EQUIPMENT LOAN NOTE
$500,000 December 22, 2003
Cranford, New Jersey
FOR VALUE RECEIVED, the undersigned, PURE WORLD BOTANICALS, INC., a
Delaware corporation (the "Borrower"), promises to pay to the order of FLEET
CAPITAL CORPORATION ("Lender"), at the office of the Lender, located at ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, or such other place as the Lender may
designate in writing, in lawful money of the United States of America and in
immediate available funds, the principal amount of FIVE HUNDRED THOUSAND
($500,000) DOLLARS or so much of such principal amount actually advanced to the
Borrower pursuant to a certain Loan and Security Agreement between Borrower and
Lender dated the date hereof (hereinafter, as amended from time to time, the
"Loan Agreement").
From the date of each Equipment Advance until the Equipment Loan
Amortization Date, the Borrower shall pay interest only to Lender on the
outstanding principal of Equipment Advances on a monthly basis commencing on the
first calendar day of each month (for the immediately preceding month computed
through the last calendar day of the preceding month).
On the Equipment Loan Amortization Date, the aggregate outstanding
principal balance of Equipment Advances then outstanding as of such date shall
be automatically converted to a term loan to be repaid in forty-eight (48) equal
monthly principal installments, which shall be as nearly equal as practicable,
together with accrued interest. Borrower will, if requested by ▇▇▇▇▇▇, execute
and deliver such additional promissory note(s) to evidence the repayment of
Equipment Advances on a term basis as provided in the Loan Agreement and herein.
Amounts borrowed under this Equipment Loan Note (the "Note") may not be repaid
and reborrowed.
This Note is the Equipment Loan Note referred to in, and is issued pursuant
to the Loan Agreement and is entitled to all of the benefits and security of the
Loan Agreement. All of the terms, covenants and conditions of the Loan Agreement
and the Security Documents are hereby made a part of this Note and are deemed
incorporated herein in full. All capitalized terms used herein, unless otherwise
specifically defined in this Note, shall have the meanings ascribed to them in
the Loan Agreement.
The rate of interest in effect hereunder shall be calculated with reference
to the Base Rate as more specifically provided in the Loan Agreement. The
interest due shall be computed in the manner provided in the Loan Agreement.
Except as otherwise expressly provided in the Loan Agreement, if any
payment on this Note becomes due and payable on a day other than a Business Day,
the maturity thereof shall be extended to the next succeeding Business Day, and
with respect to payments of principal and interest thereon, shall be payable at
the then applicable rate during such extension.
Borrower may terminate the Loan Agreement and, in connection with such
termination, prepay this Note in the manner provided in Section 4 of the Loan
Agreement.
Upon the occurrence and continuation of any one or more of the Events of
Default specified in the Loan Agreement which have not been cured by Borrower or
waived by Lender, Lender may declare all Obligations evidenced hereby to be
immediately due and payable (except with respect to any Event of Default set
forth in subsection 10.1.10 of the Loan Agreement, in which case all Obligations
evidenced hereby shall automatically become immediately due and payable without
the necessity of any notice or other demand) without presentment, demand,
protest or any other action or obligation of the Lender.
This Note shall be subject to mandatory prepayment in accordance with the
provisions of Section 3.3 of the Loan Agreement. Borrower may also terminate the
Loan Agreement and, in connection with such termination, prepay this Note in the
manner provided in Section 4 of the Loan Agreement.
Borrower shall have the right and privilege of prepaying at any time, all
or any portion of the outstanding principal amount under this Note. Provided,
however, that a prepayment premium shall be paid if all, or any portion, of this
Note is prepaid as follows:
(a) if the prepayment is made on or before December 21, 2004, the
prepayment fee shall be three (3%) percent of the amount prepaid;
(b) if the prepayment is made after December 21, 2004 but on or before
December 21, 2005, the prepayment shall be two (2%) percent of the amount
prepaid; and
(c) if the prepayment is made after December 21, 2005 but on or before
December 21, 2006, the prepayment fee shall be one (1%) percent of the amount
prepaid. Notwithstanding the foregoing, if this Note is refinanced with Lender,
FleetBoston Financial and/or any of their affiliates or related entities, no
prepayment fee shall be payable.
Time is of the essence of this Note. Borrower hereby waives presentment,
demand, protest and notice of any kind. No failure to exercise, and no delay in
exercising, any rights hereunder on the part of the holder hereof shall operate
as a waiver of such rights.
Wherever possible, each provision of this Note shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Note shall be prohibited or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or remaining provisions of this
Note. No delay or failure on the part of Lender in the exercise of any right or
remedy hereunder shall operate as a waiver thereof, nor as an acquiescence in
any default, nor shall any single or partial exercise by Lender of any right or
remedy preclude any other right or remedy. Lender, at its option, may enforce
its rights against any collateral securing this Note without enforcing its
rights against Borrower, any guarantor of the indebtedness evidenced hereby or
any other property or indebtedness due or to become due to Borrower. ▇▇▇▇▇▇▇▇
agrees that, without releasing or impairing ▇▇▇▇▇▇▇▇'s liability hereunder,
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Lender may at any time release, surrender, substitute or exchange any collateral
securing this Note and may at any time release any party primarily or
secondarily liable for the indebtedness evidenced by this Note.
The validity, interpretation and enforcement of this promissory note shall
be governed by the internal laws of the state of New Jersey without giving
effect to the conflict of laws principles thereof.
Attest: PURE WORLD BOTANICALS, INC.
By: /s/ ▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ By:/s/ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
Controller Chief Financial Officer
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SECURED PROMISSORY NOTE
$2,000,000 December 22, 2003
Cranford, New Jersey
FOR VALUE RECEIVED, the undersigned, PURE WORLD BOTANICALS, INC., a
Delaware corporation (hereinafter, "Borrower"), hereby promises to pay to the
order of FLEET CAPITAL CORPORATION, a Rhode Island corporation (hereinafter,
"Lender"), at the office of the Lender located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ or such other place as the Lender may designate in writing, in
such coin or currency of the United States which shall be legal tender in
payment of all debts and dues, public and private, at the time of payment, the
principal sum of TWO MILLION ($2,000,000) DOLLARS together with interest from
and after the date hereof on the unpaid principal balance outstanding at a
fluctuating rate per annum equal to three quarters (3/4%) percent above the Base
Rate.
This Secured Promissory Note (the "Note") is the Term Note referred to in,
and is issued pursuant to, that certain Loan and Security Agreement between
Borrower and Lender dated the date hereof (hereinafter, as amended from time to
time, the "Loan Agreement"), and is entitled to all of the benefits and security
of the Loan Agreement. All of the terms, covenants and conditions of the Loan
Agreement and the Security Documents are hereby made a part of this Note and are
deemed incorporated herein in full. All capitalized terms used herein, unless
otherwise specifically defined in this Note, shall have the meanings ascribed to
them in the Loan Agreement.
The rate of interest in effect hereunder shall be calculated with reference
to the Base Rate as more specifically provided in the Loan Agreement. The
interest due shall be computed in the manner provided in the Loan Agreement.
For so long as no Event of Default shall have occurred the principal amount
and accrued interest of this Note shall be due and payable on the dates and in
the manner hereinafter set forth:
(a) Interest shall be due and payable monthly, in arrears, on the
first day of each month, commencing on January 1, 2004, and continuing
until such time as the full principal balance, together with all other
amounts owing hereunder, shall have been paid in full;
(b) Principal shall be due and payable monthly commencing on January
1, 2004, and continuing on the first day of each month thereafter to and
including the first day of December, 2009, in installments of $23,810 each,
based on a seven (7) year amortization; and
(c) The entire remaining principal amount then outstanding, together
with any and all other amounts due hereunder, shall be due and payable on
December 21, 2009.
Except as otherwise provided in the Loan Agreement, if any payment on this Note
becomes due and payable on a day other than a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day, and with respect to
payments of principal and interest thereon, shall be payable at the then
applicable rate during such extension.
Notwithstanding the foregoing, the entire unpaid principal balance and
accrued interest on this Note shall be due and payable immediately upon any
termination of the Loan Agreement pursuant to Section 4 thereof or as otherwise
provided in the Loan Agreement.
This Note shall be subject to mandatory prepayment in accordance with the
provisions of Section 3.3 of the Loan Agreement. Borrower may also terminate the
Loan Agreement and, in connection with such termination, prepay this Note in the
manner provided in Section 4 of the Loan Agreement.
Borrower shall have the right and privilege of prepaying at any time, all
or any portion of the outstanding principal amount under this Note. Provided,
however, that a prepayment premium shall be paid if all, or any portion, of this
Note is prepaid as follows:
(a) if the prepayment is made on or before December 21, 2004, the
prepayment fee shall be three (3%) percent of the amount prepaid;
(b) if the prepayment is made after December 21, 2004 but on or before
December 21, 2005, the prepayment shall be two (2%) percent of the amount
prepaid; and
(c) if the prepayment is made after December 21, 2005 but on or before
December 21, 2006, the prepayment fee shall be one (1%) percent of the amount
prepaid. Notwithstanding the foregoing, if this Note is refinanced with Lender,
FleetBoston Financial and/or any of their affiliates or related entities, no
prepayment fee shall be payable.
Principal payments made are to be applied in the inverse order of principal
payments due.
Upon the occurrence of an Event of Default, Lender shall have all of the
rights and remedies set forth in Section 10 of the Loan Agreement.
Borrower shall pay a late payment fee equal to 5% of the amount of any
installment of principal or interest, or both, required hereunder which is
received by Lender more than ten (10) days after the due date thereof.
Time is of the essence of this Note. To the fullest extent permitted by
applicable law, Borrower, for itself and its legal representatives, successors
and assigns, expressly waives presentment, demand, protest, notice of dishonor,
notice of non-payment, notice of maturity, notice of protest, presentment for
the purpose of accelerating maturity, diligence in collection, and the benefit
of any exemption or insolvency laws.
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Wherever possible, each provision of this Note shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Note shall be prohibited or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or remaining provisions of this
Note. No delay or failure on the part of Lender in the exercise of any right or
remedy hereunder shall operate as a waiver thereof, nor as an acquiescence in
any default, nor shall any single or partial exercise by Lender of any right or
remedy preclude any other right or remedy. Lender, at its option, may enforce
its rights against any collateral securing this Note without enforcing its
rights against Borrower, any guarantor of the indebtedness evidenced hereby or
any other property or indebtedness due or to become due to Borrower. ▇▇▇▇▇▇▇▇
agrees that, without releasing or impairing ▇▇▇▇▇▇▇▇'s liability hereunder,
▇▇▇▇▇▇ may at any time release, surrender, substitute or exchange any collateral
securing this Note and may at any time release any party primarily or
secondarily liable for the indebtedness evidenced by this Note.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of New Jersey
IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇ has caused this Note to be duly executed and
on the date first above written.
Attest: PURE WORLD BOTANICALS, INC.
By:/s/ ▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ ▇▇: /s/ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
------------------------------------ -------------------------------
▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
Controller Chief Financial Officer
REVOLVING CREDIT NOTE
$5,000,000 December 22, 2003
Cranford, New Jersey
FOR VALUE RECEIVED, the undersigned, PURE WORLD BOTANICALS, INC., a New
Jersey corporation ("Borrower"), promises to pay to the order of FLEET CAPITAL
CORPORATION ("Lender"), at the office of the Lender located at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ or such other place as the Lender may
designate in writing, in lawful money of the United States of America and in
immediate available funds, the principal amount of FIVE MILLION ($5,000,000)
DOLLARS or so much of such principal amount as shall be outstanding and unpaid
on December 21, 2006.
This Revolving Credit Note (the "Note") is the Revolving Credit Note
referred to in, and is issued pursuant to, that certain Loan and Security
Agreement between Borrower and Lender dated the date hereof (hereinafter, as
amended from time to time, the "Loan Agreement"), and is entitled to all of the
benefits and security of the Loan Agreement. All of the terms, covenants and
conditions of the Loan Agreement and the Security Documents are hereby made a
part of this Note and are deemed incorporated herein in full. All capitalized
terms used herein, unless otherwise specifically defined in this Note, shall
have the meanings ascribed to them in the Loan Agreement.
The rate of interest in effect hereunder shall be calculated with reference
to the Base Rate as more specifically provided in the Loan Agreement. The
interest due shall be computed and paid in the manner provided in the Loan
Agreement.
Except as otherwise expressly provided in the Loan Agreement, if any
payment on this Note becomes due and payable on a day other than a Business Day,
the maturity thereof shall be extended to the next succeeding Business Day, and
with respect to payments of principal and interest thereon shall be payable at
the then applicable rate during such extension.
This Note is subject to mandatory prepayment in accordance with the
provisions Section 3.3 of the Loan Agreement. Borrower may terminate the Loan
Agreement and, in connection with such termination, prepay this Note in the
manner provided in Section 4 of the Loan Agreement.
Upon the occurrence and continuation of any one or more of the Events of
Default specified in the Loan Agreement which have not been cured by Borrower or
waived by Lender, Lender may declare all Obligations evidenced hereby to be
immediately due and payable (except with respect to any Event of Default set
forth in subsection 10.1.10 of the Loan Agreement, in which case all Obligations
evidenced hereby shall automatically become immediately due and payable without
the necessity of any notice or other demand) without presentment, demand,
protest or any other action or obligation of the Lender.
Time is of the essence of this Note. Borrower hereby waives presentment,
demand, protest and notice of any kind. No failure to exercise, and no delay in
exercising, any rights hereunder on the part of the holder hereof shall operate
as a waiver of such rights.
Wherever possible, each provision of this Note shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Note shall be prohibited or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or remaining provisions of this
Note. No delay or failure on the part of Lender in the exercise of any right or
remedy hereunder shall operate as a waiver thereof, nor as an acquiescence in
any default, nor shall any single or partial exercise by Lender of any right or
remedy preclude any other right or remedy. Lender, at its option, may enforce
its rights against any collateral securing this Note without enforcing its
rights against Borrower, any guarantor of the indebtedness evidenced hereby or
any other property or indebtedness due or to become due to Borrower. ▇▇▇▇▇▇▇▇
agrees that, without releasing or impairing ▇▇▇▇▇▇▇▇'s liability hereunder,
▇▇▇▇▇▇ may at any time release, surrender, substitute or exchange any collateral
securing this Note and may at any time release any party primarily or
secondarily liable for the indebtedness evidenced by this Note.
The validity, interpretation and enforcement of this promissory note shall
be governed by the internal laws of the state of New Jersey without giving
effect to the conflict of laws principles thereof.
Attest: PURE WORLD BOTANICALS, INC.
By: /s/ ▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ ▇▇: /s/ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
-------------------------------- ---------------------------------
▇▇▇▇▇▇ ▇'▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
Controller Chief Financial Officer
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made this 22 day of December 2003, by
and between FLEET CAPITAL CORPORATION ("Lender"), a Rhode Island corporation
with an office at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ and PURE WORLD
BOTANICALS, INC., a Delaware corporation ("Borrower"), with its chief executive
office and principal place of business at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇. Capitalized terms used in this Agreement have the meanings
assigned to them in Appendix A, General Definitions. Accounting terms not
otherwise specifically defined herein shall be construed in accordance with GAAP
consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, ▇▇▇▇▇▇ agrees to make a Total Credit Facility of up to $7,500,000
available upon ▇▇▇▇▇▇▇▇'s request therefor, as follows:
1.1 Revolving Credit Loans.
1.1.1 Loans and Reserves. ▇▇▇▇▇▇ agrees, for so long as no Default or Event
of Default exists, to make Revolving Credit Loans to Borrower from time to time,
as requested by Borrower in the manner set forth in subsection 3.1.1 hereof, up
to a maximum principal amount at any time outstanding equal to the Borrowing
Base at such time minus reserves, if any. Lender shall have the right to
establish reserves in such amounts, and with respect to such matters, as Lender
shall deem necessary or appropriate, against the amount of Revolving Credit
Loans which Borrower may otherwise request under this subsection 1.1.1,
including, without limitation, with respect to (i) price adjustments, damages,
unearned discounts, returned products or other matters for which credit
memoranda are issued in the ordinary course of Borrower's business; (ii)
shrinkage, spoilage and obsolescence of Inventory; (iii) other sums chargeable
against Borrower's Loan Account as Revolving Credit Loans under any section of
this Agreement; (iv) amounts owing by Borrower to any Person to the extent
secured by a Lien on, or trust over, any Property of Borrower; and (v) such
other matters, events, conditions or contingencies as to which Lender, in its
sole credit judgment, determines reserves should be established from time to
time hereunder. The Revolving Credit Loans shall be further evidenced by the
Revolving Credit Note and shall be secured by all of the Collateral.
1.1.2 Use of Proceeds. The Revolving Credit Loans shall be used solely for
the satisfaction of existing Indebtedness of Borrower to PNC Bank, American Bank
of Lehigh Valley and for Borrower's general operating capital needs in a manner
consistent with the provisions of this Agreement and all applicable laws.
1.2 Term and Equipment Loans.
1.2.1 Term Loan. ▇▇▇▇▇▇ agrees to make a term loan to Borrower on the
Closing Date in the principal amount of $2,000,000, which shall be repayable in
accordance with the terms of the Term Note and shall be secured by all of the
Collateral. The proceeds of the Term Loan shall be used solely for purposes for
which the proceeds of the Revolving Credit Loans are authorized to be used.
1.2.2 Equipment Loans.
(i) Under the terms and conditions herein set forth and provided no Default
or Event of Default exists, ▇▇▇▇▇▇ agrees to make a loan or loans to Borrower
for the purpose of purchasing Equipment up to an aggregate principal amount
advanced of $500,000. The Equipment Loan shall be evidenced by a certain
Equipment Loan Note to be executed contemporaneously herewith as the same may be
amended or substituted from time to time. Borrower may borrow up to the amount
of the Equipment Loan by requesting a single advance or multiple advances, upon
giving Lender three (3) Business Days prior written or telegraphic notice of
each requested advance, which notice shall specify the Equipment being
purchased, the proposed date of the Equipment Loan advance and the amount
requested (the "Equipment Advance" or "Equipment Advances"). At the time of each
such notice, Borrower shall provide Lender with copies, certified by ▇▇▇▇▇▇▇▇'s
chief financial officer to be true copies, of each of the invoices submitted to
Borrower showing the Equipment purchased, the date of delivery and the amount of
the Borrower's cost of such Equipment. The proceeds of the Equipment Loan are to
be used solely for the purpose of purchasing the Equipment described in the
invoice submitted to Lender. With respect to each Equipment Advance requested,
Lender will provide Borrower with the amount requested, not to exceed eighty
(80%) percent of the face amount of such invoice (excluding all soft costs such
as installation fees and the like). Lender shall make each Equipment Advance
granted hereunder by crediting the amount thereof to the regular deposit account
of Borrower at Bank or by paying the amount thereof to such corporation,
partnership, person or other entity as Borrower shall direct, either by
cashier's check or wire transfer. Each Equipment Advance shall be in the sum of
not less than $25,000. The Equipment Loan(s) shall be further evidenced by the
Equipment Loan Note and shall be secured by all of the Collateral.
(ii) ▇▇▇▇▇▇'s commitment to make Equipment Advances hereunder (subject to
the provisions of this Section) shall terminate on the date which is the earlier
of the following:
(1) The date upon which ▇▇▇▇▇▇ has made Equipment Advances to Borrower
which, in the aggregate, total the sum of $500,000; or
(2) December 21, 2004 (the "Equipment Loan Amortization Date").
(iii) From the date of each Equipment Advance, Borrower shall pay interest
only on the principal of the outstanding Equipment Advances, calculated as
hereinafter provided. On the Equipment Loan Amortization Date, any outstanding
principal due under the Equipment Advances shall be converted into a term loan
to be repaid in up to forty-eight (48) consecutive monthly principal
installments, which shall be as nearly equal as practicable, each such
installment to be paid together with interest as hereinafter provided. Any
payment of principal or interest, or prepayment of principal, howsoever
2
designated by Borrower, shall be applied first to accrued unpaid interest and
the balance, if any, to the principal balance outstanding. Amounts borrowed
under the Equipment Loan may not be repaid and reborrowed.
1.3 [INTENTIONALLY LEFT BLANK].
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Rates of Interest. Interest shall accrue on the principal amount of
the (i) Revolving Credit Loans outstanding at the end of each day at a
fluctuating rate per annum equal to 1/2% plus the Base Rate; (ii) Term Loan
outstanding at the end of each day at a fluctuating rate per annum equal to 3/4%
plus the Base Rate; and (iii) Equipment Loans outstanding at the end of each day
at a fluctuating rate per annum equal to 3/4% plus the Base Rate. The rate of
interest applicable to the Base Rate shall increase or decrease by an amount
equal to any increase or decrease in the Base Rate, effective as of the opening
of business on the day that any such change in the Base Rate occurs.
2.1.2 Default Rate of Interest. Upon and after the occurrence of an Event
of Default, and during the continuation thereof, the principal amount of all
Loans shall bear interest at a rate per annum equal to 5% above the interest
rate otherwise applicable thereto (the "Default Rate").
2.1.3 Maximum Interest. In no event whatsoever shall the aggregate of all
amounts deemed interest under the Revolving Credit Note, or under the Term Note
or the Equipment Note and charged or collected pursuant to the terms of this
Agreement or pursuant to the Revolving Credit Note or Term Note or the Equipment
Note exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
If any provisions of this Agreement, the Revolving Credit Note, the Term Note or
the Equipment Note are in contravention of any such law, such provisions shall
be deemed amended to conform thereto.
2.2 Computation of Interest and Fees. Interest and unused line fees and
collection charges hereunder shall be calculated daily and shall be computed on
the actual number of days elapsed over a year of 360 days. For the purpose of
computing interest hereunder, all items of payment received by ▇▇▇▇▇▇ shall be
deemed applied by ▇▇▇▇▇▇ on account of the Obligations (subject to final payment
of such items) on the second Business Day after receipt by Lender of such items
in Lender's account located in Cranford, New Jersey.
2.3 Commitment Fee. Borrower shall pay to Lender a commitment fee of
$37,500, $18,750 of which has previously been paid to Lender, and the balance of
which shall be fully earned and nonrefundable and payable, on the Closing Date.
2.4 [INTENTIONALLY LEFT BLANK].
3
2.5 Unused Line Fee. Borrower shall pay to Lender a fee equal to .375% per
annum of the average monthly amount by which $5,000,000 exceeds the sum of the
outstanding principal balance of the Revolving Credit Loans. The unused line fee
shall be payable monthly in arrears on the first day of each calendar month
hereafter.
2.6 Collection Charges. All items of payment received by ▇▇▇▇▇▇ at any time
(irrespective of whether there are Revolving Credit Loans outstanding at the
time of receipt) shall be subject to collection charge equal to two (2) Business
Days interest on the amount thereof at the rate then applicable to the Revolving
Credit Loans, which collection charges shall be payable monthly in arrears on
the first Business Day of each month.
2.7 Audit and Appraisal Fees. Borrower shall pay to Lender audit and
appraisal fees in accordance with ▇▇▇▇▇▇'s current schedule of fees in effect
from time to time in connection with audits and appraisals of Borrower's books
and records and such other matters as Lender shall deem appropriate, plus all
out-of-pocket expenses incurred by Lender in connection with such audits and
appraisals. Borrower shall also pay the Lender field examination fees at the
rate of $800 per person per man day, plus out-of-pocket expenses incurred by
Lender in connection with field examinations performed by Lender or its agents
or representatives. Provided no Event of Default has occurred, Lender will, at
its option, conduct no fewer than two (2) nor more than four (4) field
examinations per annum. Such fees shall be payable on the first day of the month
following the date of issuance by ▇▇▇▇▇▇ of a request for payment thereof to
Borrower. After the occurrence of an Event of Default, such fees and the number
of field examinations shall be subject to change as Lender shall determine.
2.8 Reimbursement of Expenses. If, at any time or times regardless of
whether or not an Event of Default then exists, Lender incurs legal or
accounting expenses or any other costs or out-of-pocket expenses in connection
with (i) the negotiation and preparation of this Agreement or any of the other
Loan Documents, any amendment of or modification of this Agreement or any of the
other Loan Documents; (ii) the administration of this Agreement or any of the
other Loan Documents and the transactions contemplated hereby and thereby; (iii)
any litigation, contest, dispute, suit, proceeding or action (whether instituted
by ▇▇▇▇▇▇, Borrower or any other Person) in any way relating to the Collateral,
this Agreement or any of the other Loan Documents or Borrower's affairs; (iv)
any attempt to enforce any rights of Lender against Borrower or any other Person
which may be obligated to Lender by virtue of this Agreement or any of the other
Loan Documents, including, without limitation, the Account Debtors; or (v) any
attempt to inspect, verify, protect, preserve, restore, collect, sell, liquidate
or otherwise dispose of or realize upon the Collateral; then all such reasonable
legal and accounting expenses, other costs and out of pocket expenses of Lender
shall be charged to Borrower. All amounts chargeable to Borrower under this
Section 2.8 shall be Obligations secured by all of the Collateral, shall be
payable on demand to Lender, and shall bear interest from the date such demand
is made until paid in full at the rate applicable to Revolving Credit Loans from
time to time. Borrower shall also reimburse Lender for expenses incurred by
▇▇▇▇▇▇ in its administration of the Collateral to the extent and in the manner
provided in Section 6 hereof.
2.9 Bank Charges. Borrower shall pay to Lender, on demand, any and all
fees, costs or expenses which Lender pays to a bank or other similar institution
4
arising out of or in connection with (i) the forwarding to Borrower or any other
Person on behalf of ▇▇▇▇▇▇▇▇, by ▇▇▇▇▇▇, of proceeds of loans made by Lender to
Borrower pursuant to this Agreement and (ii) the depositing for collection, by
Lender or any Participating Lender, of any check or item of payment received or
delivered to Lender or any Participating Lender on account of the Obligations.
SECTION 3. LOAN ADMINISTRATION.
3.1 Manner of Borrowing Revolving Credit Loans. Borrowings under the credit
facility established pursuant to Section 1 hereof shall be as follows:
3.1.1 Loan Requests. A request for a Revolving Credit Loan shall be made,
or shall be deemed to be made, in the following manner: (i) Borrower may give
Lender notice of its intention to borrow, in which notice Borrower shall specify
the amount of the proposed borrowing and the proposed borrowing date, no later
than 11:00 a.m. New York time on the proposed borrowing date, provided, however,
that no such request may be made at a time when there exists a Default or an
Event of Default; and (ii) the becoming due of any amount required to be paid
under this Agreement, whether as interest or for any other Obligation, shall be
deemed irrevocably to be a request for a Revolving Credit Loan on the due date
in the amount required to pay such interest or other Obligation. As an
accommodation to Borrower, ▇▇▇▇▇▇ may permit telephonic or electronic requests
for loans and electronic transmittal of instructions, authorizations, agreements
or reports to Lender by ▇▇▇▇▇▇▇▇. Unless Borrower specifically directs Lender in
writing not to accept or act upon telephonic or electronic communications from
Borrower, Lender shall have no liability to Borrower for any loss or damage
suffered by Borrower as a result of ▇▇▇▇▇▇'s honoring of any requests, execution
of any instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to have been
sent to Lender by Borrower and Lender shall have no duty to verify the origin of
any such communication or the authority of the person sending it.
3.1.2 Disbursement. Borrower hereby irrevocably authorizes ▇▇▇▇▇▇ to
disburse the proceeds of each Revolving Credit Loan requested, or deemed to be
requested, pursuant to this subsection 3.1.2 as follows: (i) the proceeds of
each Revolving Credit Loan requested under subsection 3.1.1(i) shall be
disbursed by Lender in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in accordance
with the terms of the written disbursement letter from ▇▇▇▇▇▇▇▇, and in the case
of each subsequent borrowing, by a credit to the Borrower's operating account
maintained at Bank and (ii) the proceeds of each Revolving Credit Loan requested
under subsection 3.1.1(ii) shall be disbursed by Lender by way of direct payment
of the relevant interest or other Obligation.
3.1.3 Authorization. Borrower hereby irrevocably authorizes ▇▇▇▇▇▇, in
▇▇▇▇▇▇'s sole discretion, to advance to ▇▇▇▇▇▇▇▇, and to charge to ▇▇▇▇▇▇▇▇'s
Loan Account hereunder at the applicable interest rate, a sum sufficient to pay
all interest accrued on the Obligations during the immediately preceding month
and to pay all costs, fees and expenses at any time owed by ▇▇▇▇▇▇▇▇ to Lender
hereunder.
5
3.2 Payments. Except where evidenced by notes or other instruments issued
or made by Borrower to Lender specifically containing payment provisions which
are in conflict with this Section 3.2 (in which event the conflicting provisions
of said notes or other instruments shall govern and control), the Obligations
shall be payable as follows:
3.2.1 Principal. Principal payable on account of Revolving Credit Loans
shall be payable by Borrower to Lender immediately upon the earliest of (i) the
receipt by Lender or Borrower of any proceeds of any of the Collateral, to the
extent of said proceeds, (ii) the occurrence of an Event of Default in
consequence of which Lender elects to accelerate the maturity and payment of the
Obligations, or (iii) termination of this Agreement pursuant to Section 4
hereof; provided, however, that if an Overadvance shall exist at any time,
Borrower shall, on demand, repay the Overadvance.
3.2.2 Interest. Interest accrued on the Revolving Credit Loans, Term Loan
and Equipment Loan shall be due on the earliest of (i) the first calendar day of
each month (for the immediately preceding month), computed through the last
calendar day of the preceding month, (ii) the occurrence of an Event of Default
in consequence of which Lender elects to accelerate the maturity and payment of
the Obligations or (iii) termination of this Agreement pursuant to Section 4
hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges payable pursuant to
this Agreement shall be payable by Borrower as and when provided in Section 2
hereof, to Lender or to any other Person designated by Lender in writing. Any
amounts due under this Agreement may be charged to any account of Borrower
maintained with the Bank.
3.2.4 Other Obligations. The balance of the Obligations requiring the
payment of money, if any, shall be payable by Borrower to Lender as and when
provided in this Agreement, the Other Agreements or the Security Documents, or
on demand, whichever is later.
3.3 Mandatory Prepayments.
3.3.1 Proceeds of Sale, Loss, Destruction or Condemnation of Collateral.
Except as provided in subsection 6.4.2 hereof, if Borrower sells any Equipment,
or if any of the Collateral is lost or destroyed or taken by condemnation,
Borrower shall pay to Lender, unless otherwise agreed by ▇▇▇▇▇▇, as and when
received by Borrower and as a mandatory prepayment of the Term Loan or the
Equipment Loan, or the Revolving Loan, as determined by Lender, a sum equal to
the proceeds (including insurance payments) received by Borrower from such sale,
loss, destruction or condemnation.
3.4 Application of Payments and Collections. All items of payment received
by Lender by 12:00 noon, New York time, on any Business Day shall be deemed
received on that Business Day. All items of payment received after 12:00 noon,
New York time, on any Business Day shall be deemed received on the following
Business Day. Borrower irrevocably waives the right to direct the application of
any and all payments and collections at any time or times hereafter received by
Lender from or on behalf of Borrower, and ▇▇▇▇▇▇▇▇ does hereby irrevocably agree
that Lender shall have the continuing exclusive right to apply and reapply any
6
and all such payments and collections received at any time or times hereafter by
Lender or its agent against the Obligations, in such manner as Lender may deem
advisable, notwithstanding any entry by Lender upon any of its books and
records. If as the result of collections of Accounts as authorized by subsection
6.2.6 hereof a credit balance exists in the Loan Account, such credit balance
shall not accrue interest in favor of Borrower, but shall be available to
Borrower at any time or times for so long as no Default or Event of Default
exists. Such credit balance shall not be applied or be deemed to have been
applied as a prepayment of the Term Loan or any Equipment Loan, except that
Lender may, at its option, offset such credit balance against any of the
Obligations upon and after the occurrence of an Event of Default.
3.5 All Loans to Constitute One Obligation. The Loans shall constitute one
general Obligation of Borrower, and shall be secured by ▇▇▇▇▇▇'s Lien upon all
of the Collateral.
3.6 Loan Account. Lender shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all payments made by Borrower
on any Obligations and all proceeds of Collateral which are finally paid to
Lender, and may record therein, in accordance with customary accounting
practice, other debits and credits, including interest and all charges and
expenses properly chargeable to Borrower.
3.7 Statements of Account. ▇▇▇▇▇▇ will account to Borrower monthly with a
statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Lender shall be deemed final, binding and conclusive
upon Borrower unless ▇▇▇▇▇▇ is notified by Borrower in writing to the contrary
within thirty (30) days of the date each accounting is mailed to Borrower. Such
notice shall only be deemed an objection to those items specifically objected to
therein.
3.8 Increased Costs. If any law or any governmental or quasi-governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) adopted after the date of this Agreement and having general
applicability to all banks within the jurisdiction in which Lender operates
(excluding, for the avoidance of doubt, the effect of and phasing in of capital
requirements or other regulations or guidelines passed prior to the date of this
Agreement), or any interpretation or application thereof by any governmental
authority charged with the interpretation or application thereof, or the
compliance of Lender therewith, shall:
(i) (1) subject Lender to any tax with respect to this Agreement
(other than (a) any tax based on or measured by net income or otherwise in
the nature of a net income tax, including, without limitation, any
franchise tax or any similar tax based on capital, net worth or comparable
basis for measurement and (b) any tax collected by a withholding on
payments and which neither is computed by reference to the net income of
the payee nor is in the nature of an advance collection of a tax based on
or measured by the net income of the payee) or (2) change the basis of
taxation of payments to Lender of principal, fees, interest or any other
amount payable hereunder or under any Loan Documents (other than in respect
of (a) any tax based on or measured by net income or otherwise in the
nature of a net income tax, including, without limitation, any franchise
tax or any similar tax based on capital, net worth or comparable basis for
measurement and (b) any tax collected by a withholding on payments and
which neither is computed by reference to the net income of the payee nor
7
is in the nature of an advance collection of a tax based on or measured by
the net income of the payee);
(ii) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or
for the account of, advances or loans by, or other credit extended by, any
office of Lender, including (without limitation) pursuant to Regulation D
of the Board of Governors of the Federal Reserve System; or
(iii) impose on Lender any other condition with respect to any Loan
Document;
and the result of any of the foregoing is to increase the cost to Lender of
making, renewing or maintaining Loans hereunder by an amount that Lender deems
to be material or to reduce the amount of any payment (whether of principal,
interest or otherwise) in respect of any of the Loans by an amount that Lender
deems to be material, then, in any such case, Borrower shall pay Lender, upon
demand and certification not later than sixty (60) days following its receipt of
notice of the imposition of such increased costs, such additional amount as will
compensate Lender for such additional cost or such reduction, as the case may
be, to the extent Lender has not otherwise been compensated, with respect to a
particular Loan, for such increased cost as a result of an increase in the Base
Rate. An officer of Lender shall determine the amount of such additional cost or
reduced amount using reasonable averaging and attribution methods and shall
certify the amount of such additional cost or reduced amount to Borrower, which
certification shall include a written explanation of such additional cost or
reduction to Borrower. Such certification shall be conclusive absent manifest
error. If Lender claims any additional cost or reduced amount pursuant to this
Section 3.8, then Lender shall use reasonable efforts (consistent with legal and
regulatory restrictions) to designate a different lending office or to file any
certificate or document reasonably requested by Borrower if the making of such
designation or filing would avoid the need for, or reduce the amount of, any
such additional cost or reduced amount and would not, in the sole discretion of
Lender, be otherwise disadvantageous to Lender.
3.9 [INTENTIONALLY LEFT BLANK].
SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to ▇▇▇▇▇▇'s right to cease making Loans to
Borrower upon or after the occurrence of any Default or Event of Default, this
Agreement shall be in effect for a period of three (3) years from the date
hereof, through and including December 21, 2006 (the "Original Term").
4.2 Termination.
4.2.1 Termination by ▇▇▇▇▇▇. Lender may terminate this Agreement as of the
last day of the Original Term and Lender may terminate this Agreement upon or
after the occurrence of an Event of Default.
8
4.2.2 Termination by ▇▇▇▇▇▇▇▇. Upon at least ninety (90) days prior written
notice to Lender, Borrower may, at its option, terminate this Agreement;
provided, however, no such termination shall be effective until Borrower has
paid all of the Obligations in immediately available funds. Any notice of
termination given by Borrower shall be irrevocable unless ▇▇▇▇▇▇ otherwise
agrees in writing, and ▇▇▇▇▇▇ shall have no obligation to make any Loans on or
after the termination date stated in such notice. Borrower may elect to
terminate this Agreement in its entirety only. No section of this Agreement or
type of Loan available hereunder may be terminated singly.
4.2.3 Termination Charges. At the effective date of termination of this
Agreement for any reason, Borrower shall pay to Lender (in addition to the then
outstanding principal, accrued interest and other charges owing, including,
without limitation, the prepayment premiums set forth in the Term Note and
Equipment Note, under the terms of this Agreement and any of the other Loan
Documents) as liquidated damages for the loss of the bargain and not as a
penalty, an amount equal to 3% of the Total Credit Facility if termination
occurs during the first twelve-month period of the Original Term (December 21,
2003 through December 21, 2004); 2% of the Total Credit Facility if termination
occurs during the second 12-month period of the Original Term (December 22,
2004) through December 21, 2005); 1% of the Total Credit Facility if termination
occurs during the third 12-month period of the Original Term (December 22, 2005
through December 21, 2006); Notwithstanding the foregoing, if the Obligations
are refinanced with Lender, FleetBoston Financial and/or any of their affiliates
or related entities, or if termination occurs during the last sixty (60) days of
the Original Term, no termination charge shall be payable. Further, the then
existing outstanding principal balance of the Term Loan at the time of
termination shall be used in calculating the Total Credit Facility for the
purposes of the termination charges herein.
4.2.4 Effect of Termination. All of the Obligations shall be immediately
due and payable upon the termination date stated in any notice of termination of
this Agreement, the last day of the Original Term, acceleration of the
Obligations by the Lender as set forth herein or by prepayment of any of the
Obligations. All undertakings, agreements, covenants, warranties and
representations of Borrower contained in the Loan Documents shall survive any
such termination and Lender shall retain its Liens in the Collateral and all of
its rights and remedies under the Loan Documents notwithstanding such
termination until Borrower has paid the Obligations to Lender, in full, in
immediately available funds, together with the applicable termination charge, if
any. Notwithstanding the payment in full of the Obligations, Lender shall not be
required to terminate its security interests in the Collateral unless, with
respect to any loss or damage Lender may incur as a result of dishonored checks
or other items of payment received by Lender from Borrower or any Account Debtor
and applied to the Obligations, Lender shall, at its option, (i) have received a
written agreement, executed by Borrower and by any Person whose loans or other
advances to Borrower are used in whole or in part to satisfy the Obligations,
indemnifying Lender from any such loss or damage; or (ii) have retained such
monetary reserves and Liens on the Collateral for such period of time as Lender,
in its reasonable discretion, may deem necessary to protect Lender from any such
loss or damage.
9
SECTION 5. SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment and
performance to Lender of the Obligations, Borrower hereby grants to Lender a
continuing Lien upon all of Borrower's assets, including all of the following
Property and interests in Property of Borrower, whether now owned or existing or
hereafter created, acquired or arising and wheresoever located:
(i) Accounts;
(ii) Certificated Securities;
(iii) Chattel Paper;
(iv) Computer Hardware and Software and all rights with respect thereto,
including, any and all licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights, improvement rights,
renewal rights and indemnifications, and any substitutions, replacements,
additions or model conversions of any of the foregoing;
(v) Contract Rights;
(vi) Deposit Accounts;
(vii) Documents;
(viii) Equipment;
(ix) Financial Assets;
(x) Fixtures;
(xi) General Intangibles, including Payment Intangibles and Software;
(xii) Goods (including all of its Equipment, Fixtures and Inventory), and
all accessions, additions, attachments, improvements, substitutions and
replacements thereto and therefor;
(xiii) Instruments;
(xiv) Intellectual Property;
(xv) Inventory;
(xvi) Investment Property;
10
(xvii) money (of every jurisdiction whatsoever);
(xviii) Letter-of-Credit Rights;
(xix) Payment Intangibles;
(xx) Security Entitlements;
(xxi) Software;
(xxii) Supporting Obligations;
(xxiii) Commercial Tort Claims;
(xxiv) Uncertificated Securities; and
(xxv) to the extent not included in the foregoing, all other personal
property of any kind or description;
together with all books, records, writings, data bases, information and other
property relating to, used or useful in connection with, or evidencing,
embodying, incorporating or referring to any of the foregoing, and all Proceeds,
products, offspring, rents, issues, profits and returns of and from any of the
foregoing; provided that to the extent that the provisions of any lease or
license of Computer Hardware and Software or Intellectual Property expressly
prohibit (which prohibition is enforceable under applicable law) any assignment
thereof, and the grant of a security interest therein, Lender will not enforce
its security interest in Borrower's rights under such lease or license (other
than in respect of the Proceeds thereof) for so long as such prohibition
continues, it being understood that upon request of ▇▇▇▇▇▇, Borrower will in
good faith use reasonable efforts to obtain consent for the creation of a
security interest in favor of ▇▇▇▇▇▇ (and to ▇▇▇▇▇▇'s enforcement of such
security interest) in such Lender's rights under such lease or license.
5.2 Other Collateral.
5.2.1 Commercial Tort Claims. Borrower shall promptly notify Lender in
writing upon incurring or otherwise obtaining a Commercial Tort Claim after the
Closing Date against any third party and, upon request of Lender, promptly enter
into an amendment to this Agreement and do such other acts or things deemed
appropriate by Lender to give Lender a security interest in any such Commercial
Tort Claim.
5.2.2 Other Collateral. Borrower shall promptly notify Lender in writing
upon acquiring or otherwise obtaining any Collateral after the date hereof
consisting of Deposit Accounts, Investment Property, Letter-of-Credit Rights or
Electronic Chattel Paper and, upon the request of Lender, promptly execute such
other documents, and do such other acts or things deemed appropriate by Lender
to deliver to Lender control with respect to such Collateral; promptly notify
Lender in writing upon acquiring or otherwise obtaining any Collateral after the
date hereof consisting of Documents or Instruments and, upon the request of
11
Lender, will promptly execute such other documents, and do such other acts or
things deemed appropriate by Lender to deliver to Lender possession of such
Documents which are negotiable and Instruments, and, with respect to
nonnegotiable Documents, to have such nonnegotiable Documents issued in the name
of Lender; and with respect to Collateral in the possession of a third party,
other than Certificated Securities and Goods covered by a Document and obtain an
acknowledgement from the third party that it is holding the Collateral for the
benefit of Lender.
5.3 Lien Perfection; Further Assurances. Borrower authorizes such UCC
financing statements as are required by the UCC and such other instruments,
assignments or documents as are necessary to perfect Lender's Lien upon any of
the Collateral and shall take such other action as may be required to perfect or
to continue the perfection of ▇▇▇▇▇▇'s Lien upon the Collateral. Unless
prohibited by applicable law, Borrower hereby irrevocably authorizes Lender to
execute and file any such financing statements, including, without limitation,
financing statements that indicate the Collateral (i) as all assets of Borrower
or words of similar effect, or (ii) as being of an equal or lesser scope, or
with greater or lesser detail, than as set forth in Section 5.1, on Borrower's
behalf. Borrower also hereby ratifies its authorization for Lender to have filed
in any jurisdiction any like financing statements or amendments thereto if filed
prior to the date hereof. The parties agree that a photographic or other
reproduction of this Agreement shall be sufficient as a financing statement and
may be filed in any appropriate office in lieu thereof. At Lender's request,
Borrower shall also promptly execute or cause to be executed and shall deliver
to Lender any and all documents, instruments and agreements deemed necessary by
Lender to give effect to or carry out the terms or intent of the Loan Documents.
5.4 [INTENTIONALLY LEFT BLANK].
SECTION 6. COLLATERAL ADMINISTRATION
6.1 General
6.1.1 Location of Collateral. All Collateral, other than Inventory in
transit and motor vehicles, will at all times be kept by Borrower and its
Subsidiaries at one or more of the business locations set forth in Exhibit C
hereto and shall not, without the prior written approval of Lender, be moved
therefrom except, prior to an Event of Default and Lender's acceleration of the
maturity of the Obligations in consequence thereof, for (i) sales of Inventory
in the ordinary course of business; and (ii) removals in connection with
dispositions of Equipment that are authorized by subsection 6.4.2 hereof.
6.1.2 Insurance of Collateral. Borrower shall maintain and pay for
insurance upon all Collateral wherever located and with respect to Borrower's
business, covering casualty, hazard, public liability, product liability and
such other risks in such amounts and with such insurance companies as are
reasonably satisfactory to Lender. Borrower shall deliver the originals of such
policies to Lender with satisfactory lender's loss payable endorsements, naming
Lender as loss payee, assignee or additional insured, as appropriate. Each
policy of insurance or endorsement shall contain a clause requiring the insurer
to give not less than thirty (30) days prior written notice to Lender in the
event of cancellation of the policy for any reason whatsoever and a clause
specifying that the interest of Lender shall not be impaired or invalidated by
12
any act or neglect of Borrower or the owner of the Property or by the occupation
of the premises for purposes more hazardous than are permitted by said policy.
If Borrower fails to provide and pay for such insurance, Lender may, at its
option, but shall not be required to, procure the same and charge Borrower
therefor. ▇▇▇▇▇▇▇▇ agrees to deliver to Lender, promptly as rendered, true
copies of all reports made in any reporting forms to insurance companies.
6.1.3 Protection of Collateral. All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral, any
and all excise, property, sales, and use taxes imposed by any state, federal, or
local authority on any of the Collateral or in respect of the sale thereof shall
be borne and paid by Borrower. If Borrower fails to promptly pay any portion
thereof when due, Lender may, at its option, but shall not be required to, pay
the same and charge Borrower therefor. Lender shall not be liable or responsible
in any way for the safekeeping of any of the Collateral or for any loss or
damage thereto (except for reasonable care in the custody thereof while any
Collateral is in Lender's actual possession) or for any diminution in the value
thereof, or for any act or default of any warehouseman, carrier, forwarding
agency, or other person whomsoever, but the same shall be at Borrower's sole
risk.
6.2 Administration of Accounts.
6.2.1 Records, Schedules and Assignments of Accounts. Borrower shall keep
accurate and complete records of its Accounts and all payments and collections
thereon and shall submit to Lender on such periodic basis as Lender shall
request a sales and collections report for the preceding period, in form
satisfactory to Lender. On or before the twentieth (20th) day of each month from
and after the date hereof, Borrower shall deliver to Lender, in form acceptable
to Lender, a detailed, aged trial balance of all Accounts existing as of the
last day of the preceding month, specifying the names, addresses, face value,
dates of invoices and due dates for each Account Debtor obligated on an Account
so listed ("Schedule of Accounts"), and, upon ▇▇▇▇▇▇'s request therefor, copies
of proof of delivery and the original copy of all documents, including, without
limitation, repayment histories and present status reports relating to the
Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request. In
addition, if Accounts become ineligible because they fall within one of the
specified categories of ineligibility set forth in the definition of Eligible
Accounts or otherwise established by Lender, Borrower shall notify Lender of
such occurrence in the reports required by Section 8.1.3(v) hereof and the
Borrowing Base shall thereupon be adjusted accordingly.
6.2.2 Discounts, Allowances, Disputes. If Borrower grants any discounts,
allowances or credits that are not shown on the face of the invoice for the
Account involved, Borrower shall report such discounts, allowances or credits,
as the case may be, to Lender as part of the next required Schedule of Accounts.
If any amounts due and owing are in dispute between ▇▇▇▇▇▇▇▇ and any Account
Debtor, Borrower shall provide Lender with written notice thereof at the time of
submission of the next Schedule of Accounts, explaining in detail the reason for
the dispute, all claims related thereto and the amount in controversy. Upon and
after the occurrence of an Event of Default and the continuation thereof, ▇▇▇▇▇▇
shall have the right to settle or adjust all disputes and claims directly with
the Account Debtor and to compromise the amount or extend the time for payment
of the Accounts upon such terms and conditions as Lender may deem advisable, and
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to charge the deficiencies, costs and expenses thereof, including attorney's
fees, to Borrower.
6.2.3 Taxes. If an Account includes a charge for any tax payable to any
governmental taxing authority, Lender is authorized, in its sole discretion, to
pay the amount thereof to the proper taxing authority for the account of
Borrower and to charge Borrower therefor, provided, however that Lender shall
not be liable for any taxes to any governmental taxing authority that may be due
by Borrower.
6.2.4 Account Verification. Whether or not a Default or an Event of Default
has occurred, any of Lender's officers, employees or agents shall have the
right, at any time or times hereafter, in the name of Lender, any designee of
Lender, or Borrower, to verify the validity, amount or any other matter relating
to any Accounts by mail, telephone, electronic communication or otherwise.
Borrower shall cooperate fully with Lender in an effort to facilitate and
promptly conclude any such verification process.
6.2.5 Maintenance of Dominion Account. Borrower shall maintain a lockbox
and Dominion Account pursuant to the Blocked Account Service Agreement with such
banks as may be selected by Borrower and be acceptable to Lender. Borrower shall
issue to any such banks an irrevocable letter of instruction directing such
banks to deposit all payments or other remittances received in the lockbox to
the Dominion Account for application on account of the Obligations. Borrower
shall direct all Account Debtors to remit payment directly to the lockbox, and
all items received in the lockbox shall be deposited in the Dominion Account.
All funds received into the lockbox or deposited in the Dominion Account shall
immediately become the property of ▇▇▇▇▇▇ and Borrower shall obtain the
agreements by such banks in favor of Lender to waive any recoupment, set-off
rights, and any security interest in, or against the funds so deposited. Lender
assumes no responsibility for such lockbox arrangement, including, without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder.
6.2.6 Collection of Accounts, Proceeds of Collateral. If, notwithstanding
▇▇▇▇▇▇▇▇'s instructions to its Account Debtors to remit payment to the lockbox,
payments on account of the Accounts receivable are made directly to Borrower,
all remittances received by Borrower on account of Accounts, together with the
proceeds of any other Collateral, shall be held as ▇▇▇▇▇▇'s property by Borrower
as trustee of an express trust for ▇▇▇▇▇▇'s benefit and Borrower shall
immediately deposit same in kind in the Dominion Account. ▇▇▇▇▇▇ retains the
right at all times after the occurrence and during the continuance of a Default
or an Event of Default to notify Account Debtors that Accounts have been
assigned to Lender and to collect Accounts directly in its own name, or in the
name of ▇▇▇▇▇▇'s agent, and to charge the collection costs and expenses,
including attorneys' fees, to Borrower.
6.3 Administration of Inventory.
6.3.1 Records and Reports of Inventory. Borrower shall keep accurate and
complete records of its Inventory. Borrower shall to furnish Lender Inventory
reports in form and detail satisfactory to Lender at such times as Lender may
14
request, but at least once each month, not later than the twentieth (20th) day
of such month. Borrower shall conduct a physical inventory no less frequently
than annually and shall provide to Lender a report based on each such physical
inventory promptly thereafter, together with such supporting information as
Lender shall request.
6.3.2 Returns of Inventory. If at any time or times hereafter any Account
Debtor returns any Inventory in excess of $50,000 to Borrower, Borrower shall
immediately notify Lender of the same, specifying the reason for such return and
the location, condition and intended disposition of the returned Inventory.
6.4 Administration of Equipment.
6.4.1 Records and Schedules of Equipment. Borrower shall keep accurate
records itemizing and describing the kind, type, quality, quantity and value of
its Equipment and all dispositions made in accordance with subsection 6.4.2
hereof, and shall furnish Lender with a current schedule containing the
foregoing information on at least an annual basis and more often if requested by
Lender. Immediately on request therefor by ▇▇▇▇▇▇, Borrower shall deliver to
Lender any and all evidence of ownership, if any, of any of the Equipment.
6.4.2 Dispositions of Equipment. Borrower will not sell, lease or otherwise
dispose of or transfer any of the Equipment or any part thereof without the
prior written consent of Lender; provided, however, that the foregoing
restriction shall not apply, for so long as no Default or Event of Default
exists, to (i) dispositions of Equipment in the ordinary course of Borrower's
business, provided that all proceeds thereof are remitted to Lender for
application to the Loans, or (ii) replacements of Equipment that is
substantially worn, damaged or obsolete with Equipment of like kind, function
and value, provided that the replacement Equipment shall be acquired prior to or
concurrently with any disposition of the Equipment that is to be replaced, the
replacement Equipment shall be free and clear of Liens other than Permitted
Liens that are not Purchase Money Liens, and Borrower shall have given Lender at
least five (5) days prior written notice of such disposition.
6.5 Payment of Charges. All amounts chargeable to Borrower under Section 6
hereof shall be Obligations secured by all of the Collateral, shall be payable
on demand and shall bear interest from the date such advance was made until paid
in full at the rate applicable to Revolving Credit Loans from time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce ▇▇▇▇▇▇ to enter into
this Agreement and to make advances hereunder, Borrower warrants, represents and
covenants to Lender that:
7.1.1 Organization and Qualification. Each of Borrower and its Subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Each of Borrower and its
Subsidiaries is duly qualified and is authorized to do business and is in good
standing as a foreign corporation in each state or jurisdiction listed on
15
Exhibit D hereto and in all other states and jurisdictions in which the failure
of Borrower or any of its Subsidiaries to be so qualified would have a material
adverse effect on the financial condition, business or Properties of Borrower or
any of its Subsidiaries.
7.1.2 Corporate Power and Authority. Each of Borrower and its Subsidiaries
is duly authorized and empowered to enter into, execute, deliver and perform
this Agreement and each of the other Loan Documents to which it is a party. The
execution, delivery and performance of this Agreement and each of the other Loan
Documents have been duly authorized by all necessary corporate action and do not
and will not (i) require any consent or approval of the shareholders (or
members, in the case of a limited liability company) of Borrower or any of its
Subsidiaries; (ii) contravene Borrower's or any of its Subsidiaries' charter,
articles or certificate of incorporation or by-laws; (iii) violate, or cause
Borrower or any of its Subsidiaries to be in default under, any provision of any
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award in effect having applicability to Borrower or any of its Subsidiaries;
(iv) result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which
Borrower or any of its Subsidiaries is a party or by which it or its Properties
may be bound or affected; or (v) result in, or require, the creation or
imposition of any Lien (other than Permitted Liens) upon or with respect to any
of the Properties now owned or hereafter acquired by Borrower or any of its
Subsidiaries.
7.1.3 Legally Enforceable Agreement. This Agreement is, and each of the
other Loan Documents when delivered under this Agreement will be, a legal, valid
and binding obligation of each of Borrower and its Subsidiaries enforceable
against it in accordance with its respective terms.
7.1.4 Capital Structure. Exhibit E hereto states (i) the correct name of
each of the Subsidiaries of Borrower, its jurisdiction of incorporation and the
percentage of its Voting Stock owned by Borrower, (ii) the name of each of
Borrower's corporate or joint venture Affiliates and the nature of the
affiliation, (iii) the number, nature and holder of all outstanding Securities
of Borrower and each Subsidiary of Borrower and (iv) the number of authorized,
issued and treasury shares of Borrower and each Subsidiary of Borrower. Borrower
has good title to all of the shares it purports to own of the stock of each of
its Subsidiaries, free and clear in each case of any Lien other than Permitted
Liens. All such shares have been duly issued and are fully paid and
non-assessable. There are no outstanding options to purchase, or any rights or
warrants to subscribe for, or any commitments or agreements to issue or sell, or
any Securities or obligations convertible into, or any powers of attorney
relating to, shares of the capital stock of Borrower or any of its Subsidiaries.
There are no outstanding agreements or instruments binding upon any of
Borrower's shareholders (or members, in the case of a limited liability company)
relating to the ownership of its shares of capital stock (or member interests,
in the case of a limited liability company).
7.1.5 Corporate Names, etc. Neither Borrower nor any of its Subsidiaries
has been known as or used any corporate, fictitious or trade names except those
listed on Exhibit F hereto. Except as set forth on Exhibit F, neither Borrower
nor any of its Subsidiaries has been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any Person.
16
Each of Borrower's and its Subsidiaries' state(s) of incorporation or
organization, Type of Organization and Organizational I.D. Number is set forth
on Exhibit F. The exact legal name of Borrower and each of its Subsidiaries is
set forth on Exhibit F.
7.1.6 Business Locations; Agent for Process. Each of Borrower's and its
Subsidiaries' chief executive office and other places of business are as listed
on Exhibit C hereto. During the preceding one-year period, neither Borrower nor
any of its Subsidiaries has had an office, place of business or agent for
service of process other than as listed on Exhibit C. Except as shown on Exhibit
C, no Inventory is stored with a bailee, warehouseman or similar party, nor is
any Inventory consigned to any Person.
7.1.7 Title to Properties; Priority of Liens. Each of Borrower and its
Subsidiaries has good, indefeasible and marketable title to and fee simple
ownership of, or valid and subsisting leasehold interests in, all of its real
Property, and good title to all of the Collateral and all of its other Property,
in each case, free and clear of all Liens except Permitted Liens. Borrower has
paid or discharged all lawful claims which, if unpaid, might become a Lien
against any of Borrower's Properties that is not a Permitted Lien except as
disclosed in Section 7.1.20 hereof. The Liens granted to Lender under Section 5
hereof are first-priority Liens, subject only to Permitted Liens.
7.1.8 Accounts. Lender may rely, in determining which Accounts are Eligible
Accounts, on all statements and representations made by Borrower with respect to
any Account or Accounts. Unless otherwise indicated in writing to Lender, with
respect to each Account:
(i) It is genuine and in all respects what it purports to be, and it
is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and delivery of
goods or rendition of services by Borrower in the ordinary course of its
business and in accordance with the terms and conditions of all purchase
orders, contracts or other documents relating thereto and forming a part of
the contract between Borrower and the Account Debtor;
(iii) It is for a liquidated amount maturing as stated in the
duplicate invoice covering such sale or rendition of services, a copy of
which has been furnished or is available to Lender;
(iv) Such Account, and ▇▇▇▇▇▇'s security interest therein, is not, and
will not (by voluntary act or omission of Borrower) be in the future,
subject to any offset, Lien, deduction, recoupment, defense, dispute,
counterclaim or any other adverse condition except for disputes resulting
in returned goods where the amount in controversy is deemed by Lender to be
immaterial, and each such Account is absolutely owing to Borrower and is
not contingent in any respect or for any reason;
(v) Borrower has made no agreement with any Account Debtor thereunder
for any extension, compromise, settlement or modification of any such
17
Account or any deduction therefrom, except discounts or allowances which
are granted by Borrower in the ordinary course of its business for prompt
payment and which are reflected in the calculation of the net amount of
each respective invoice related thereto and are reflected in the Schedules
of Accounts submitted to Lender pursuant to subsection 6.2.1 hereof;
(vi) There are no facts, events or occurrences which in any way impair
the validity or enforceability of any Accounts or tend to reduce the amount
payable thereunder from the face amount of the invoice and statements
delivered to Lender with respect thereto;
(vii) To the best of ▇▇▇▇▇▇▇▇'s knowledge, the Account Debtor
thereunder (1) had the capacity to contract at the time any contract or
other document giving rise to the Account was executed and (2) such Account
Debtor is Solvent; and
(viii) To the best of ▇▇▇▇▇▇▇▇'s knowledge, there are no proceedings
or actions which are threatened or pending against any Account Debtor
thereunder which might result in any material adverse change in such
Account Debtor's financial condition or the collectibility of such Account.
7.1.9 Equipment. The Equipment is in good operating condition and repair,
and all necessary replacements of and repairs thereto shall be made so that the
value and operating efficiency of the Equipment shall be maintained and
preserved, reasonable wear and tear excepted. Borrower will not permit any of
the Equipment to become affixed to any real Property leased to Borrower so that
an interest arises therein under the real estate laws of the applicable
jurisdiction unless the landlord of such real Property has executed a landlord
waiver or leasehold mortgage in favor of and in form acceptable to Lender, and
Borrower will not permit any of the Equipment to become an accession to any
personal Property other than Equipment that is subject to first-priority (except
for Permitted Liens) Liens in favor of Lender.
7.1.10 Financial Statements; Fiscal Year. The balance sheets of Borrower
and such other Persons described therein (including the accounts of all
Subsidiaries of Borrower for the respective periods during which a Subsidiary
relationship existed) as of September 30, 2003, and the related statements of
income, changes in stockholder's equity, and changes in financial position for
the periods ended on such dates, have been prepared in accordance with GAAP, and
present fairly the financial positions of Borrower and such Persons at such
dates and the results of Borrower's and such Persons' operations for such
periods. Since September 30, 2003, there has been no material change in the
condition, financial or otherwise, of Borrower and such other Persons as shown
on the balance sheet as of such date and no change in the aggregate value of
Equipment and real Property owned by Borrower or such other Persons, except
changes in the ordinary course of business, none of which individually or in the
aggregate has been materially adverse. The fiscal year of Borrower and each of
its Subsidiaries ends on December 31 of each year.
7.1.11 Full Disclosure. The financial statements referred to in subsection
7.1.10 hereof do not, nor does this Agreement or any other written statement of
18
Borrower to Lender, contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein or herein not
misleading. There is no fact which ▇▇▇▇▇▇▇▇ has failed to disclose to Lender in
writing which materially affects adversely or, so far as Borrower can now
foresee, will materially affect adversely the Properties, business, prospects,
profits or condition (financial or otherwise) of Borrower or any of its
Subsidiaries or the ability of Borrower or its Subsidiaries to perform this
Agreement or the other Loan Documents.
7.1.12 Solvent Financial Condition. Each of Borrower and its Subsidiaries
is now and, after giving effect to the Loans to be made, at all times will be,
Solvent.
7.1.13 Surety Obligations. Neither Borrower nor any of its Subsidiaries is
obligated as surety or indemnitor under any surety or similar bond or other
contract, or has issued or entered into any agreement to assure payment,
performance or completion of performance of any undertaking or obligation of any
Person.
7.1.14 Taxes. ▇▇▇▇▇▇▇▇'s federal tax identification number is ▇▇-▇▇▇▇▇▇▇.
The federal tax identification number of each of Borrower's Subsidiaries is
shown on Exhibit G hereto. Borrower and each of its Subsidiaries has filed all
federal, state and local tax returns and other reports it is required by law to
file and has paid, or made provision for the payment of, all taxes, assessments,
fees, levies and other governmental charges upon it, its income and Properties
as and when such taxes, assessments, fees, levies and charges are due and
payable, unless and to the extent any thereof are being actively contested in
good faith and by appropriate proceedings and Borrower maintains reasonable
reserves on its books therefor. The provision for taxes on the books of Borrower
and its Subsidiaries are adequate for all years not closed by applicable
statutes, and for its current fiscal year.
7.1.15 Brokers. There are no claims for brokerage commissions, finder's
fees or investment banking fees in connection with the transactions contemplated
by this Agreement.
7.1.16 Patents, Trademarks, Copyrights and Licenses. Each of Borrower and
its Subsidiaries owns or possesses all the patents, trademarks, service marks,
tradenames, copyrights and licenses necessary for the present and planned future
conduct of its business without any known conflict with the rights of others.
All such patents, trademarks, service marks, tradenames, copyrights, licenses
and other similar rights are listed on Exhibit H hereto.
7.1.17 Governmental Consents. Each of Borrower and its Subsidiaries has,
and is in good standing with respect to, all governmental consents, approvals,
licenses, authorizations, permits, certificates, inspections and franchises
necessary to continue to conduct its business as heretofore or proposed to be
conducted by it and to own or lease and operate its Properties as now owned or
leased by it.
7.1.18 Compliance with Laws. Each of Borrower and its Subsidiaries has duly
complied with, and its Properties, business operations and leaseholds are in
compliance in all material respects with, the provisions of all federal, state
and local laws, rules and regulations applicable to Borrower or such Subsidiary,
as applicable, its Properties or the conduct of its business and there have been
no citations, notices or orders of noncompliance issued to Borrower or any of
19
its Subsidiaries under any such law, rule or regulation. Each of Borrower and
its Subsidiaries has established and maintains an adequate monitoring system to
insure that it remains in compliance with all federal, state and local laws,
rules and regulations applicable to it including, without limitation, those
promulgated by the United States Food and Drug Administration, Bureau of
Alcohol, Tobacco and Firearms and United States Department of Agriculture. No
Inventory has been produced in violation of the above including, without
limitation, the Fair Labor Standards Act (29 U.S.C. ss.201 et seq.), as amended.
To the extent applicable, ▇▇▇▇▇▇▇▇ has complied with the provisions of PACA and
has paid all invoices due and owing suppliers, brokers and sellers of perishable
agricultural commodities. No notices of non-payment have been filed with the
United States Department of Agriculture by any supplier, broker or seller of
such commodity. ▇▇▇▇▇▇▇▇ has no knowledge of any breach of the trust created by
PACA.
7.1.19 Restrictions. Neither Borrower nor any of its Subsidiaries is a
party or subject to any contract, agreement, or charter or other corporate
restriction, which materially and adversely affects its business or the use or
ownership of any of its Properties. Neither Borrower nor any of its Subsidiaries
is a party or subject to any contract or agreement which restricts its right or
ability to incur Indebtedness, other than as set forth on Exhibit I hereto, none
of which prohibit the execution of or compliance with this Agreement or the
other Loan Documents by Borrower or any of its Subsidiaries, as applicable.
7.1.20 Litigation. Except as set forth on Exhibit J hereto, there are no
actions, suits, proceedings or investigations pending, or to the knowledge of
Borrower, threatened, against or affecting Borrower or any of its Subsidiaries,
or the business, operations, Properties, prospects, profits or condition of
Borrower or any of its Subsidiaries. Neither Borrower nor any of its
Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration
board or tribunal.
7.1.21 No Defaults. No event has occurred and no condition exists which
would, upon or after the execution and delivery of this Agreement or ▇▇▇▇▇▇▇▇'s
performance hereunder, constitute a Default or an Event of Default. Neither
Borrower nor any of its Subsidiaries is in default, and no event has occurred
and no condition exists which constitutes, or which with the passage of time or
the giving of notice or both would constitute, a default in the payment of any
Indebtedness to any Person for Money Borrowed.
7.1.22 Leases. Exhibit K hereto is a complete listing of all capitalized
leases of Borrower and its Subsidiaries and Exhibit L hereto is a complete
listing of all operating leases of Borrower and its Subsidiaries. Each of
Borrower and its Subsidiaries is in full compliance with all of the terms of
each of its respective capitalized and operating leases.
7.1.23 Pension Plans. Except as disclosed on Exhibit M hereto, neither
Borrower nor any of its Subsidiaries has any Plan. Borrower and each of its
Subsidiaries is in full compliance with the requirements of ERISA and the
regulations promulgated thereunder with respect to each Plan. No fact or
situation that could result in a material adverse change in the financial
condition of Borrower or any of its Subsidiaries exists in connection with any
20
Plan. Neither Borrower nor any of its Subsidiaries has any withdrawal liability
in connection with a Multi-employer Plan.
7.1.24 Trade Relations. There exists no actual or threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship between Borrower or any of its Subsidiaries and any customer or any
group of customers whose purchases individually or in the aggregate are material
to the business of Borrower or any of its Subsidiaries, or with any material
supplier, and there exists no present condition or state of facts or
circumstances which would materially affect adversely Borrower or any of its
Subsidiaries or prevent Borrower or any of its Subsidiaries from conducting such
business after the consummation of the transaction contemplated by this
Agreement in substantially the same manner in which it has heretofore been
conducted.
7.1.25 Labor Relations. Except as described on Exhibit N hereto, neither
Borrower nor any of its Subsidiaries is a party to any collective bargaining
agreement. There are no material grievances, disputes or controversies with any
union or any other organization of Borrower's or any of its Subsidiaries'
employees, or threats of strikes, work stoppages or any asserted pending demands
for collective bargaining by any union or organization.
7.2 Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this Agreement, except for
changes in the nature of Borrower's or its Subsidiaries' business or operations
that would render the information in any exhibit attached hereto either
inaccurate, incomplete or misleading, so long as Lender has consented to such
changes or such changes are expressly permitted by this Agreement. Without
limiting the generality of the foregoing, each loan request made hereunder shall
constitute ▇▇▇▇▇▇▇▇'s reaffirmation, as of the date of each such loan request,
of each representation, warranty or other statement made or furnished to Lender
by or on behalf of Borrower, or any Subsidiary of Borrower in this Agreement,
any of the other Loan Documents, or any instrument, certificate or financial
statement furnished in compliance with or in reference thereto.
7.3 Survival of Representations and Warranties. All representations and
warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by ▇▇▇▇▇▇
and the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.1.1 Visits and Inspections. Permit representatives of ▇▇▇▇▇▇, from time
to time, as often as may be reasonably requested, but only during normal
business hours and upon reasonable prior notice provided no Event of Default
21
exists, to visit and inspect the Properties of Borrower and each of its
Subsidiaries, inspect, audit and make extracts from its books and records, and
discuss with its officers, its employees and its independent accountants,
Borrower's and each of its Subsidiaries' business, assets, liabilities,
financial condition, business prospects and results of operations.
8.1.2 Notices. Promptly notify Lender in writing of the occurrence of any
event or the existence of any fact which renders any representation or warranty
in this Agreement or any of the other Loan Documents inaccurate, incomplete or
misleading, including, without limitation, any notice of a breach of the trust
created by PACA.
8.1.3 Financial Statements. Keep, and cause each Subsidiary to keep,
adequate records and books of account with respect to its business activities in
which proper entries are made in accordance with GAAP reflecting all its
financial transactions; and cause to be prepared and furnished to Lender the
following (all to be prepared in accordance with GAAP applied on a consistent
basis, unless Borrower's certified public accountants concur in any change
therein and such change is disclosed to Lender and is consistent with GAAP):
(i) not later than ninety (90) days after the close of each fiscal
year of Borrower, unqualified, audited financial statements of Borrower and
its Subsidiaries as of the end of such year, on a Consolidated and
consolidating basis, certified by a firm of independent certified public
accountants of recognized standing selected by Borrower but acceptable to
Lender (except for a qualification for a change in accounting principles
with which the accountant concurs);
(ii) not later than thirty (30) days after the end of each month
hereafter (excluding the last month of the end of the first three fiscal
quarters of Borrower), and including the last month of Borrower's fiscal
year, management prepared interim financial statements of Borrower and its
Subsidiaries as of the end of such month and of the portion of Borrower's
financial year then elapsed, on a Consolidated and consolidating basis,
certified by the principal financial officer of Borrower as prepared in
accordance with GAAP and fairly presenting the Consolidated financial
position and results of operations of Borrower and its Subsidiaries for
such month and period subject only to changes from audit and year-end
adjustments and except that such statements need not contain notes;
(iii) not later than thirty (30) days after the end of each quarter,
management prepared interim financial statements of Borrower and its
Subsidiaries as of the end of such quarter and of the portion of Borrower's
financial year then elapsed, on a Consolidated and consolidating basis,
certified by the principal financial officer of Borrower as prepared in
accordance with GAAP and fairly presenting the Consolidated financial
position and results of operations of Borrower and its Subsidiaries for
such period subject only to changes from audit and year-end adjustments and
except that such statements need not contain notes;
22
(iv) promptly upon ▇▇▇▇▇▇'s request, but in any event, on the last
Business Day of each week, a Borrowing Base Certificate reporting Accounts
receivable, sales, collections, debits and credits and compliance with
PACA;
(v) not later than twenty (20) days after the end of each month, a
detailed Account receivable aging report and Accounts payable aging report
as of the last day of the preceding month, along with a loan recapitulation
report and loan/Accounts receivable reconciliation report substantially in
the form of Exhibit R attached hereto and calculation of Accounts that fail
to meet the requirements of Eligible Accounts, in form and substance
satisfactory to Lender;
(vi) promptly after the sending or filing thereof, as the case may be,
copies of any proxy statements, financial statements or reports which
Borrower has made available to its shareholders;
(vii) promptly after the filing thereof, copies of any annual report
to be filed with ERISA in connection with each Plan;
(viii) promptly after filing thereof, copies of all reports,
certifications, applications and the like required to be filed with the
United States Food and Drug Administration and the United States Department
of Agriculture; and
(ix) such other data and information (financial and otherwise) as
Lender, from time to time, may reasonably request, bearing upon or related
to the Collateral or Borrower's and each of its Subsidiaries' financial
condition or results of operations.
Concurrently with the delivery of the financial statements described in
clause (i) of this subsection 8.1.3, Borrower shall forward to Lender, if
issued, a copy of the accountants' letter to ▇▇▇▇▇▇▇▇'s management that is
prepared in connection with such financial statements and also shall cause to be
prepared and shall furnish to Lender a certificate of the aforesaid certified
public accountants certifying to Lender that, based upon their examination of
the financial statements of Borrower and its Subsidiaries performed in
connection with their examination of said financial statements, they are not
aware of any Default or Event of Default, or, if they are aware of such Default
or Event of Default, specifying the nature thereof, and acknowledging, in a
manner satisfactory to Lender, that they are aware that ▇▇▇▇▇▇ is relying on
such financial statements in making its decisions with respect to the Loans.
Concurrently with the delivery of the financial statements described in clauses
(i), (ii) and (iii) of this subsection 8.1.3, or more frequently if requested by
▇▇▇▇▇▇, Borrower shall cause to be prepared and furnished to Lender a Compliance
Certificate in the form of Exhibit O hereto executed by the Chief Financial
Officer of Borrower and with respect to the delivery of the financial statements
described in clause (i) of this subsection 8.1.3, an accountant's reliance
letter acknowledging ▇▇▇▇▇▇'s reliance upon such financial statements.
23
8.1.4 Landlord and Storage Agreements. Provide Lender with copies of all
agreements between Borrower or any of its Subsidiaries and any landlord or
warehouseman which owns any premises at which any Inventory may, from time to
time, be kept.
8.1.5 Parent Financial Statements. Deliver or cause to be delivered to
Lender financial statements for the Parent in form and substance satisfactory to
Lender at such intervals and covering such time periods as Lender may request
including, without limitation, Parent's 10-Q financial statements within
forty-five (45) days after each quarter and 10-K financial statements within
ninety (90) days after each fiscal year of the Parent.
8.1.6 Projections. No later than thirty (30) days prior to the end of each
fiscal year of Borrower, deliver to Lender Projections of Borrower for the
forthcoming three (3) years, year by year, and for the forthcoming fiscal year,
month by month.
8.1.7 Deposit and Brokerage Accounts. For each deposit account or brokerage
account that Borrower at any time opens or maintains, Borrower shall, at
Lender's request and option, pursuant to an agreement in form and substance
satisfactory to Lender, cause the depository bank or securities intermediary, as
applicable, to agree to comply at any time with instructions from Lender to such
depository bank or securities intermediary, as applicable, directing the
disposition of funds from time to time credited to such deposit or brokerage
account, without further consent of Borrower.
8.2 Negative Covenants. During the term of this Agreement, and thereafter
for so long as there are any Obligations to Lender, Borrower covenants that,
unless ▇▇▇▇▇▇ has first consented thereto in writing, it will not:
8.2.1 Mergers; Consolidations; Acquisitions; Structural Changes. Merge or
consolidate, or permit any Subsidiary of Borrower to merge or consolidate, with
any Person; nor acquire, nor permit any of its Subsidiaries to acquire, all or
any substantial part of the Properties of any Person; nor change its or any of
its Subsidiaries' state of incorporation or organization or Type of
Organization; nor change its or any of its Subsidiaries' legal names.
8.2.2 Loans. Make, or permit any Subsidiary of Borrower to make, any loans
or other advances of money (other than for salary, travel advances, advances
against commissions and other similar advances in the ordinary course of
business) to any Person.
8.2.3 Total Indebtedness. Create, incur, assume, or suffer to exist, or
permit any Subsidiary of Borrower to create, incur or suffer to exist, any
Indebtedness, except:
(i) Obligations owing to Lender;
(ii) Subordinated Debt existing on the date of this Agreement;
(iii) accounts payable to trade creditors and current operating
expenses (other than for Money Borrowed) which are not aged more than one
hundred twenty (120) days from billing date or more than thirty (30) days
24
from the due date, in each case incurred in the ordinary course of business
and paid within such time period, unless the same are being actively
contested in good faith and by appropriate and lawful proceedings; and
Borrower or such Subsidiary shall have set aside such reserves, if any,
with respect thereto as are required by GAAP and deemed adequate by
Borrower or such Subsidiary and its independent accountants;
(iv) Obligations to pay Rentals permitted by subsection 8.2.13;
(v) Permitted Purchase Money Indebtedness; and
(vi) contingent liabilities arising out of endorsements of checks and
other negotiable instruments for deposit or collection in the ordinary
course of business.
8.2.4 Affiliate Transactions. Enter into, or be a party to, or permit any
Subsidiary of Borrower to enter into or be a party to, any transaction with any
Affiliate of Borrower or stockholder, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's or such Subsidiary's
business and upon fair and reasonable terms which are fully disclosed to Lender
and are no less favorable to Borrower than would obtain in a comparable arm's
length transaction with a Person not an Affiliate or stockholder of Borrower or
such Subsidiary; or co-mingle funds or transfer funds to any Affiliate,
Subsidiary or the Parent.
8.2.5 Limitation on Liens. Create or suffer to exist, or permit any
Subsidiary of Borrower to create or suffer to exist, any Lien upon any of its
Property, income or profits, whether now owned or hereafter acquired, except:
(i) Liens at any time granted in favor of ▇▇▇▇▇▇;
(ii) Liens for taxes (excluding any Lien imposed pursuant to any of
the provisions of ERISA) not yet due, or being contested in the manner
described in subsection 7.1.14 hereto, but only if in ▇▇▇▇▇▇'s judgment
such Lien does not adversely affect ▇▇▇▇▇▇'s rights or the priority of
▇▇▇▇▇▇'s Lien in the Collateral;
(iii) Liens arising in the ordinary course of ▇▇▇▇▇▇▇▇'s business by
operation of law or regulation, but only if payment in respect of any such
Lien is not at the time required and such Liens do not, in the aggregate,
materially detract from the value of the Property of Borrower or materially
impair the use thereof in the operation of ▇▇▇▇▇▇▇▇'s business;
(iv) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(v) such other Liens as appear on Exhibit P hereto; and
(vi) such other Liens as Lender may hereafter approve in writing.
25
8.2.6 Subordinated Debt. Make, or permit any Subsidiary of Borrower to
make, any payment of any part or all of any Subordinated Debt or take any other
action or omit to take any other action in respect of any Subordinated Debt or
change any of the terms thereof, except in accordance with the Subordination
Agreement relative thereto.
8.2.7 Distributions. Declare or make, or permit any Subsidiary of Borrower
to declare or make, any Distributions.
8.2.8 Capital Expenditures. Make Capital Expenditures (including, without
limitation, by way of capitalized leases) which, in the aggregate, as to
Borrower and its Subsidiaries, exceed $750,000 during Borrower's fiscal year
ending 2004 (including the Equipment Loan); and an additional $500,000 in the
aggregate for each fiscal year of Borrower thereafter.
8.2.9 Disposition of Assets. Sell, lease or otherwise dispose of any of, or
permit any Subsidiary of Borrower to sell, lease or otherwise dispose of any of,
its Properties, including any disposition of Property as part of a sale and
leaseback transaction, to or in favor of any Person, except (i) sales of
Inventory in the ordinary course of business for so long as no Event of Default
exists hereunder, (ii) a transfer of Property to Borrower by a Subsidiary of
Borrower or (iii) dispositions expressly authorized by this Agreement.
8.2.10 Stock of Subsidiaries. Permit any of its Subsidiaries to issue any
additional shares of its capital stock except director's qualifying shares.
8.2.11 Bill-and-Hold Sales, Etc. Make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval or consignment
basis, or any sale on a repurchase or return basis.
8.2.12 Restricted Investment. Make or have, or permit any Subsidiary of
Borrower to make or have, any Restricted Investment.
8.2.13 Leases. Become, or permit any of its Subsidiaries to become, a
lessee under any operating lease (other than a lease under which Borrower or any
of its Subsidiaries is lessor) of Property if the aggregate Rentals payable
during any current or future period of twelve (12) consecutive months under the
lease in question and all other leases under which Borrower or any of its
Subsidiaries is then lessee would exceed $125,000. The term "Rentals" means, as
of the date of determination, all payments which the lessee is required to make
by the terms of any lease.
8.2.14 Tax Consolidation. File or consent to the filing of any consolidated
income tax return with any Person other than a Subsidiary of Borrower.
8.2.15 Management Fees. Pay or allow to be paid any management fees to any
Person.
26
8.3 Specific Financial Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.3.1 Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage Ratio
of not less than the ratio shown below for the period corresponding thereto
measured on a trailing twelve (12) month basis (to be tested quarterly):
Date of Period End Ratio
------------------ -----
December 31, 2003 1.1 to 1.0
March 31, 2004 1.1 to 1.0
June 30, 2004 1.1 to 1.0
September 30, 2004 and thereafter 1.25 to 1.0
8.3.2 Maximum Leverage Ratio. Maintain a maximum Leverage Ratio of not more
than the ratio shown below for the period corresponding thereto (to be tested
quarterly):
Date of Period End Ratio
------------------ -----
September 30, 2003 and thereafter 2.0 to 1.0
8.3.3 Minimum Net Income. Achieve positive net income on an annual basis in
accordance with GAAP commencing with fiscal year ended 2004 based on the audited
financials submitted to Lender as set forth herein.
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender under
the other sections of this Agreement, Lender shall not be required to make any
Loan under this Agreement unless and until each of the following conditions has
been and continues to be satisfied:
9.1 Documentation. Lender shall have received, in form and substance
satisfactory to Lender, a duly executed copy of this Agreement and the other
Loan Documents, together with such additional documents, instruments and
certificates as Lender shall require in connection therewith from time to time,
all in form and substance satisfactory to Lender.
9.2 No Default. No Default or Event of Default shall exist.
9.3 Other Loan Documents. Each of the conditions precedent set forth in the
other Loan Documents shall have been satisfied.
9.4 Availability. Lender shall have determined that immediately after
▇▇▇▇▇▇ has made the initial Loans and paid all closing costs incurred in
27
connection with the transactions contemplated hereby, Availability shall not be
less than $500,000 after deducting Accounts payable that are sixty (60) days or
more past the invoice date.
9.5 No Litigation. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby.
9.6 Product Liability Insurance. Lender shall have received copies of
Borrower's product liability insurance, in form and substance satisfactory to
Lender.
9.7 PACA. To the extent applicable, Lender shall have received evidence of
Borrower's compliance with PACA as Lender shall determine.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default. The occurrence of one or more of the following
events shall constitute an "Event of Default":
10.1.1 Payment of Notes. Borrower shall fail to pay any installment of
principal, interest or premium, if any, owing on the Revolving Credit Note, the
Term Note or any Equipment Note on the due date of such installment.
10.1.2 Payment of Other Obligations. Borrower shall fail to pay any of the
Obligations that are not evidenced by the Revolving Credit Note, the Term Note
or any Equipment Note within ten (10) days of the due date thereof (whether due
at stated maturity, on demand, upon acceleration or otherwise).
10.1.3 Misrepresentations. Any representation, warranty or other statement
made or furnished to Lender by or on behalf of Borrower, or any Subsidiary of
Borrower in this Agreement, any of the other Loan Documents or any instrument,
certificate or financial statement furnished in compliance with or in reference
thereto proves to have been false or misleading in any material respect when
made or furnished or when reaffirmed pursuant to Section 7.2 hereof including,
without limitation and to the extent applicable, representations with respect to
PACA.
10.1.4 Breach of Specific Covenants. Borrower shall fail or neglect to
perform, keep or observe any covenant contained in Sections 5.2, 5.3, 6.1.1,
6.1.2, 6.2.5, 6.2.6, 8.1, 8.2 or 8.3 hereof on the date that Borrower is
required to perform, keep or observe such covenant.
10.1.5 Breach of Other Covenants. Borrower shall fail or neglect to
perform, keep or observe any covenant contained in this Agreement (other than a
covenant which is dealt with specifically elsewhere in Section 10.1 hereof) and
the breach of such other covenant is not cured to Lender's satisfaction within
fifteen (15) days after the sooner to occur of ▇▇▇▇▇▇▇▇'s receipt of notice of
28
such breach from Lender or the date on which such failure or neglect first
becomes known to any officer of Borrower.
10.1.6 Default Under Security Documents/Other Agreements. Any event of
default shall occur under, or Borrower shall default in the performance or
observance of any term, covenant, condition or agreement contained in, any of
the Security Documents; or the Other Agreements and such default shall continue
beyond any applicable grace period.
10.1.7 Other Defaults. There shall occur any default or event of default on
the part of Borrower under any agreement, document or instrument to which
Borrower is a party or by which Borrower or any of its Property is bound,
creating or relating to any Indebtedness (other than the Obligations) if the
payment or maturity of such Indebtedness is accelerated in consequence of such
event of default or demand for payment of such Indebtedness is made.
10.1.8 Uninsured Losses. Any material loss, theft, damage or destruction of
any of the Collateral not fully covered (subject to such deductibles as Lender
shall have permitted) by insurance.
10.1.9 Adverse Changes. There shall occur any material adverse change in
the financial condition or business prospects of Borrower.
10.1.10 Insolvency and Related Proceedings. Borrower shall cease to be
Solvent or shall suffer the appointment of a receiver, trustee, custodian or
similar fiduciary, or shall make an assignment for the benefit of creditors, or
any petition for an order for relief shall be filed by or against Borrower under
the Bankruptcy Code (if against Borrower, the continuation of such proceeding
for more than sixty (60) days), or Borrower shall make any offer of settlement,
extension or composition to their respective unsecured creditors generally.
10.1.11 Business Disruption; Condemnation. There shall occur a cessation of
a substantial part of the business of Borrower, any Subsidiary of Borrower for a
period which significantly affects Borrower's capacity to continue its business,
on a profitable basis; or Borrower, any Subsidiary of Borrower shall suffer the
loss or revocation of any license or permit now held or hereafter acquired by
Borrower which is necessary to the continued or lawful operation of its
business; or Borrower shall be enjoined, restrained or in any way prevented by
court, governmental or administrative order from conducting all or any material
part of its business affairs; or any material lease or agreement pursuant to
which Borrower leases, uses or occupies any Property shall be canceled or
terminated prior to the expiration of its stated term; or any part of the
Collateral shall be taken through condemnation or the value of such Property
shall be impaired through condemnation.
10.1.12 Change of Ownership. The Parent shall cease to own and control,
beneficially and of record, all of the issued and outstanding capital stock of
Borrower.
10.1.13 ERISA. A Reportable Event shall occur which Lender, in its sole
discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
29
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if Borrower, any Subsidiary of Borrower is in "default" (as
defined in Section 4219(c)(5) of ERISA) with respect to payments to a
Multi-employer Plan resulting from Borrower's, or such Subsidiary's complete or
partial withdrawal from such Plan.
10.1.14 Challenge to Agreement. Borrower, or any Subsidiary of Borrower or
Parent, or any Affiliate of any of them, shall challenge or contest in any
action, suit or proceeding the validity or enforceability of this Agreement, or
any of the other Loan Documents, the legality or enforceability of any of the
Obligations or the perfection or priority of any Lien granted to Lender.
10.1.15 Repudiation of or Default Under Subordination Agreement. The Parent
shall revoke or attempt to revoke the Subordination Agreement, or shall
repudiate the Parent's obligations thereunder or shall be in default under the
terms thereof.
10.1.16 Criminal Forfeiture. Borrower, or any Subsidiary of Borrower, shall
be criminally indicted or convicted under any law that could lead to a
forfeiture of any Property of Borrower, or any Subsidiary of Borrower.
10.1.17 Judgments. Any money judgment, writ of attachment or similar
process is filed against Borrower, or any Subsidiary of Borrower, or any of
their respective Property in excess of $25,000 or not covered by insurance.
10.1.18 PACA. A claim under PACA is made and is not otherwise contested in
good faith on such terms as Lender requires.
10.2 Acceleration of the Obligations. Without in any way limiting the right
of Lender to demand payment of any portion of the Obligations payable on demand
in accordance with Section 3.2 hereof, upon or at any time after the occurrence
of an Event of Default, all or any portion of the Obligations shall, at the
option of Lender and without presentment, demand, protest or further notice by
▇▇▇▇▇▇, become at once due and payable and Borrower shall forthwith pay to
Lender, the full amount of such Obligations, provided, that upon the occurrence
of an Event of Default specified in subsection 10.1.10 hereof, all of the
Obligations shall become automatically due and payable without declaration,
notice or demand by ▇▇▇▇▇▇.
10.3 Other Remedies. Upon and after the occurrence of an Event of Default,
Lender shall have and may exercise from time to time the following other rights
and remedies:
10.3.1 All of the rights and remedies of a secured party under the UCC or
under other applicable law, and all other legal and equitable rights to which
Lender may be entitled, all of which rights and remedies shall be cumulative and
shall be in addition to any other rights or remedies contained in this Agreement
or any of the other Loan Documents, and none of which shall be exclusive.
30
10.3.2 The right to take immediate possession of the Collateral, and to (i)
require Borrower to assemble the Collateral, at Borrower's expense, and make it
available to Lender at a place designated by Lender which is reasonably
convenient to both parties, and (ii) enter any premises where any of the
Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of Borrower, ▇▇▇▇▇▇▇▇
agrees not to charge Lender for storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any Collateral in
its then condition, or after any further manufacturing or processing thereof, at
public or private sale or sales, with such notice as may be required by law, in
lots or in bulk, for cash or on credit, all as Lender, in its sole discretion,
may deem advisable. Lender may, at ▇▇▇▇▇▇'s option, disclaim any and all
warranties regarding the Collateral in connection with any such sale. Borrower
agrees that ten (10) days written notice to Borrower of any public or private
sale or other disposition of Collateral shall be reasonable notice thereof, and
such sale shall be at such locations as Lender may designate in said notice.
Lender shall have the right to conduct such sales on Borrower's premises,
without charge therefor, and such sales may be adjourned from time to time in
accordance with applicable law. Lender shall have the right to sell, lease or
otherwise dispose of the Collateral, or any part thereof, for cash, credit or
any combination thereof, and Lender may purchase all or any part of the
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations. The proceeds realized from the sale of any Collateral
may be applied, after allowing two (2) Business Days for collection, first to
the costs, expenses and attorneys' fees incurred by ▇▇▇▇▇▇ in collecting the
Obligations, in enforcing the rights of Lender under the Loan Documents and in
collecting, retaking, completing, protecting, removing, storing, advertising for
sale, selling and delivering any Collateral; second to the interest due upon any
of the Obligations; and third, to the principal of the Obligations. If any
deficiency shall arise, Borrower shall remain liable to Lender therefor.
10.3.4 Lender is hereby granted a license or other right to use, without
charge, ▇▇▇▇▇▇▇▇'s labels, patents, copyrights, rights of use of any name, trade
secrets, tradenames, trademarks and advertising matter, or any Property of a
similar nature, as it pertains to the Collateral, in advertising for sale and
selling any Collateral and Borrower's rights under all licenses and all
franchise agreements shall inure to Lender's benefit.
10.4 Remedies Cumulative; No Waiver. All covenants, conditions, provisions,
warranties, guaranties, indemnities, and other undertakings of Borrower
contained in this Agreement and the other Loan Documents, or in any document
referred to herein or contained in any agreement supplementary hereto or in any
schedule given to Lender or contained in any other agreement between Lender and
Borrower, heretofore, concurrently, or hereafter entered into, shall be deemed
cumulative to and not in derogation or substitution of any of the terms,
covenants, conditions, or agreements of Borrower herein contained. The failure
or delay of Lender to require strict performance by Borrower of any provision of
this Agreement or to exercise or enforce any rights, Liens, powers, or remedies
hereunder or under any of the aforesaid agreements or other documents or
security or Collateral shall not operate as a waiver of such performance, Liens,
rights, powers and remedies, but all such requirements, Liens, rights, powers,
and remedies shall continue in full force and effect until all Loans and all
31
other Obligations owing or to become owing from Borrower to Lender shall have
been fully satisfied. None of the undertakings, agreements, warranties,
covenants and representations of Borrower contained in this Agreement or any of
the other Loan Documents and no Default or Event of Default by Borrower under
this Agreement or any other Loan Documents shall be deemed to have been
suspended or waived by Lender, unless such suspension or waiver is by an
instrument in writing specifying such suspension or waiver and is signed by a
duly authorized representative of Lender and directed to Borrower.
SECTION 11. MISCELLANEOUS
11.1 Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints ▇▇▇▇▇▇ (and all Persons designated by ▇▇▇▇▇▇) as
Borrower's true and lawful attorney (and agent-in-fact) and ▇▇▇▇▇▇, or ▇▇▇▇▇▇'s
agent, may, without notice to Borrower and in either ▇▇▇▇▇▇▇▇'s or Lender's
name, but at the cost and expense of Borrower:
11.1.1 At such time or times upon or after the occurrence of an Event of
Default as Lender or said agent, in its sole discretion, may determine, endorse
Borrower's name on any checks, notes, acceptances, drafts, money orders or any
other evidence of payment or proceeds of the Collateral which come into the
possession of Lender or under ▇▇▇▇▇▇'s control.
11.1.2 At such time or times upon or after the occurrence of an Event of
Default as Lender or its agent in its sole discretion may determine: (i) demand
payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of
▇▇▇▇▇▇▇▇'s rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral; (iii) sell or assign any of the Accounts and other
Collateral upon such terms, for such amounts and at such time or times as Lender
deems advisable and, at Lender's option, with all warranties regarding the
Collateral disclaimed; (iv) take control, in any manner, of any item of payment
or proceeds relating to any Collateral; (v) prepare, file and sign ▇▇▇▇▇▇▇▇'s
name to a proof of claim in bankruptcy or similar document against any Account
Debtor or to any notice of lien, assignment or satisfaction of lien or similar
document in connection with any of the Collateral; (vi) receive, open and
dispose of all mail addressed to Borrower and to notify postal authorities to
change the address for delivery thereof to such address as Lender may designate;
(vii) endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Lender on
account of the Obligations; (viii) endorse the name of Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Accounts, Inventory and any other
Collateral; (ix) use Borrower's stationery and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account Debtors; (x) use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, Inventory, Equipment
and any other Collateral; (xi) make and adjust claims under policies of
insurance; and (xii) do all other acts and things necessary, in ▇▇▇▇▇▇'s
determination, to fulfill Borrower's obligations under this Agreement.
32
11.2 Indemnity. ▇▇▇▇▇▇▇▇ hereby agrees to indemnify Lender and hold Lender
harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by ▇▇▇▇▇▇ (including reasonable attorneys
fees and legal expenses) as the result of ▇▇▇▇▇▇▇▇'s failure to observe, perform
or discharge ▇▇▇▇▇▇▇▇'s duties hereunder. In addition, ▇▇▇▇▇▇▇▇ shall defend
Lender against and save it harmless from all claims of any Person with respect
to the Collateral. Without limiting the generality of the foregoing, these
indemnities shall extend to any claims asserted against Lender by any Person
under any Environmental Laws or similar laws by reason of Borrower's or any
other Person's failure to comply with laws applicable to solid or hazardous
waste materials or other toxic substances. Notwithstanding any contrary
provision in this Agreement, the obligation of Borrower under this Section 11.2
shall survive the payment in full of the Obligations and the termination of this
Agreement.
11.3 Modification of Agreement; Sale of Interest. This Agreement may not be
modified, altered or amended, except by an agreement in writing signed by
▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇. Borrower may not sell, assign or transfer any interest in
this Agreement, any of the other Loan Documents, or any of the Obligations, or
any portion thereof, including, without limitation, ▇▇▇▇▇▇▇▇'s rights, title,
interests, remedies, powers, and duties hereunder or thereunder. Borrower hereby
consents to ▇▇▇▇▇▇'s participation, sale, assignment, transfer or other
disposition, at any time or times hereafter, of this Agreement and any of the
other Loan Documents, or of any portion hereof or thereof, including, without
limitation, ▇▇▇▇▇▇'s rights, title, interests, remedies, powers, and duties
hereunder or thereunder. In the case of an assignment, the assignee shall have,
to the extent of such assignment, the same rights, benefits and obligations as
it would if it were "Lender" hereunder and ▇▇▇▇▇▇ shall be relieved of all
obligations hereunder upon any such assignments. ▇▇▇▇▇▇▇▇ agrees that it will
use its best efforts to assist and cooperate with ▇▇▇▇▇▇ in any manner
reasonably requested by ▇▇▇▇▇▇ to effect the sale of participations in or
assignments of any of the Loan Documents or any portion thereof or interest
therein, including, without limitation, assisting in the preparation of
appropriate disclosure documents. ▇▇▇▇▇▇▇▇ further agrees that ▇▇▇▇▇▇ may
disclose credit information regarding Borrower and its Subsidiaries to any
potential participant or assignee.
11.4 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
11.5 Successors and Assigns. This Agreement, the Other Agreements and the
Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lender permitted under Section 11.3
hereof.
11.6 Cumulative Effect; Conflict of Terms. The provisions of the Other
Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.2 hereof
and except as otherwise provided in any of the other Loan Documents by specific
reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
33
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
11.7 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which counterparts taken together shall constitute but one and the
same instrument.
11.8 Notice. Except as otherwise provided herein, all notices, requests and
demands to or upon a party hereto, to be effective, shall be in writing and
shall be sent by certified or registered mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt, one
Business Day after deposit in the mail, postage prepaid, or with an overnight
courier or, in the case of facsimile notice, when sent, addressed as follows:
If to Lender: Fleet Capital Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrower: Pure World Botanicals, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. Hackensack, New Jersey 07606
Attention: ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, Chief Financial Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Winne, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ & Basralian, P.C.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇., Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as each party may designate for itself by notice given
in accordance with this Section 11.8; provided, however, that any notice,
request or demand to or upon Lender pursuant to subsection 3.1.1 or 4.2.2 hereof
shall not be effective until received by Lender.
11.9 ▇▇▇▇▇▇'s Consent. Whenever ▇▇▇▇▇▇'s consent is required to be obtained
under this Agreement, any of the Other Agreements or any of the Security
34
Documents as a condition to any action, inaction, condition or event, Lender
shall be authorized to give or withhold such consent in its sole and absolute
discretion and to condition its consent upon the giving of additional collateral
security for the Obligations, the payment of money or any other matter.
11.10 Credit Inquiries. Borrower hereby authorizes and permits Lender to
respond to usual and customary credit inquiries from third parties concerning
Borrower or any of its Subsidiaries.
11.11 Time of Essence. Time is of the essence of this Agreement, the Other
Agreements and the Security Documents.
11.12 Entire Agreement. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
11.13 Interpretation. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
11.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN CRANFORD, NEW
JERSEY. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW JERSEY; PROVIDED, HOWEVER, THAT IF ANY OF THE
COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN NEW JERSEY, THE LAWS
OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR
FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF
▇▇▇▇▇▇'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE
LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF
NEW JERSEY. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS
OF ANY PRESENT OR FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR
LENDER, BORROWER HEREBY CONSENTS AND AGREES THAT ANY COURT OF THE STATE OF NEW
JERSEY, OR, AT ▇▇▇▇▇▇'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF NEW JERSEY, SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT
OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT. BORROWER EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH
35
BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO BORROWER AT THE
ADDRESS SET FORTH IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3)
DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF LENDER TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE
ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE
TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER
APPROPRIATE FORUM OR JURISDICTION.
11.15 WAIVERS BY ▇▇▇▇▇▇▇▇. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY JURY
(WHICH ▇▇▇▇▇▇ ▇▇▇▇▇▇ ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL; (ii) PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE,
COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER,
ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES
AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY
RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN THIS REGARD; (iii) NOTICE PRIOR
TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH
MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S REMEDIES; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION
LAWS; (v) NOTICE OF ACCEPTANCE HEREOF; AND (VI) EXCEPT AS PROHIBITED BY LAW, ANY
RIGHT TO CLAIM OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. BORROWER
ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO ▇▇▇▇▇▇'S
ENTERING INTO THIS AGREEMENT AND THAT ▇▇▇▇▇▇ IS RELYING UPON THE FOREGOING
WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER. BORROWER WARRANTS AND REPRESENTS
36
THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS
KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
[SIGNATURES FOLLOW NEXT PAGE]
37
IN WITNESS WHEREOF, this Agreement has been duly executed in Cranford, New
Jersey, on the day and year specified at the beginning of this Agreement.
ATTEST: PURE WORLD BOTANICALS, INC.
By:/s/ ▇▇▇▇▇▇ ▇'▇▇▇▇▇▇, Controller
-------------------------------
▇▇▇▇▇▇ ▇'▇▇▇▇▇▇, Controller
By: /s/ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, Chief Financial Officer
--------------------------------------------
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, Chief Financial Officer
FLEET CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President
38
APPENDIX A
A. GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of December 22 2003,
by and between Fleet Capital Corporation and PURE WORLD BOTANICALS, INC., (a)
the terms Account, Certificated Security, Chattel Paper, Deposit Account,
Document, Equipment, Financial Asset, Fixture, General Intangibles, Goods,
Instrument, Inventory, Investment Property, Security, Proceeds, Security
Entitlement and Uncertificated Security have the respective meanings assigned
thereto under the UCC (as defined below) and as described in the Security
Documents; (b) the terms Commercial Tort Claims, Electronic Chattel Paper,
Health-Care-Insurance Receivables, Letter-of-Credit Rights, Payment Intangibles,
Software, Supporting Obligations and Tangible Chattel Paper have the respective
meanings assigned thereto in the UCC (as defined below); (c) all terms
indicating Collateral having the meanings assigned thereto under the UCC shall
be deemed to mean such Property, whether now owned or hereafter created or
acquired by Borrower or in which Borrower now has or hereafter acquires any
interest; (d) capitalized terms which are not otherwise defined have the
respective meanings assigned thereto in said Loan and Security Agreement; and
(e) the following terms shall have the following meanings (terms defined in the
singular to have the same meaning when used in the plural and vice versa):
Account Debtor - any Person who is or may become obligated on or under
or on account of any Account, Contract Right, Chattel Paper or General
Intangible.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled
by, or is under common control with, a Person; (ii) which beneficially owns
or holds 5% or more of any class of the Voting Stock of a Person; or (iii)
5% or more of the Voting Stock (or in the case of a Person which is not a
corporation, 5% or more of the equity interest) of which is beneficially
owned or held by a Person or a Subsidiary of a Person.
Agreement - the Loan and Security Agreement referred to in the first
sentence of this Appendix A, all Exhibits thereto and this Appendix A.
Availability - the amount of money which Borrower is entitled to
borrow from time to time as Revolving Credit Loans, such amount being the
difference derived when the sum of the principal amount of Revolving Credit
Loans then outstanding (including any amounts which ▇▇▇▇▇▇ may have paid
for the account of Borrower pursuant to any of the Loan Documents and which
have not been reimbursed by Borrower) is subtracted from the Borrowing
Base. If the amount outstanding is equal to or greater than the Borrowing
Base, Availability is zero (0).
Bank - Fleet National Bank, its successors and assigns.
39
Base Rate - the rate of interest announced or quoted by Bank from time
to time as its prime rate for commercial loans, whether or not such rate is
the lowest rate charged by Bank to its most preferred borrowers; and, if
such prime rate for commercial loans is discontinued by Bank as a standard,
a comparable reference rate designated by Bank as a substitute therefor
shall be the Base Rate.
Blocked Account Servicing Agreement. - the Three Party Blocked Account
Service Agreement executed on or about the Closing Date among the Borrower,
Lender and Bank.
Borrowing Base - as at any date of determination thereof, an amount
equal to the lesser of:
(i) $5,000,000 at such date; or
(ii) an amount equal to:
(a) up to 85% of the net amount of Eligible Accounts
outstanding at such date;
PLUS
(b) the lesser of (1) $2,500,000 or (2) up to 40%, of
the value of Eligible Inventory at such date calculated on
the basis of the lower of cost or market with the cost of
raw materials and finished goods calculated on a first-in,
first-out basis.
For purposes hereof, the net amount of Eligible Accounts at any time
shall be the face amount of such Eligible Accounts less any and all
returns, rebates, discounts (which may, at ▇▇▇▇▇▇'s option, be calculated
on shortest terms), credits, allowances or excise taxes of any nature at
any time issued, owing, claimed by Account Debtors, granted, outstanding or
payable in connection with such Accounts at such time.
Borrowing Base Certificate - a certificate by a responsible officer of
Borrower, substantially in the form of Exhibit Q (or another form
acceptable to Lender) setting forth the calculation of the Borrowing Base,
including a calculation of each component thereof, all in such detail as
shall be satisfactory to Lender. All calculations of the Borrowing Base in
connection with the preparation of any Borrowing Base Certificate shall
originally be made by Borrower and certified to Lender; provided, that
Lender shall have the right to review and adjust, in the exercise of its
reasonable credit judgment, any such calculation after giving notice
thereof to the Borrower, (1) to reflect its reasonable estimate of declines
in value of any of the Collateral described therein, and (2) to the extent
that such calculation is not in accordance with this Agreement.
40
Business Day - any day excluding Saturday, Sunday and any day which is
a legal holiday under the laws of the State of New Jersey or is a day on
which banking institutions located in such state are closed.
Capital Expenditures - expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than
one year, including the total principal portion of Capitalized Lease
Obligations.
Capitalized Lease Obligation - any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP.
Closing Date - the date on which all of the conditions precedent in
Section 9 of the Agreement are satisfied and the initial Loan is made under
the Agreement.
Collateral - all of the Property and interests in Property described
in Section 5 of the Agreement, and all other Property and interests in
Property that now or hereafter secure the payment and performance of any of
the Obligations.
Computer Hardware and Software - all of Borrower's rights (including
rights as licensee and lessee) with respect to (i) computer and other
electronic data processing hardware, including all integrated computer
systems, central processing units, memory units, display terminals,
printers, computer elements, card readers, tape drives, hard and soft disk
drives, cables, electrical supply hardware, generators, power equalizers,
accessories, peripheral devices and other related computer hardware; (ii)
all Software and all software programs designed for use on the computers
and electronic data processing hardware described in clause (i) above,
including all operating system software, utilities and application programs
in any form (source code and object code in magnetic tape, disk or hard
copy format or any other listings whatsoever); (iii) any firmware
associated with any of the foregoing; and (iv) any documentation for
hardware, Software and firmware described in clauses (i), (ii) and (iii)
above, including flow charts, logic diagrams, manuals, specifications,
training materials, charts and pseudo codes.
Consolidated - the consolidation in accordance with GAAP of the
accounts or other items as to which such term applies.
Contract Right - any right of Borrower to payment under a contract for
the sale or lease of goods or the rendering of services, which right is at
the time not yet earned by performance.
Current Assets - at any date means the amount at which all of the
current assets of a Person would be properly classified as current assets
shown on a balance sheet at such date in accordance with GAAP.
41
Default - an event or condition the occurrence of which would, with
the lapse of time or the giving of notice, or both, become an Event of
Default.
Default Rate - as defined in subsection 2.1.2 of the Agreement.
Distribution - in respect of any corporation means and includes: (i)
the payment of any dividends or other distributions on capital stock of the
corporation (except distributions in such stock) and (ii) the redemption or
acquisition of Securities unless made contemporaneously from the net
proceeds of the sale of Securities.
Dominion Account - a special account established by Borrower pursuant
to the Agreement at a bank selected by Borrower, but acceptable to Lender
in its reasonable discretion, and over which Lender shall have sole and
exclusive access and control for withdrawal purposes.
EBITDA - with respect to any fiscal period, the sum of ▇▇▇▇▇▇▇▇'s
Consolidated net earnings (or loss) (but excluding therefrom extraordinary
items and non-recurring gains) before interest expense, taxes, depreciation
and amortization for said period as determined in accordance with GAAP.
Eligible Account - an Account arising in the ordinary course of
▇▇▇▇▇▇▇▇'s business from the sale of goods or rendition of services which
Lender, in its sole credit judgment, deems to be an Eligible Account.
Without limiting the generality of the foregoing, no Account shall be an
Eligible Account if:
(i) it arises out of a sale made by Borrower to a Subsidiary or
an Affiliate of Borrower or to a Person controlled by an Affiliate of
Borrower; or
(ii) it is unpaid for more than sixty (60) days after the
original due date shown on the invoice; or
(iii) it is due or unpaid more than ninety (90) days after the
original invoice date; or
(iv) 50% or more of the Accounts from the Account Debtor are not
deemed Eligible Accounts hereunder; or
(v) the total unpaid Accounts of the Account Debtor exceed 20% of
the net amount of all Eligible Accounts, to the extent of such excess;
or
(vi) any covenant, representation or warranty contained in the
Agreement with respect to such Account has been breached; or
(vii) the Account Debtor is also ▇▇▇▇▇▇▇▇'s creditor or supplier,
or the Account Debtor has disputed liability with respect to such
Account, or the Account Debtor has made any claim with respect to any
42
other Account due from such Account Debtor to Borrower, or the Account
otherwise is or may become subject to any right of setoff by the
Account Debtor; or
(viii) the Account Debtor has commenced a voluntary case under
the federal bankruptcy laws, as now constituted or hereafter amended,
or made an assignment for the benefit of creditors, or a decree or
order for relief has been entered by a court having jurisdiction in
the premises in respect of the Account Debtor in an involuntary case
under the federal bankruptcy laws, as now constituted or hereafter
amended, or any other petition or other application for relief under
the federal bankruptcy laws has been filed against the Account Debtor,
or if the Account Debtor has failed, suspended business, ceased to be
Solvent, or consented to or suffered a receiver, trustee, liquidator
or custodian to be appointed for it or for all or a significant
portion of its assets or affairs; or
(ix) it arises from a sale to an Account Debtor outside the
United States, unless (a) the sale is on letter of credit, guaranty,
credit insurance or acceptance terms, in each case acceptable to
Lender, in its sole discretion, (b) it is due from an Account Debtor
located in Canada not to exceed the lesser of (1) 10% of Borrower's
total Accounts or (2) $200,000 in the aggregate at any time, or (c) it
is due from Pepsi Cola Mexicana, SA not to exceed the lesser of (1)
20% of Borrower's total Accounts or (2) $400,000 in the aggregate at
any time; or
(x) it arises from a sale to the Account Debtor on a
bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other repurchase or return basis; or
(xi) the Account Debtor is the United States of America or any
department, agency or instrumentality thereof, unless Borrower assigns
its right to payment of such Account to Lender, in a manner
satisfactory to Lender, so as to comply with the Assignment of Claims
Act of 1940 (31 U.S.C. ss.203 et seq., as amended); or
(xii) the Account is subject to a Lien other than a Permitted
Lien; or
(xiii) the goods giving rise to such Account have not been
delivered to and accepted by the Account Debtor or the services giving
rise to such Account have not been performed by ▇▇▇▇▇▇▇▇ and accepted
by the Account Debtor or the Account otherwise does not represent a
final sale; or
(xiv) the Account is evidenced by chattel paper or an instrument
of any kind, or has been reduced to judgment; or
(xv) Borrower has made any agreement with the Account Debtor for
any deduction therefrom, except for discounts or allowances which are
made in the ordinary course of business for prompt payment and which
43
discounts or allowances are reflected in the calculation of the face
value of each invoice related to such Account; or
(xvi) Borrower has made an agreement with the Account Debtor to
extend the time of payment thereof; or
(xvii) the Account or Account Debtor is otherwise unsatisfactory
to Lender in its sole discretion.
Eligible Inventory - such Inventory of Borrower (other than packaging
materials and supplies) which Lender, in its sole credit judgment, deems to
be Eligible Inventory. Without limiting the generality of the foregoing, no
Inventory shall be Eligible Inventory if:
(i) it is not raw materials or finished goods, that is, in
▇▇▇▇▇▇'s opinion, readily marketable in its current form; or
(ii) it is not in good, new and saleable condition; or
(iii) it is slow-moving (more than 2 years old), obsolete or
unmerchantable; or
(iv) it does not meet all standards imposed by any governmental
agency or authority; or
(v) it does not conform in all respects to the warranties and
representations set forth in the Agreement; or
(vi) it is not at all times subject to ▇▇▇▇▇▇'s duly perfected,
first-priority security interest and no other Lien; or
(vii) it is not situated at a location in compliance with the
Agreement or is in transit; or
(viii) it is stored at a location not made subject to a landlord
waiver and/or bailee waiver acceptable to Lender.
Environmental Laws - all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidances, orders and consent
decrees relating to health, safety and environmental matters.
Equipment Loan - the Loans to be made by Lender to Borrower pursuant
to subsection 1.2.2 of the Agreement.
44
Equipment Note - the Equipment Loan Note to be executed by ▇▇▇▇▇▇▇▇ in
favor of ▇▇▇▇▇▇ as provided in Section 1.2.2 of this Agreement, which shall
be in the form of Exhibit B-2 to the Agreement.
ERISA - the Employee Retirement Income Security Act of 1974, as
amended, and all rules and regulations from time to time promulgated
thereunder.
Event of Default - as defined in Section 10.1 of the Agreement.
Fixed Charge Coverage Ratio -.means, as of any date, the ratio of (i)
EBITDA minus Distributions, unfunded Capital Expenditures and cash taxes
paid during the applicable measurement period to (ii) scheduled payments of
principal on account of current maturities of Money Borrowed plus interest
during the applicable measurement period. For the purposes of this
definition, the effects of any potential year end inventory adjustments for
2003 shall be excluded from the calculation of EBITDA.
GAAP - generally accepted account principles in the United States of
America in effect from time to time.
Indebtedness - as applied to a Person means, without duplication
(i) all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Indebtedness
is to be determined, including, without limitation, Capitalized Lease
Obligations,
(ii) all obligations of other Persons which such Person has
guaranteed,
(iii) all reimbursement obligations in connection with letters of
credit or letter of credit guaranties issued for the account of such
Person, and
(iv) in the case of Borrower (without duplication), the
Obligations.
Intellectual Property - all past, present and future: trade secrets,
know-how and other proprietary information; trademarks, internet domain
names, service marks, trade dress, trade names, business names, designs,
logos, slogans (and all translations, adaptations, derivations and
combinations of the foregoing) indicia and other source and/or business
identifiers, and the goodwill of the business relating thereto and all
registrations or applications for registrations which have heretofore been
or may hereafter be issued thereon throughout the world; copyrights
(including copyrights for computer programs) and copyright registrations or
applications for registrations which have heretofore been or may hereafter
be issued throughout the world and all tangible property embodying the
copyrights, unpatented inventions (whether or not patentable); patent
applications and patents; industrial design applications and registered
industrial designs; license agreements related to any of the foregoing and
income therefrom; books, records, writings, computer tapes or disks, flow
diagrams, specification sheets, computer software, source codes, object
45
codes, executable code, data, databases and other physical manifestations,
embodiments or incorporations of any of the foregoing; the right to sue for
all past, present and future infringements of any of the foregoing; all
other intellectual property; and all common law and other rights throughout
the world in and to all of the foregoing.
Leverage Ratio - means, as of any date, the ratio on a Consolidation
basis of (i) Indebtedness minus Subordinated Debt to (ii) Tangible Capital
Funds.
Lien - any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such
interest is based on common law, statute or contract. The term "Lien" shall
also include reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and other title
exceptions and encumbrances affecting Property. For the purpose of the
Agreement, Borrower shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person for security purposes.
Loan Account - the loan account established on the books of Lender
pursuant to Section 3.6 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the Security
Documents.
Loans - all loans and advances of any kind made by ▇▇▇▇▇▇, and/or by
any affiliate of Lender, pursuant to the Agreement.
Money Borrowed - means (i) Indebtedness arising from the lending of
money by any Person to Borrower; (ii) Indebtedness, whether or not in any
such case arising from the lending by any Person of money to Borrower, (A)
which is represented by notes payable or drafts accepted that evidence
extensions of credit, (B) which constitutes obligations evidenced by bonds,
debentures, notes or similar instruments, or (C) upon which interest
charges are customarily paid (other than accounts payable) or that was
issued or assumed as full or partial payment for Property; (iii)
Indebtedness that constitutes a Capitalized Lease Obligation; (iv)
reimbursement obligations with respect to letters of credit or guaranties
of letters of credit and (v) Indebtedness of Borrower under any guaranty of
obligations that would constitute Indebtedness for Money Borrowed under
clauses (i) through (iii) hereof, if owed directly by Borrower.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3)
of ERISA.
Obligations - all Loans and all other advances, (including, but not
limited to, obligations arising under any interest or currency swap,
future, option or similar arrangements, foreign exchange contracts, all
obligations arising from any derivative transactions and electronic funds
transfers (whether through automated clearing house or otherwise) or out of
46
▇▇▇▇▇▇'s non-receipt or inability to collect funds or otherwise not being
made whole in connection with depositing transfer checks or similar
arrangements) debts, liabilities, obligations, covenants and duties,
together with all interest, fees (including, without limitation, attorneys'
fees) and other charges thereon, owing, arising, due or payable from
Borrower to Lender, and/or to any affiliate of Lender, of any kind or
nature, present or future, whether or not evidenced by any note, guaranty
or other instrument, whether arising under the Agreement or any of the
other Loan Documents or otherwise whether direct or indirect (including
those acquired by assignment), absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising and
however acquired.
Organizational I.D. Number - with respect to Borrower, the
organizational identification number assigned to Borrower by the applicable
governmental unit or agency of the jurisdiction of organization of
Borrower.
Original Term - as defined in Section 4.1 of the Agreement.
Other Agreements - any and all agreements, instruments and documents
(other than the Agreement and the Security Documents), heretofore, now or
hereafter executed by Borrower, any Subsidiary of Borrower or any other
third party and delivered to Lender in respect of the transactions
contemplated by this Agreement including, without limitation, the
Subordination Agreement.
Overadvance - the amount, if any, by which the outstanding principal
amount of Revolving Credit Loans exceeds the Borrowing Base.
PACA - the Perishable Agricultural Commodities Act 7 U.S.C. ss.499 et
seq. and the rules and regulations promulgated thereunder, as may be
amended from time to time.
Parent - Pure World, Inc., a Delaware corporation.
Participating Lender - each Person who shall be granted the right by
▇▇▇▇▇▇ to participate in any of the Loans described in the Agreement and
who shall have entered into a participation agreement in form and substance
satisfactory to Lender.
Permitted Liens - any Lien of a kind specified in subsection 8.2.5 of
the Agreement.
Permitted Purchase Money Indebtedness - Purchase Money Indebtedness of
Borrower incurred after the date hereof which is secured by a Purchase
Money Lien and does not exceed the amounts allowable under subsection 8.2.8
of this Agreement. For the purposes of this definition, the principal
amount of any Purchase Money Indebtedness consisting of capitalized leases
shall be computed as a Capitalized Lease Obligation.
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Person - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, or unincorporated
organization, or a government or agency or political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for
employees of Borrower that is covered by Title IV of ERISA.
Projections - ▇▇▇▇▇▇▇▇'s forecasted Consolidated and consolidating (a)
balance sheets, (b) profit and loss statements, (c) cash flow statements,
and (d) capitalization statements, all prepared on a consistent basis with
▇▇▇▇▇▇▇▇'s historical financial statements, together with appropriate
supporting details and a statement of underlying assumptions.
Property - any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means and includes (i) Indebtedness
(other than the Obligations) for the payment of all or any part of the
purchase price of any fixed assets, (ii) any Indebtedness (other than the
Obligations) incurred at the time of or within ten (10) days prior to or
after the acquisition of any fixed assets for the purpose of financing all
or any part of the purchase price thereof, and (iii) any renewals,
extensions or refinancings thereof, but not any increases in the principal
amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase
Money Indebtedness, but only if such Lien shall at all times be confined
solely to the fixed assets the purchase price of which was financed through
the incurrence of the Purchase Money Indebtedness secured by such Lien.
Rentals - as defined in subsection 8.2.13 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(b) of
ERISA.
Restricted Investment - any investment made in cash or by delivery of
Property to any Person, whether by acquisition of stock, Indebtedness or
other obligation or Security, or by loan, advance or capital contribution,
or otherwise, or in any Property except the following:
(i) investments in one or more Subsidiaries of Borrower to the
extent existing on the Closing Date;
(ii) Property to be used in the ordinary course of business;
(iii) Current Assets arising from the sale of goods and services
in the ordinary course of business of Borrower and its Subsidiaries;
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(iv) investments in direct obligations of the United States of
America, or any agency thereof or obligations guaranteed by the United
States of America, provided that such obligations mature within one
(1) year from the date of acquisition thereof;
(v) investments in certificates of deposit maturing within one
(1) year from the date of acquisition issued by a bank or trust
company organized under the laws of the United States or any state
thereof having capital surplus and undivided profits aggregating at
least $100,000,000; and
(vi) investments in commercial paper given the highest rating by
a national credit rating agency and maturing not more than 270 days
from the date of creation thereof.
Revolving Credit Loan - a Loan made by ▇▇▇▇▇▇ as provided in Section
1.1 of the Agreement.
Revolving Credit Note - the Revolving Credit Note to be executed by
▇▇▇▇▇▇▇▇ on or about the Closing Date in favor of Lender to evidence the
Revolving Credit Loan, which shall be in the form of Exhibit A to the
Agreement.
Schedule of Accounts - as defined in subsection 6.2.1 of the
Agreement.
Security - shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
Security Documents - all instruments and agreements now or at any time
hereafter securing the whole or any part of the Obligations.
Solvent - as to any Person, that such Person (i) owns Property whose
fair saleable value is greater than the amount required to pay all of such
Person's Indebtedness (including contingent debts), (ii) is able to pay all
of its Indebtedness as such Indebtedness matures and (iii) has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.
Subordinated Debt - Indebtedness of Borrower that is subordinated to
the Obligations in a manner satisfactory to Lender pursuant to the
Subordination Agreement.
Subordination Agreement - the Subordination Agreement to be dated on
or about the Closing Date among Borrower, Lender and Parent.
Subsidiary - any corporation of which a Person owns, directly or
indirectly through one or more intermediaries, more than 50% of the Voting
Stock at the time of determination.
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Tangible Capital Funds - means, at any time, the net worth of a Person
as determined in accordance with GAAP, plus Subordinated Debt of such
Person minus all items that would be considered "intangible assets" under
GAAP minus amounts due from employees, officers, directors and managers and
equity holders of such Person.
Term Loan - the Loan described in subsection 1.2.1 of the Agreement.
Term Note - the Secured Promissory Note to be executed by ▇▇▇▇▇▇▇▇ on
or about the Closing Date in favor of Lender to evidence the Term Loan,
which shall be in the form of Exhibit B-1 to the Agreement.
Total Credit Facility - $7,500,000, consisting of Revolving Credit
Loans ($5,000,000), the Term Loan ($2,000,000) and the Equipment Loan
($500,000).
Type of Organization - with respect to Borrower, the kind or type of
entity by which Borrower is organized, such as a corporation or limited
liability company.
UCC - the Uniform Commercial Code as in effect in the State of New
Jersey on the date of this Agreement, as the UCC may be amended or
otherwise modified.
Voting Stock - Securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled
to elect a majority of the corporate directors (or Persons performing
similar functions).
Other Terms. All other terms contained in the Agreement shall have, when
the context so indicates, the meanings provided for by the UCC to the extent the
same are used or defined therein.
Certain Matters of Construction. The terms "herein," "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any of the Loan Documents shall include any and
all modifications thereto and any and all extensions or renewals thereof.
(a) LIST OF EXHIBITS
Exhibit A Form of Revolving Credit Note
Exhibit B-1 Term Note
Exhibit B-2 Equipment Note
Exhibit C Borrower's and each Subsidiary's Business Locations
Exhibit D Jurisdictions in which Borrower and each Subsidiary is
Authorized to do Business
Exhibit E Capital Structure of Borrower
Exhibit F Corporate Names
Exhibit G Tax Identification Numbers of Subsidiaries
Exhibit H Patents, Trademarks, Copyrights and Licenses
Exhibit I Contracts Restricting Borrower's Right to Incur Debts
Exhibit J Litigation
Exhibit K Capitalized Leases
Exhibit L Operating Leases
Exhibit M Pension Plans
Exhibit N Labor Contracts
Exhibit O Compliance Certificate
Exhibit P Permitted Liens
Exhibit Q Borrowing Base Certificate
Exhibit R Loan Recapitulation Report