments of principal are not paid when due or declared due, whether at
maturity, by acceleration, by lapse of time or otherwise, including any fees,
costs or expenses advanced or paid by you, the principal balance shall bear
interest thereafter, at your option, and without affecting any of your rights
and remedies provided for in the Agreement, this Rider or any promissory note
evidencing our Obligations, at a per annum rate equal to DEFAULT RATE as set
forth on the Term Sheet. Any change in any of the above interest rates resulting
from a change in the Prime Rate shall become effective immediately with each
change in the Prime Rate. Interest charges shall be computed on the basis of a
year of 360 days for the actual days elapsed in a month and, except as set forth
in Paragraph 12 of the Agreement, will be payable to you on the first day of
each month hereafter at your address shown at Paragraph 16 of the Agreement.
E. PRINCIPAL PAYMENTS. In the event that the principal
amount outstanding under the Revolving Credit Loan is in excess (for whatever
reason) of the amount of the Xxxxx
XX-3
Availability, we agree to remit to you within one (1) business day such amount
as may be necessary to reduce the total outstanding amount to the amount of the
Gross Availability. All principal and interest due under the Revolving Credit
Loan shall be due upon termination of the Agreement.
F. USE OF PROCEEDS. We shall use the proceeds of the
Revolving Credit Loan solely for the purposes as set forth in the Agreement and
on the attached Term Sheet.
3. COLLECTIONS. If you elect to place Borrower on a dominion of
funds arrangement, we shall, at our expense and in the manner directed by you
from time to time, direct that all cash, checks, drafts and other instruments
for the payment of money (properly endorsed, where required, so that such items
may be collected by you), which may be received by us at any time in full or
partial payment of any of the Receivables or as proceeds of any of the
Collateral ("REMITTANCES") shall be sent to a lockbox designated by you and/or
maintained in your name, and deposited into a non-interest bearing deposit
account now or hereafter selected by you and maintained in your name (the "CASH
COLLECTION ACCOUNT") as security for payment of the Obligations, and under
arrangements with the depository bank under which all funds deposited to the
Cash Collection Account are required to be transferred solely to you. We shall
have no right to withdraw any funds deposited in the Cash Collection Account. In
the event that we repay the Obligations in full at any time hereafter, the
balance in the Cash Collection Account or such other accounts holding the
proceeds thereof will be delivered to us five (5) business days after the date
of pay off. Unless you shall (acting in your sole discretion) notify us to the
contrary, Remittances shall be administered on the basis set forth on the Term
Sheet. We shall bear all risk of loss of any funds deposited into the Cash
Collection Account. To implement the foregoing, we shall execute such lockbox
and bank account agreements and all other documents from time to time as you
shall specify ("CASH COLLECTION DOCUMENTS"). Any collections or other proceeds
received by us shall be held in trust for you and immediately remitted to you in
kind.
4. INVENTORY.
A. RETURN OF INVENTORY. If at any time prior to our
Default under the Agreement or this Rider, any account debtor returns any
Inventory to us in the ordinary course of our business, we shall promptly
determine the reason for such return and issue a credit memorandum to the
account debtor in the appropriate amount. We agree to give you prompt notice of
the return of such Inventory. In the event any attempted return occurs after our
Default hereunder, we shall (i) hold the returned Inventory in trust for you,
(ii) segregate all returned Inventory from all of our other property and (iii)
conspicuously label the returned Inventory as your property.
B. SALE OF INVENTORY. Until our Default under the
Agreement or this Rider, we may, in any lawful manner, sell Inventory, but only
in the ordinary course of our business, provided, however, our sale shall not
cause a breach of our warranties and representations as set forth in this Rider.
We acknowledge that any sale of Inventory in the ordinary course of business
does not include a transfer of partial or total satisfaction of Indebtedness.
5. COVENANTS.
A. RECEIVABLES. Unless or until you notify us in writing
that you have dispensed with any one or more of the following requirements, we
shall:
TS-4
(i) Immediately upon our learning thereof,
inform you in writing of the rejection of
goods by any account debtor, delays in
delivery of goods, nonperformance of
contracts and of any assertion of any
claims, offsets or counterclaims by any
account debtor;
(ii) Not permit or agree to any extension,
compromise or settlement or make any change
or modification of any kind or nature with
respect to any Receivables, including any of
the terms relating thereto;
(iii) Immediately upon our learning thereof,
furnish to and inform you of all information
relating to the financial condition of any
account debtor;
(iv) Immediately upon our learning thereof,
notify you in writing of those Receivables
which are not Eligible Receivables;
(v) Keep all goods returned by any account
debtor and all good repossessed or stopped
in transit by us from any account debtor
segregated from our other property, holding
the same as trustee for you until otherwise
directed in writing by you;
(vi) Not re-date any invoice or sale or make
sales on extended dating terms beyond that
customary in our industry; and
(vii) Immediately deliver to you any promissory
note, trade acceptance or any other
instrument for the payment of money
evidencing any Receivables and endorsed to
your order.
B. INVENTORY. Unless or until you notify us in writing
that you have dispensed with one or any one or more of the following
requirements, we shall:
(i) not remove the Inventory from the Collateral
Locations described in the Agreement except
in the ordinary course of business sales;
(ii) promptly, and in any event within five (5)
days of the receipt thereof, deliver such
certification schedules and information
relating to the Inventory and Eligible
Inventory as you may reasonably request;
(iii) keep correct and accurate records itemizing
and describing the kind, type, quality and
quantity of Inventory, our costs, therefore,
selling price thereof, and the daily
withdrawals therefrom and additions thereto,
all of which records shall be available to
you, your officers, employees and agents
upon demand for inspection and copying;
(iv) concurrently, with the delivery of any of
the Inventory to a bailee, warehousemen or
similar party deliver to you, in form
TS-5
acceptable to you, warehouse receipts in
your name evidencing the storage of
Inventory;
(v) allow you to have the right upon the demand
and at any time or times hereafter during
our usual business hours to inspect and
examine Inventory and to check and test the
same as to quality, quantity, value and
condition. We agree to reimburse you for
your reasonable costs and expenses in doing
so;
(vi) conduct a physical count of the Inventory at
such intervals as you may request and
promptly supply you with a copy of such
counts accompanied by a report of the value
(valued at the lower of cost or market
value) of the Inventory;
(vii) if sales of Inventory are made for cash, we
shall immediately deliver to you the
identical checks, cash or other forms of
payment which we receive (only in the event
Lender elects to place Borrower on a
dominion of funds arrangement or on
Default);
(viii) not acquire consigned Inventory.
6. REPRESENTATIONS.
A. RECEIVABLES. With respect to all Receivables now in
existence or hereafter created, we warrant and represent to you that, except as
disclosed to you in writing:
(i) all Receivables are genuine in all respects,
are what they purport to be and are not
evidenced by a judgment;
(ii) all Receivables represent undisputed, bona
fide transactions completed in accordance
with the terms and provisions contained in
the invoices and purchase orders relating
thereto;
(iii) the amounts shown on all certifications
provided to you, our books and records and
all invoices and statements delivered to you
with respect thereto are actually and
absolutely owing to us and are not
contingent for any reason, subject only to
ordinary course of business adjustments;
(iv) if you have requested us to do so, all
payments thereon following such request have
been or shall be turned over to you by us;
(v) there are no setoffs, counterclaims or
disputes existing or asserted with respect
thereto and we have not made any agreement
with any account debtor thereof for any
deduction or discount of the sum payable
thereunder except regular discounts allowed
by us in the ordinary course of our business
for prompt payment and ordinary course of
business billing disputes;
TS-6
(vi) there are not now and there shall not be at
any time or times hereafter any facts,
events or occurrences which in any way
impair the validity or enforcement thereof
or tend to reduce the amount payable
thereunder from the amounts thereof as shown
on the certifications provided to you, our
books and records and the invoices and
statements delivered to you with respect
thereto, except for ordinary course of
business billing disputes;
(vii) all account debtors thereof have the
capacity to contract and are solvent to the
best of our knowledge;
(viii) the goods sold or transferred and the
services furnished, giving rise thereto are
not subject to a lien, claim, encumbrance or
security interest except your security
interest and Permitted Liens;
(ix) we have no knowledge of any fact or
circumstance which would impair the validity
or collectability thereof;
(x) to our knowledge, there are no proceedings
or actions which are threatened or pending
against any account debtor which might
result in any material adverse change in its
financial condition; and
(xi) with respect to those Receivables upon which
we rely for Advances, all are Eligible
Receivables.
B. INVENTORY. With respect to all Inventory now in
existence or hereafter required, we warrant and represent to you that, except as
disclosed to you in writing:
(i) Inventory is kept only at the COLLATERAL
LOCATIONS described in the Agreement;
(ii) The amount shown on all certifications
provided to you and on our books and records
is actually owned by us without any claim or
ownership by any other Person; and
(iii) With respect to that Inventory upon which we
rely for Advances, all is Eligible
Inventory.
7. NOTIFICATION AND COLLECTION. We understand that you will:
A. At your option, notify all account debtors that
Receivables have been assigned to you, you have a security interest therein and
payment is to be made to a lockbox;
B. To the extent you have not given notice previously,
you may request all account debtors to make payments on Receivables directly to
you;
C. If deemed necessary by you, enforce payment and
collect in your name, by legal proceedings or otherwise, our Receivables and to
charge the collection costs and expenses to our Loan account; and
TS-7
D. If deemed necessary by you, take control in any
manner of any cash or non-cash proceeds of Receivables and of any rejected,
returned, stopped in transit or repossessed goods relating to Receivables.
8. POWER OF ATTORNEY. We hereby irrevocably designate, make,
constitute and appoint you (and any agents designated by you) as our true and
lawful attorney, with power, without notice to us and at such time or times
hereafter as you may in your sole discretion determine, in our name or your name
and at our expense:
A. To demand payment of Receivables;
B. To enforce payment of Receivables, by legal
proceedings or otherwise;
C. To exercise all of our rights and remedies with
respect to the collection of Receivables;
D. To settle, adjust, compromise, extend or renew any
Receivables;
E. To settle, adjust or compromise any legal proceedings
brought to collect Receivables;
F. To sell or assign any Receivables upon such terms,
for such amount and at such time as you deem advisable;
G. To discharge and release any Receivables;
H. To prepare, file and sign our name on any proof of
claim in bankruptcy or similar document against any account debtor;
I. To prepare, file and sign our name on any financing
statement, notice of lien, claim of mechanic's lien, assignment or satisfaction
of lien or mechanics lien, or similar document in connection with any
Receivables;
J. To do all acts and things necessary, in your sole
discretion, to fulfill our obligations under the Agreement and this Rider;
K. To endorse our name upon any checks, notes,
acceptances, money orders or other forms of payment and to deposit the same in
the Cash Collateral Account on account of our Obligations;
L. To endorse our name upon any chattel paper, document,
instrument, freight xxxx, xxxx of lading or similar document or agreement
relating to any Receivables or goods pertaining thereto;
M. To sign our name to verifications of Receivables and
notices thereof to account debtors; and
N. To notify the post office authorities, after our
Default under this Agreement, to change the address for delivery of our mail to
an address designated by you and to open such mail for purposes of collecting
Receivables.
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We ratify and approve all acts of you and your designee. Neither you
nor your designee will be liable for any acts or omissions nor for any error of
judgment or mistake of fact or law. This power, being coupled with an interest,
is irrevocable until the Obligations have been fully satisfied.
9. COSTS AND EXPENSES. All costs and expenses incurred by you in
any manner or way with respect to your enforcement of your rights and remedies
under the Agreement or this Rider or with respect to your collection of
Receivables or protection of your security interest in Receivables and the
Collateral, whether by suit or otherwise, or with respect to your notification
of account debtors or verification of Receivables shall be a part of the
Obligations and payable on demand. Without limiting the generality of the
foregoing, such costs and expenses include reasonable attorneys' fees, court
costs, court reporting expenses, long distance telephone charges, postage,
telegram charges, wire transfer expenses, expenses of auditors, collectors,
clerks and investigators, expenses for travel, lodging and food and expenses for
repairing, altering or supplying goods, if any, necessary to fulfill in whole or
in part any purchase order of any account debtor from which the Receivables
involved have arisen.
10. TERMINATION. This Rider and your and our respective
obligations hereunder shall terminate upon payment in full of the Obligations or
upon our execution and your acceptance of a subsequently numbered and/or dated
Term Sheet and Revolving Credit Loan Rider.
Very truly yours,
AHPC HOLDINGS, INC.,
a Maryland corporation
By: _____________________________________
Xxxx Xxxxxx
Its: President
and
AMERICAN HEALTH PRODUCTS
CORPORATION
a Texas corporation
By: _____________________________________
Xxxx Xxxxxx
Its: President
Accepted on September 9, 2004
GREENFIELD COMMERCIAL CREDIT, L.L.C.,
a Michigan limited liability company
By: GCC Management, Inc.
Its: Manager
By: ________________________________
Xxxxxx X. Xxxxx
Its: Vice President
TS-9
TERM SHEET
ATTACHMENT TO
REVOLVING CREDIT LOAN RIDER #1
DATED AS OF SEPTEMBER 9, 2004
TO LOAN AND SECURITY AGREEMENT
DATED AS OF SEPTEMBER 9, 2004
PARAGRAPH PROVISIONS TERMS
--------- ---------- -----
2(A)(i) Maximum Loan Amount $3,000,000.00
2(A)(ii) Percentage Advance Rate
Eligible Receivables 75%
Eligible Inventory 35% of non-obsolete finished goods
Inventory from the Itasca and Fond Du
Lac warehouses only, with an aggregate
cap of $1,000,000.00.
2(B) Effective Rate 8% plus the Prime Rate
Default Rate 12% plus the Prime Rate
2(D) Use of Proceeds refinance debt and working capital
3(A) Lockbox Collection Basis Yes
Lockbox Bank LaSalle Bank, N.A.
Float Days Five (5) banking days
We understand that this Term Sheet defines certain terms used in the Revolving
Credit Loan Rider (the "Rider") to which this Term Sheet is attached. We have
read the Rider and this Term Sheet and fully understand their relationship. By
executing both documents, we acknowledge the foregoing.
GREENFIELD COMMERCIAL CREDIT, LLC AHPC HOLDINGS, INC.,
a Michigan limited liability company a Maryland corporation
By: GCC Management, Inc.
Its: Manager By: ________________________________
Xxxx Xxxxxx
Its: President
By:________________________
Xxxxxx X. Xxxxx and
Its: Vice President
AMERICAN HEALTH PRODUCTS
CORPORATION
a Texas corporation
By: ________________________________
Xxxx Xxxxxx
Its: President
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ATTACHMENT A TO LANDLORD'S WAIVER OF LIEN AND SECURITY INTEREST
"ASSETS" means all presently owned and hereafter acquired or arising:
(i) accounts (whether or not earned by
performance), letter of credit rights,
chattel paper, contracts, contract rights,
instruments, documents and supporting
obligations (individually and collectively
referred to as "RECEIVABLES");
(ii) general intangibles (including, without
limitation, tax refunds, tax refund claims,
trade names, goodwill, trademarks,
copyrights, processes, patents, patent
rights, patent applications, licenses,
inventories, royalties, and/or commissions
and permits, choses-in-action, judgments and
tort claims) (individually and collectively
referred to as "INTANGIBLES");
(iii) goods, inventory, merchandise and other
personal property, wherever located, to be
furnished under any contract of service or
held for sale or lease, all raw materials,
work in process, finished goods and
materials and supplies of any kind, nature
or description which are or might be used or
consumed in Tenant's business or used in
connection with the manufacture, packing,
shipping, advertising, selling or finishing
of such goods, merchandise and other
personal property including without
limitation such goods which give rise to any
Receivables and which goods have been
returned to or repossessed or stopped in
transit by Tenant ("INVENTORY");
(iv) tangible goods (other than Inventory),
machinery, equipment and fixtures including
without limitation office machines, tools,
dies, furniture, and vehicles together with
all accessions, parts and appurtenances
thereto appertaining or attached or kept or
used or intended for use in connection
therewith, and all substitutions, renewals,
improvements and replacements of and
additions thereto (sometimes hereinafter
individually and collectively referred to as
"EQUIPMENT");
(v) all interests in any lease of real property
or personal property, whether as a lessor or
lessee, including all options to purchase
any leased property, and all leasehold
improvements;
(vi) books, blueprints, drawings and records
related to any of the foregoing as described
in subsection (i) through (vi) above;
and all proceeds (including proceeds of any insurance policies, including
business interruption or business income insurance policies) and products of and
accessions to all the foregoing described property in which we may have any
right, title or interest.
REVOLVING CREDIT LOAN NOTE
$3,000,000.00
Due Date: The earlier of Demand
or one year from the date hereof Dated: September 9, 2004
FOR VALUE RECEIVED, the undersigned ("Borrower"), promises to pay to
the order of GREENFIELD COMMERCIAL CREDIT, L.L.C., a Michigan limited liability
company (the "Lender"), at its office at 000 Xxxx Xxxx Xxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000, or at such other place as Lender may designate
in writing, the principal sum of Three Million and 00/100 Dollars
($3,000,000.00), or such lesser sum as shall have been advanced by Lender to
Borrower pursuant to that certain Loan and Security Agreement dated as of this
date, between Borrower and Lender (which, together with all amendments and
modifications thereof, is hereinafter referred to as the "Loan Agreement"), plus
interest as hereinafter provided, in lawful money of the United States of
America, in accordance with the terms hereof.
The unpaid principal balance of this Revolving Credit Loan Note
("Note") shall bear interest computed upon the basis of a year of 360 days for
the actual number of days elapsed in a month, at a rate of interest (the
"Effective Rate") which is equal to (8) percentage points above the prime rate
(hereafter defined), as such rate shall vary from time to time, upwards and
downwards, and each such Prime Rate change shall cause an identical change in
the Effective Rate to occur effective immediately. "Prime Rate" means that rate
of interest published from day to day in the WALL STREET JOURNAL in its Money
Rates column as the "Prime Rate." Should such publication not continue to
publish the Prime Rate or a substitute rate, then Lender will select a
comparable announced rate.
Interest on all principal amounts advanced by Lender from time to time
and unpaid by Borrower shall be paid on the first (1st) day of the month
following execution of this Note, and on the same day of each month thereafter
until the Due Date, upon which date the entire unpaid principal balance of this
Note, together with all accrued and unpaid interest, shall be due and payable in
full. Borrower shall pay to Lender a late charge of five percent (5%) of any
monthly payment not received by Lender within ten (10) calendar days after said
payment is due, which late charge shall be payable on the next monthly payment
date or on demand. In addition to the foregoing, Borrower shall pay to Lender on
the first day of each month with respect to the prior calendar month or portion
thereof, the amount, if any, necessary to pay the fees as set forth in the Loan
Agreement.
Advances of principal, repayment, and readvances may be made under this
Note from time to time, upon the terms set forth in the Loan Agreement and said
Loan Agreement is incorporated herein by reference. Mandatory repayments of
principal before the Due Date shall be made by Borrower to Lender pursuant to
the Loan Agreement. If, prior to the Due Date, Borrower pays the balance of the
Note after Demand or terminates the Loan, whether voluntarily or involuntarily,
Borrower shall pay to Lender as liquidated damages and as compensation for the
costs of being prepared to make funds available under the Loan Agreement a
termination fee as set forth in the Loan Agreement.
All advances made hereunder shall be charged to a loan account in
Borrower's name on Lender's books, and Lender shall debit to such account the
amount of each advance made to, and credit to such account the amount of each
repayment made by Borrower. Lender shall furnish Borrower with a monthly
statement of Borrower's loan account, which statement shall be deemed to be
correct, accepted by, and binding upon Borrower, unless Lender receives a
written statement of exceptions from Borrower within thirty (30) days after such
statement has been furnished. Borrower expressly assumes all risks of loss or
delay in the delivery of any payments made by mail, and no course of conduct or
dealing shall affect Borrower's assumption of these risks.
Upon the Due Date, which Borrower acknowledges may be upon demand,
Lender, without prior notice to Borrower, may declare the entire unpaid
principal balance of this Note and all accrued interest, together with all other
indebtedness of Borrower to Lender, to be immediately due and payable. Upon the
occurrence of any Default specified on the Loan Agreement or upon demand, the
unpaid principal balance of this Note shall bear interest at a rate which is
four percent (4%) greater than the Effective Rate otherwise applicable. After
Default or Demand,
Lender may apply its own indebtedness or liability to Borrower to any
indebtedness due under this Note. Borrower agrees to pay all of the Lender's
costs incurred in the collection of this Note as provided in the Loan Agreement.
Acceptance by Lender of any payment in an amount less than the amount
then due shall be deemed an acceptance on account only. Upon any Default,
neither the failure of the Lender promptly to exercise its right to declare the
outstanding principal and accrued unpaid interest hereunder to be immediately
due and payable, nor the failure of the Lender to demand strict performance of
any other obligation of the Borrower or any other person who may be liable
hereunder, shall constitute a waiver of any such rights, nor a waiver of such
rights in connection with any future default on the part of the Borrower or any
other person who may be liable hereunder.
Borrower acknowledges that no Default is necessary for Lender to make
Demand.
Borrower and all endorsees, sureties and guarantors hereof hereby
jointly and severally waive presentment for payment, demand, notice of
non-payment, notice of protest or protest of this Note, and Lender diligence in
collection or bringing suit, and do hereby consent to any and all extensions of
time, renewals, waivers or modifications as may be granted by Lender with
respect to payment or any other provisions of this Note, and to the release of
any collateral or any part thereof, with or without substitution. The liability
of Borrower under this Note shall be absolute and unconditional, without regard
to the liability of any other party. This Note and all rights and obligations
hereunder shall be governed by the laws of the State of Michigan.
In no event whatsoever shall the interest rate and other charges
charged hereunder exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in the final determination, deem
applicable hereto. In the event that a court determines that Lender has received
interest or other charges hereunder in excess of the highest rate applicable
hereto, Lender shall either, in its sole discretion, promptly apply such amounts
to the principal due hereunder or refund such amount to Borrower and the
provisions herein shall be deemed amended to provide for such permissible rate.
This Note is issued pursuant to the terms of the Loan Agreement and is
secured by the Collateral, as defined in the Loan Agreement. All of the terms,
covenants and conditions of the Loan Agreement are hereby made a part of this
Note and are hereby incorporated by reference.
"BORROWER"
AHPC HOLDINGS, INC.,
a Maryland corporation
By: _____________________________________
Xxxx Xxxxxx
Its: President
and
AMERICAN HEALTH PRODUCTS
CORPORATION
a Texas corporation
By: _____________________________________
Xxxx Xxxxxx
Its: President
2
Pay to the order of Standard Federal Bank with recourse, representations and
warranties.
Greenfield Commercial Credit, LLC
a Michigan limited liability company
By: GCC Management, Inc.
By: ________________________________
Xxxxxx X. Xxxx, Xx.
Its: President
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VALIDITY GUARANTY
Dated as of September 9, 2004
GREENFIELD COMMERCIAL CREDIT, L.L.C. ("GREENFIELD")
THIS GUARANTY, effective as of the above date, sets forth the terms and
conditions upon which the undersigned (whether one or more in number, referred
to herein as "we," "us" or "our" and whom, if two or more in number, shall be
jointly and severally bound) agrees to guaranty certain agreements entered into
by you:
1. UNDERLYING FACTS.
(a) You have agreed to enter into a certain Loan And
Security Agreement of even date herewith (the "Agreement") with AHPC Holdings,
Inc., a Maryland corporation, and American Health Products Corporation, a Texas
corporation (together "Borrower"), pursuant to which you will extend certain
loans to Borrower.
(b) Borrower has executed and delivered to you the
Agreement and other documents executed in connection therewith (the "Transaction
Documents").
(c) You require as a condition of entering into the
Agreement that we execute and deliver this Guaranty.
2. AMOUNT OF GUARANTY. In order to induce you to enter into the
Agreement with Borrower, we absolutely and unconditionally guarantee to you the
due and prompt payment and performance of any and all indebtedness, liabilities
and obligations of Borrower to you which arise principally out of (a) the
undersigned's failure to exercise due care in the performance of his duties as
the Chief Executive Officer of Borrower, including the duty to exercise
supervisory control over officers of the Company directly reporting to the
undersigned and to those submitting borrowing certificates to Greenfield and/or
(b) any loss that is incurred due to the fraud or intentional misrepresentation
of the undersigned (collectively, the " Guaranty Obligations"). In addition, we
shall pay you all costs incurred, including reasonable attorneys' fees, in
enforcing payment and performance of this Guaranty.
3. YOUR AUTHORITY. You may from time to time without notice to us
and/or without our consent and upon such terms and conditions as you may deem
advisable without affecting this Guaranty:
(a) release Borrower, any maker, guarantor, surety or
other person liable for payment of all or any part of the Guaranty Obligations;
(b) make any agreement extending or otherwise altering
the time for or the terms of payment of all or any part of the Guaranty
Obligations;
(c) modify, waive, forbear, compromise, release,
subordinate, resort to, exercise or refrain from exercising any right you may
have hereunder, or under any of the Transaction Documents;
(d) accept or decline additional security or guarantees
of any kind;
(e) endorse, transfer or assign the Note or any other
security to any other party;
(f) accept partial payment or payments on account of the
Guaranty Obligations;
(g) make loans or give or extend further or additional
credit to or for the benefit of Borrower;
(h) release, settle or compromise any of your claims
against Borrower or any other person, firm, corporation, guarantor, or account
debtor whose obligation is held by you as collateral security for the Guaranty
Obligations;
(i) release or substitute collateral, guaranties or
guarantors; and/or
(j) amend the Agreement whether or not such amendment
increases the likelihood of our liability under this Guaranty.
4. OUR WAIVERS. We unconditionally and absolutely waive:
(a) any obligation you may have to protect, secure or
insure any of the collateral given to secure the payment of the Guaranty
Obligations;
(b) any right to participate in any of the collateral
given as security for the payment under the terms of the Agreement;
(c) notice of your acceptance of this Guaranty;
(d) any right to notice of presentment, notice of demand
for payment, notice of non-performance, protest, notice of protest and notice of
dishonor, notice of non-payment and notice of partial payment;
(e) any right to notice of any default under any of the
Transaction Documents or in the performance of any of the covenants and
agreements contained therein or in any instrument given as security for the
transactions contemplated in the Agreement;
(f) any defense, offset or claim Borrower may have
against you;
(g) any limitation or exculpation of liability on the
part of Borrower whether contained in the Transaction Documents or otherwise;
(h) the right to notice and the right to consent or
object to the transfer or sale by Borrower of any collateral or any diminution
in value of any collateral or any release of any collateral;
(i) any defense, offset or claim of lack of commercial
reasonableness in the method, manner, time, place and terms of the disposition
of collateral given as security for the Guaranty Obligations;
(j) any failure, neglect or omission on your part to
realize upon or protect the Guaranty Obligations or any collateral given as
security therefor;
(k) any right to insist that you prosecute collection of
the Guaranty Obligations or resort to any collateral given as security for the
Guaranty Obligations or to proceed against Borrower or against any other
guarantor or surety prior to enforcing this Guaranty; provided, however, in your
sole discretion you may, either in a separate action or in an action pursuant to
this Guaranty, pursue your remedies against Borrower or any other guarantor or
surety, without affecting your rights under this Guaranty;
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(l) any right to participate in or direct such action or
proceeding in (k) above;
(m) any right to notice of advances made to Borrower
under the Transaction Documents;
(n) any right relating to notice or any order, method or
manner of application of any payments on the Guaranty Obligations; and/or
(o) any right to insist that you disburse the full
principal amount due under the Transaction Documents to Borrower or the order,
method, manner or amounts disbursed pursuant to the Transaction Documents.
5. OUR REVOCATION. This Guaranty shall remain in full force and
effect and be binding upon us and shall inure to your benefit until the earlier
of a) thirty (30) days after the date this Guaranty is expressly terminated by
notice in writing delivered personally to or received by registered mail by you
at 000 Xxxx Xxxx Xxxx, Xxxxx 000, Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000, or such
other address you specify in writing to us or b) immediately upon notice in
writing as described above, that we are no longer employed by Borrower;
provided, however, that this Guaranty shall remain in full force and effect
regardless of such termination with respect to all Guaranty Obligations arising
under this Guaranty in existence on the date of such termination (including any
subsequent extension, renewal, modification, amendment or compromise thereof and
all subsequently accruing interest and other charges thereon) until all such
Guaranty Obligations are fully satisfied and paid to you. In the absence of any
termination of this Guaranty in accordance with the provisions of this Section
5, we agree that until all Guaranty Obligations under this Guaranty are
satisfied, this Guaranty shall remain in full force and effect notwithstanding
that from time to time Borrower may be free from all Guaranty Obligations.
6. ADDITIONAL WAIVERS. We will not assert against you and do
hereby unconditionally and absolutely waive all defenses of Borrower and any
defenses we may have against you, including, but not limited to, defenses of
waiver, release, discharge, bankruptcy, statute of limitations, res judicata,
statute of frauds, anti-deficiency statute, fraud, fraudulent conveyance,
insolvency, lack of consideration, merger of claims under this Guaranty with the
Guaranty Obligations, ultra xxxxx acts, usury, illegality or unenforceability,
any defense which, under principles of guaranty, suretyship or other applicable
law, would operate to impair or diminish our liability under this Guaranty, any
set-off available against you by Borrower whether or not on account of a related
transaction, and we shall be and remain liable for any deficiency remaining
after foreclosure of any mortgage or any security interest securing the Guaranty
Obligations notwithstanding any provisions of law that may prevent you from
enforcing such deficiency against Borrower.
7. EFFECT OF BANKRUPTCY. Our liability shall not be affected nor
impaired by any voluntary or involuntary dissolution, sale or other disposition
of all or substantially all of the collateral or assets of Borrower,
receivership, insolvency proceeding, bankruptcy, assignment for the benefit of
creditors, reorganization proceeding, arrangement, composition or readjustment
of, or other similar event or proceeding affecting Borrower or any of its assets
and that upon the institution of any of the above actions, at your sole
discretion and without notice thereof or demand therefor, our obligations
hereunder shall become due and payable and enforceable against us, whether or
not the Guaranty Obligations are then due and payable.
8. MARSHALLING OF ASSETS. We waive any defense or claim relating
to any obligation you may have to marshal the collateral or other assets of
Borrower for our benefit, and we agree that you shall be under no duty to
marshal the assets of Borrower for our benefit or any third party.
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9. ABSOLUTE AND UNCONDITIONAL. No act or thing, except for
payment in full, which but for this provision might or could in law or in equity
act as a release of our liabilities, shall in any way affect or impair this
Guaranty. This shall be a continuing, absolute and unconditional Guaranty, and
our liability on this Guaranty shall be immediate. You may have immediate
recourse against us for full and immediate payment and performance of the
Guaranty Obligations, or any part thereof, at any time after the Guaranty
Obligations have not been paid or performed when due (whether by acceleration or
otherwise). Subject to Section 5 hereof, this Guaranty shall remain in full
force and effect until the Guaranty Obligations have been paid in full
notwithstanding any change or modification of our relationship with Borrower
which exists as of the date hereof.
10. SUBORDINATION. All indebtedness and liability now or at any
time or times hereafter owing to us by Borrower is hereby subordinated to the
Guaranty Obligations and any payment of indebtedness or liabilities of Borrower
to us shall be held by us in trust for you, segregated from other funds, and
shall, immediately upon our receipt, be turned over to you in the exact form
received by us (duly endorsed to you, if required), to be applied against the
Guaranty Obligations, whether matured or unmatured, in such order as you may
determine.
11. SUBROGATION. We waive any claim or other right which we may
now have or may hereafter acquire against Borrower or any other person that is
primarily or contingently liable on the obligations that arise from the
existence or performance of our obligations under this Guaranty, including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution, indemnification, any right to participate in any claim or remedy
you may have against Borrower or any collateral security therefor, which you now
have or hereafter acquire, whether or not such claim, remedy or right arises in
equity, or under contract, statute or common law. If any amount shall be paid to
us contrary to the terms of this Section 11, such amount shall be held by us in
trust for you, segregated from our other funds, and shall, immediately upon
receipt by us, be turned over to you in the exact form received by us (duly
endorsed to you, if required), to be applied against the Guaranty Obligations,
whether matured or unmatured, in such order as you may determine.
12. SET-OFF. Upon the occurrence and continuation of a Default (as
defined in the Agreement) under the Transaction Documents, we hereby authorize
you at any time and from time to time to set off and apply any deposit held and
any other indebtedness at any time owing by you to us or for our account against
our Guaranty Obligations and liabilities to you.
13. REINSTATEMENT. This Guaranty shall continue to be effective or
be reinstated, as the case may be, if at any time any payment of all or any part
of the Guaranty Obligations is rescinded or must otherwise be returned by you
upon the insolvency, bankruptcy, reorganization, liquidation or dissolution of
Borrower or otherwise, all as if such payment had not been made. We hereby
indemnify and hold you harmless from and against all costs and expenses you may
incur, including reasonable attorneys' fees, in connection with the defense of a
bankruptcy preference action, fraudulent conveyance action, lien avoidance
action, or other action relating to your right to retain amounts previously paid
to you in respect of the Guaranty Obligations, and for all costs and expenses
you may incur relating to the Guaranty Obligations or the security therefor
during any applicable redemption period following the foreclosure of any
mortgage or security interest in any collateral, including but not limited to,
taxes and insurance costs in respect of such collateral..
14. YOUR RELIANCE. We acknowledge that this Guaranty is executed
in order to induce you to enter into the Agreement and disburse the amounts due
under the Transaction Documents with the intent that you will rely upon it in
entering into the Agreement and disbursing such amounts with the knowledge that
you would not enter into the Agreement or disburse such amounts but for
execution of
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this Guaranty. Disbursement of any part of the amounts due under the Transaction
Documents, without any further action or notice, shall constitute conclusive
evidence of your reliance hereon.
15. REPRESENTATIONS AND COVENANTS. Each of the undersigned hereby
represents and agrees as follows:
(a) the fair saleable value of our assets exceeds our
liabilities, including the liability undertaken pursuant to this Guaranty; we
are meeting our current liabilities as they mature; our financial statements
furnished to you are true and correct; since the date of such financial
statements, there have been no material adverse change in our financial
condition; there are not now pending any material court or administrative
proceedings or any undischarged judgments against us, and no federal or state
tax liens have been filed or threatened against us, nor are we in default or
claimed default under any agreement for borrowed money.
(b) We agree to immediately give you written notice of
any material adverse change in our financial condition, including but not
limited to litigation commenced, tax liens filed, defaults claimed under our
indebtedness for borrowed money or bankruptcy proceedings commenced by or
against us. Upon your request, we agree to deliver to you timely annual
financial statements for the preceding year and supporting federal and state tax
returns, and at such reasonable time as you request, to furnish our current
financial statement.
(c) We are fully aware of the financial condition of
Borrower and deliver this Guaranty based solely upon our own independent
investigation and in no part upon any representation or statement made by you
with respect thereto. We are in a position to and hereby assume full
responsibility for obtaining any additional information concerning Borrower's
financial condition as we may deem material to our obligations hereunder. We are
not relying upon nor expecting you to furnish us any information in your
possession concerning Borrower's financial condition.
(d) Other than proceeds paid to Borrower pursuant to the
Transaction Documents which may be used by the Borrower to pay us salary,
bonuses or dividends, none of those amounts will be used for (i) our personal,
family or household purposes, or (ii) to purchase or otherwise obtain title to
residential property which is security for our obligations under this Guaranty.
16. SECURITY. The performance of our obligations under this
Guaranty is unsecured, other than for such rights of set-off which you may have
by virtue of your holding our property.
17. MISCELLANEOUS.
(a) No right or remedy conferred upon or reserved to you
under this Guaranty is intended to be exclusive of any other available remedy or
remedies but each and every remedy shall be cumulative and shall be in addition
to every other remedy given under this Guaranty, or the Transaction Documents,
or as may now or hereafter exist at law or in equity. No waiver, amendment,
release or modification of this Guaranty shall be established by conduct, custom
or course of dealing, but only by an instrument in writing duly executed by you.
(b) Whenever the context requires or permits the singular
shall include the plural, the plural shall include the singular and the
masculine, feminine and neuter shall be freely interchangeable.
(c) This Guaranty is delivered in and made in, is
executed with respect to and shall in all respects be construed pursuant to and
governed by the laws of the State of Michigan.
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(d) This Guaranty and each and every part hereof, shall
be binding on us and our heirs, administrators, representatives and executors
and shall inure to your benefit, and your successors and assigns, including each
and every holder of the Note.
(e) This Guaranty may be executed by one or more of the
parties hereto on any number of separate counterparts and all of the
counterparts taken together shall constitute one and the same instrument.
(f) This Guaranty constitutes the joint and several
obligation of each guarantor of the Guaranty Obligations, including the
undersigned, and shall be fully binding upon and enforceable against any or all
of such parties or persons and their sole and separate estates. Neither the
death nor release of any guarantor of the Guaranty Obligations shall affect or
release the joint and several liability of any other person or party. You may at
your option enforce this Guaranty against one or more or all of the guarantors
of the Guaranty Obligations; provided you shall not be required to resort to
enforcement against each and every guarantor of the Guaranty Obligations and the
failure to proceed against or join each and every of the guarantors of the
Guaranty Obligations shall not affect the joint and several liability of each of
the guarantors of the Guaranty Obligations.
(g) This Guaranty is intended by us as a final expression
of our agreement and is intended as a complete statement of the terms and
conditions to which we are bound.
18. WAIVER OF JURY TRIAL.
OUR LEGAL COUNSEL HAS ADVISED US THAT (a) THERE MAY BE A CONSTITUTIONAL
RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY CLAIM, DISPUTE OR LAWSUIT ARISING
OUT OF THIS GUARANTY, AND (b) SUCH CONSTITUTIONAL RIGHT MAY BE WAIVED. AFTER
CONSULTATION WITH OUR COUNSEL (WHICH HAS INCLUDED OUR COUNSEL'S REVIEW OF THIS
GUARANTY), WE BELIEVE THAT IT IS IN OUR BEST INTEREST IN THIS COMMERCIAL
TRANSACTION TO WAIVE SUCH RIGHT. ACCORDINGLY, WE HEREBY WAIVE OUR RIGHT TO A
JURY TRIAL AND FURTHER AGREE THAT THE BEST FORUM FOR HEARING ANY CLAIM, DISPUTE
OR LAWSUIT, IF ANY, ARISING IN CONNECTION WITH THIS GUARANTY OR OUR RELATIONSHIP
WITH YOU, SHALL BE A COURT OF COMPETENT JURISDICTION SITTING WITHOUT A JURY.
WE GIVE THIS GUARANTY FREELY AND VOLUNTARILY TO YOU WITHOUT ANY DURESS
OR COERCION. WE HAVE CONSULTED WITH COUNSEL AND WE HAVE CAREFULLY AND COMPLETELY
READ ALL OF THE TERMS AND PROVISIONS OF THIS GUARANTY.
WITNESS:
___________________________ ____________________________________
XXXX X. XXXXXX
___________________________
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