EXHIBIT 10.02
CREDIT AGREEMENT
by and between
GEL TECH, L.L.C., an Arizona limited liability company
GUM TECH INTERNATIONAL, INC., a Utah corporation
and
COMERICA BANK-CALIFORNIA, successory by merger to
Imperial Bank, a California banking corporation
Dated as of
May 29, 2002
TABLE OF CONTENTS
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ARTICLE 1. DEFINITION OF TERMS..............................................1
1.1 Definitions......................................................1
1.2 References.......................................................8
1.3 Accounting Terms.................................................9
ARTICLE 2. THE RLC..........................................................9
2.1 RLC Commitment...................................................9
2.2 Revolving Line of Credit.........................................9
2.3 RLC Payments.....................................................9
2.4 Excess Balance Payment..........................................10
2.5 Conditions......................................................10
2.6 Other RLC Advances by Lender....................................10
2.7 Assignment......................................................11
2.8 Issuance of Letters of Credit...................................11
2.9 Issuance Procedure for Letter of Credit.........................12
2.10 Letter of Credit Fees...........................................12
2.11 Disbursements...................................................12
2.12 Reimbursement Obligations of Borrower...........................12
2.13 Nature of Reimbursement Obligations.............................13
2.14 Certain Requirements............................................13
2.15 Drawings and Reimbursements.....................................14
2.16 Role of Lender..................................................14
ARTICLE 3. PAYMENTS AND FEES PROVISIONS....................................14
3.1 Payments........................................................14
3.2 Commitment Fee..................................................15
3.3 Letter of Credit Fees...........................................15
3.4 Computations....................................................15
3.5 Maintenance of Accounts.........................................16
ARTICLE 4. SECURITY........................................................16
4.1 Security........................................................16
4.2 Outstanding LC Balance..........................................16
4.3 Security Documents..............................................16
4.4 Zensano Lien....................................................16
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ARTICLE 5. CONDITIONS PRECEDENT............................................17
5.1 Initial Advance.................................................17
5.2 No Event of Default.............................................18
5.3 No Material Adverse Effect......................................18
5.4 Representations and Warranties..................................18
ARTICLE 6. REPRESENTATIONS AND WARRANTIES..................................19
6.1 Recitals........................................................19
6.2 Organization and Good Standing..................................19
6.3 Authorization and Power.........................................19
6.4 Security Documents..............................................19
6.5 No Conflicts or Consents........................................19
6.6 No Litigation...................................................19
6.7 Financial Condition.............................................20
6.8 Taxes...........................................................20
6.9 No Stock Purchase...............................................20
6.10 Advances........................................................20
6.11 Enforceable Obligations.........................................20
6.12 No Default......................................................20
6.13 Significant Debt Agreements.....................................21
6.14 ERISA...........................................................21
6.15 Compliance with Law.............................................21
6.16 Solvent.........................................................21
6.17 Investment Company Act..........................................21
6.18 Title...........................................................21
6.19 Survival of Representations, Etc................................21
6.20 Environmental Matters...........................................21
6.21 Licenses, Tradenames............................................21
6.22 Permits.........................................................22
6.23 Prior Revolving Line of Credit..................................22
ARTICLE 7. AFFIRMATIVE COVENANTS...........................................22
7.1 Financial Statements, Reports and Documents.....................22
7.2 Maintenance of Existence and Rights; Conduct of
Business; Management..........................................23
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7.3 Operations and Properties.......................................23
7.4 Authorizations and Approvals....................................23
7.5 Compliance with Law.............................................23
7.6 Payment of Taxes and Other Indebtedness.........................23
7.7 Compliance with Significant Debt Agreements and
Other Agreements..............................................24
7.8 Compliance with Credit Documents................................24
7.9 Notice of Default...............................................24
7.10 Other Notices...................................................24
7.11 Books and Records; Access; Audits...............................24
7.12 ERISA Compliance................................................24
7.13 Further Assurances..............................................25
7.14 Insurance.......................................................25
7.15 Deposit Accounts................................................25
ARTICLE 8. NEGATIVE COVENANTS..............................................26
8.1 Existence.......................................................26
8.2 Amendments to Organizational Documents..........................26
8.3 Margin Stock....................................................26
8.4 Distributions...................................................26
8.5 Liens...........................................................27
8.6 Transfer Collateral.............................................27
8.7 Merger; Sale of Assets..........................................27
8.8 Indebtedness....................................................27
8.9 Financial Covenants.............................................27
ARTICLE 9. EVENTS OF DEFAULT...............................................27
9.1 Events of Default...............................................27
9.2 Remedies Upon Event of Default..................................30
9.3 Performance by Lender...........................................31
ARTICLE 10. MISCELLANEOUS...................................................31
10.1 Modification....................................................31
10.2 Waiver..........................................................31
10.3 Payment of Expenses.............................................31
10.4 Notices.........................................................32
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10.5 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial........33
10.6 Invalid Provisions..............................................33
10.7 Binding Effect..................................................33
10.8 Entirety........................................................33
10.9 Headings........................................................33
10.10 Survival........................................................33
10.11 No Third Party Beneficiary......................................33
10.12 Time............................................................34
10.13 Termination.....................................................34
10.14 Schedules and Exhibits Incorporated.............................34
10.15 Counterparts....................................................34
10.16 Participations..................................................34
EXHIBIT "A" Form of Advance Notice
EXHIBIT "B" Form of Compliance Certificate
EXHIBIT "C" Form of Borrowing Base Certificate
EXHIBIT "D" Forms of Waiver/Release of Lien Rights
▇-▇ ▇▇▇▇▇▇▇▇
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EXHIBIT "E" Forms of Assignment of Time Certificate of Deposit
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CREDIT AGREEMENT
BY THIS CREDIT AGREEMENT (together with any amendments or modifications,
the "Credit Agreement"), entered into as of this 29th day of May, 2002 by and
between GEL TECH, L.L.C., an Arizona limited liability company ("Gel Tech"), and
GUM TECH INTERNATIONAL, INC., a Utah corporation ("Gum Tech" and, collectively
with Gel Tech, the "Borrower"), and COMERICA BANK-CALIFORNIA, successor by
merger to Imperial Bank, a California banking corporation (the "Lender"), in
consideration of the mutual promises herein contained and for other valuable
consideration, the parties hereto do hereby agree as follows:
RECITALS
A. Borrower has requested that Lender establish the following
financial accommodations:
(1) A revolving line of credit facility (the "RLC") in the
principal amount of FOUR MILLION AND NO/100 DOLLARS ($4,000,000.00) for the
purpose of funding Borrower's short-term working capital.
B. As a condition for extending such financial accommodations,
Lender has required that Borrower enter into this Credit Agreement, establishing
the terms and conditions thereof.
ARTICLE 1.
DEFINITION OF TERMS
1.1 DEFINITIONS. For the purposes of this Credit Agreement, unless the
context otherwise requires, the following terms shall have the respective
meanings assigned to them in this Article 1 or in the Section hereof referred to
below:
"ADVANCE" means an RLC Advance.
"AFFILIATE" of any Person means any Person which, directly or
indirectly, Controls or is Controlled by such Person.
"ASSIGNED ACCOUNT AMOUNT" means the aggregate balance of those time
certificate of deposit accounts of Borrower held by Lender and assigned to
Lender by an Assignment of Time Certificate of Deposit in the form of Exhibit
"E" hereto.
"AUTHORIZED PERSON" means one or more managers or officers of Borrower
duly authorized (and so certified to Lender by the members or directors of
Borrower pursuant to a borrowing authorization or resolution from time to time
satisfactory to Lender in the exercise of Lender's reasonable discretion),
acting alone, to request Advances under the provisions of this Credit Agreement
and execute and deliver documents, instruments, agreements, reports, statements
and certificates in connection herewith.
"BANKING DAY" means a day of the year on which banks are not required
or authorized to close in Phoenix, Arizona.
"BORROWER": See the Preamble hereto.
"BORROWING BASE" means the sum of (i) the Eligible Accounts Amount,
plus (ii) the Eligible Inventory Amount.
"BORROWING BASE CERTIFICATE" means a certificate substantially in the
form attached hereto as Exhibit C.
"CHANGE OF CONTROL" means, with respect to Gum Tech or Gel Tech, the
direct or indirect acquisition by any Person (other than an Affiliate of Gum
Tech) of Control of either such party.
"CHANGE OF CONTROL TRANSACTION" means any transaction in which either
Gum Tech or Gel Tech is merged or consolidated with any other entity that is not
an Affiliate and such other entity is the surviving entity.
"CLOSING DATE" means the date of delivery of this Credit Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means all property subject to the Security Documents.
"COMMITMENT FEE": See Section 3.2 hereof.
"CONTROL" when used with respect to any Person means the power,
directly or indirectly, to vote or control the voting of more than fifty percent
(50%) of the outstanding voting securities of such Person, or to otherwise
direct the management policies of such Person by contract or otherwise; and the
terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"CONTROLLED GROUP" means, severally and collectively, the members of
the group controlling, controlled by and/or in common control of Borrower,
within the meaning of Section 4001(b) of ERISA.
"CREDIT AGREEMENT": See the Preamble hereto.
"CREDIT DOCUMENTS" means this Credit Agreement, the Note (including
any renewals, extensions and refundings thereof), the Security Documents, and
any written agreements, certificates or documents (and with respect to this
Credit Agreement and such other written agreements and documents, any amendments
or supplements thereto or modifications thereof) executed or delivered pursuant
to the terms of this Credit Agreement.
"DEFAULT RATE" means at any time five percent (5%) per annum over the
then applicable interest rate.
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"DISBURSEMENT": See Section 2.11.
"DISBURSEMENT DATE": See Section 2.11.
"DOLLARS" and the sign "$" mean lawful currency of the United States
of America.
"ELIGIBLE ACCOUNTS" means those accounts receivable of Borrower,
except that Eligible Accounts shall not include any of the following:
(a) Account balances over sixty (60) calendar days from
the due date.
(b) Accounts with respect to which the account debtor
is an officer, director, shareholder, employee, subsidiary
or affiliate of Borrower.
(c) Accounts with respect to which 25% or more of the
account debtor's total accounts or obligations outstanding
to Borrower are more than sixty (60) calendar days from due
date.
(d) As to accounts representing more than the Maximum
Concentration Percentage of Borrower's total accounts
receivable outstanding at any time, the balance in excess of
Maximum Concentration Percentage plus balances over sixty
(60) calendar days from the due date are not eligible, where
the "Maximum Concentration Percentage" means 30% as to
Borrower's accounts with each of Walgreens, CVS, Walmart and
Costco, and 20% as to all other accounts of Borrower.
(e) Accounts with respect to international transactions
unless insured by an insurance company acceptable to Lender
in its sole discretion or covered by letters of credit
issued or confirmed by a bank acceptable to Lender or
otherwise specifically approved by Lender, in its sole and
absolute discretion.
(f) Credit balances greater than ninety (90) calendar
days from invoice date.
(g) Accounts where the account debtor is a seller to
Borrower, whereby a potential offset (contra) exists, to the
extent of the offset.
(h) Accounts of any department or agency of the federal
government of the United States of America.
(i) Consignment or guaranteed sales.
(j) ▇▇▇▇ and hold accounts.
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(k) Contracts receivable.
(l) Progress ▇▇▇▇▇▇▇▇, CODs, container receivables,
non-trade receivables, Chapter 11 receivables.
"ELIGIBLE ACCOUNTS AMOUNT" means an amount equal to sixty percent
(60%) of the Eligible Accounts.
"ELIGIBLE INVENTORY" means inventory held by Borrower that is finished
products.
"ELIGIBLE INVENTORY AMOUNT" means thirty-three percent (33%) of
Eligible Inventory from April 1 to July 31 of each year and from November 1
through December 31 of each year, and 0% of Eligible Inventory from January 1 to
March 31 of each year and from July 31 to October 31 of each year, which amount
may not exceed Five Hundred Thousand Dollars ($500,000.00).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with all final and permanent regulations issued pursuant
thereto. References herein to sections and subsections of ERISA are deemed to
refer to any successor or substitute provisions therefor.
"EVENT OF DEFAULT": See Section 9.1 hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"FINANCIAL COVENANTS": See Section 8.9 hereof.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its Accounting Principles Board or by the
Financial Accounting Standards Board or through other appropriate boards or
committees thereof and which are consistently applied for all periods after the
date hereof so as to properly reflect the financial condition, and the results
of operations and changes in the financial position, of Borrower, subject to
Section 1.3 hereof.
"GOVERNMENTAL AUTHORITY" means any government (or any political
subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over Borrower or any of its business,
operations or properties.
"HONOR DATE": See Section 2.15(a).
"ISSUANCE DATE" means the date on which a Letter of Credit is
delivered to the beneficiary thereof.
"ISSUANCE REQUEST" means a request for a Letter of Credit duly
executed by Borrower in a form satisfactory to Lender.
"ISSUE" means, with respect to any Letter of Credit, to issue or, by
amendment or otherwise, to extend the expirey of, or to renew or decrease the
amount of, such Letter of Credit, and the terms "ISSUE," "ISSUING," and
"ISSUANCE" have corresponding meanings.
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"INDEBTEDNESS" of a Person means each of the following (without
duplication): (a) obligations of that Person to any other Person for payment of
borrowed money, (b) capital lease obligations, (c) notes and drafts drawn or
accepted by that Person payable to any other Person, whether or not representing
obligations for borrowed money (but without duplication of indebtedness for
borrowed money), (d) any obligation for the purchase price of property the
payment of which is deferred for more than one year or evidenced by a note or
equivalent instrument, (e) guarantees of Indebtedness of third parties, and (f)
a recourse or nonrecourse payment obligation of any other Person that is secured
by a Lien on any property of the first Person, whether or not assumed by the
first Person, up to the fair market value (from time to time) of such property
(absent manifest evidence to the contrary, the fair market value of such
property shall be the amount determined under GAAP for financial reporting
purposes).
"INTEREST COVERAGE RATIO" means net income plus depreciation,
amortization and interest expense, all divided by interest expense, calculated
in accordance with GAAP at each fiscal quarter end of the Borrower for the prior
four fiscal quarters.
"IP SECURITY AGREEMENT": See Section 4.1(b) hereof.
"LC DRAW FEE": See Section 3.3(b).
"LC ISSUANCE FEE": See Section 3.3(a).
"LENDER": See the Preamble hereto.
"LETTER OF CREDIT" means a letter of credit issued by Lender for the
account of Borrower pursuant to Article 2.
"LIEN" means any lien, mortgage, security interest, tax lien, pledge,
encumbrance, conditional sale or title retention arrangement, or any other
interest in property designed to secure the repayment of Indebtedness whether
arising by agreement or under any statute or law, or otherwise.
"LIQUIDITY" means total cash held by Borrower less the amount thereof
that is restricted cash, plus the value of all marketable securities held by
Borrower, measured at the end of each fiscal quarter of Borrower.
"LOAN" or "LOANS" means the RLC.
"MATERIAL ADVERSE EFFECT" means any circumstance or event which (i)
has any material adverse effect upon the validity or enforceability of any
Credit Document, (ii) materially impairs the ability of Borrower to fulfill its
obligations under the Credit Documents, or (iii) causes an Event of Default or
any event which, with notice or lapse of time or both, would become an Event of
Default.
"MATURITY DATE" means the RLC Maturity Date.
"MAXIMUM LC COMMITMENT" means One Million Five Hundred Thousand And
No/100 Dollars ($1,500,000.00).
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"MAXIMUM RLC LOAN AMOUNT": See Section 2.1 hereof.
"NET INCOME" means, for any period, the net income of Borrower for
such period, determined in accordance with GAAP.
"NOTE" or "NOTES" means the RLC Note.
"OBLIGATION" means all present and future indebtedness, obligations
and liabilities of Borrower to Lender, and all renewals and extensions thereof,
or any part thereof, arising pursuant to this Credit Agreement or represented by
the Note, including without limitation the Loan and all interest accruing
thereon, and attorneys' fees incurred in the enforcement or collection thereof,
regardless of whether such indebtedness, obligations and liabilities are direct,
indirect, fixed, contingent, joint, several or joint and several; together with
all indebtedness, obligations and liabilities of Borrower evidenced or arising
pursuant to any of the other Credit Documents, and all renewals and extensions
thereof, or part thereof.
"OUTSTANDING LC BALANCE" in effect at any time means the maximum
aggregate amount available to be drawn at such time under all outstanding
Letters of Credit, the determination of such maximum amount to assume compliance
with all conditions for a Disbursement.
"PAYMENT DATE" means the first day of each month, provided that if any
such day is not a Banking Day, then such Payment Date shall be the next
successive Banking Day.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or substantially all of the Pension Benefit Guaranty
Corporation's functions under ERISA.
"PERMITTED LIENS" means:
(a) Liens in Lender's favor.
(b) Liens for taxes not delinquent.
(c) Liens resulting from purchase money financing as to the
personal property so financed and any sales proceeds therefrom.
(d) Liens arising under that certain Security Agreement made as
of December 5, 2001 by and between Gum Tech and Zensano, Inc.
(e) The intellectual property rights of Zensano, Inc. under that
certain Intellectual Property Development and License Agreement dated
effective May 21, 1999 among Gum Tech, Gel Tech and Bio-Delivery
Technologies, Inc. (of which Zensano, Inc. is the lawful successor),
as amended by that certain Confidentiality and Non-Competition
Agreement dated as of December 5, 2001 among Zengen, Inc., Zensano,
Inc., Gum Tech, Gel Tech and certain individuals.
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"PERSON" includes an individual, a corporation, a joint venture, a
partnership, a trust, a limited liability company, an unincorporated
organization or a government or any agency or political subdivision thereof.
"PLAN" means an employee defined benefit plan or other plan maintained
by Borrower for employees of Borrower and covered by Title IV of ERISA, or
subject to the minimum funding standards under Section 412 of the Code.
"PRIME RATE" means the interest rate per annum publicly announced by
Lender, or its successors, as its "prime rate" as in effect from time to time.
Borrower acknowledges that the Prime Rate is not necessarily the best or lowest
rate offered by Lender and Lender may lend to its customers at rates that are
at, above or below its Prime Rate.
"QUICK RATIO" means total cash held by Borrower plus Eligible
Accounts, all divided by total current liabilities of Borrower, measured at the
end of each fiscal quarter of Borrower.
"REGULATION U" means Regulation U promulgated by the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any other
regulation hereafter promulgated by said Board to replace the prior Regulation U
and having substantially the same function.
"REPORTABLE EVENT" means any "reportable event" as described in
Section 4043(b) of ERISA with respect to which the thirty (30) day notice
requirement has not been waived by the PBGC.
"RLC": See Recital A hereof.
"RLC ADVANCE" means a disbursement of the proceeds of the RLC.
"RLC BALANCE" means (i) with respect to the RLC on any date, the
aggregate outstanding principal amount thereof after giving effect to any
borrowings and prepayments or repayments of RLC Advances occurring on such date;
plus (ii) with respect to any Outstanding LC Obligations on any date, the amount
of such LC Obligations on such date after giving effect to any Issuances of
Letters of Credit occurring on such date and any other changes in the aggregate
amount of the Outstanding LC Obligations as of such date, including changes
occurring as a result of any reimbursements of outstanding unpaid drawings under
any Letters of Credit or any reductions in the maximum amount available for
drawing under Letters of Credit taking effect on such date.
"RLC COMMITMENT" means Four Million And No/100 Dollars
($4,000,000.00).
"RLC MATURITY DATE" means May 15, 2003.
"RLC NOTE" means that Revolving Promissory Note of even date herewith
in the amount of the RLC Commitment, executed by Borrower and delivered pursuant
to the terms of this Credit Agreement, together with any renewals, extensions,
modifications or replacements thereof.
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"SECURITY AGREEMENT": See Section 4.1(a) hereof.
"SECURITY DOCUMENTS": See Section 4.2 hereof.
"SIGNIFICANT DEBT AGREEMENT" means all documents, instruments and
agreements executed by Borrower, evidencing, securing or ensuring any
Indebtedness of Borrower or any guaranty in excess of $100,000.00 in outstanding
principal (or principal equivalent) amount.
"STATED AMOUNT" of a Letter of Credit means the amount of the Letter
of Credit as stated in the Letter of Credit.
"STATED EXPIRY DATE" of a Letter of Credit means the stated expiry
date or expiration date as stated in the Letter of Credit.
"SUBORDINATED DEBT" means Indebtedness of Borrower subordinated to the
payment of the Obligation pursuant to written agreements acceptable to Lender.
"SUBSIDIARY" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such corporation,
irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by the Borrower, by the
Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"TANGIBLE NET WORTH" means the sum of the total shareholders' or
members' equity (including capital stock, additional paid in capital and
retained earnings after deducting treasury stock or the equivalent thereof)
which would appear on a balance sheet of Borrower prepared in accordance with
GAAP as of the end of each fiscal quarter of Borrower, less the sum of the
aggregate book value of "Intangible Assets" (as defined below) shown on such
balance sheet and any amounts due from stockholders, officers and Affiliates of
Borrower. "Intangible Assets" means those assets that are (i) deferred assets,
other than prepaid taxes; (ii) patents, copyrights, trademarks, tradenames,
franchises, goodwill, experimental expenses, organization expense and other
similar assets which would be classified as intangible assets on a balance sheet
prepared in accordance with GAAP; and (iii) unamortized debt discount and
expense, all measured as of each fiscal quarter end.
"VARIABLE RATE" means the rate per annum equal to the sum of one and
one-half percent (1.5%) and the Prime Rate per annum as in effect from time to
time. The Variable Rate will change on each day that the "Prime Rate" changes.
"VARIABLE RATE ADVANCE" means an Advance that bears interest at the
Variable Rate.
1.2 REFERENCES. Capitalized terms shall be equally applicable to both the
singular and the plural forms of the terms therein defined. References to
"Credit Agreement," "this Agreement," "herein," "hereof," "hereunder," or other
like words mean this Credit Agreement as amended, supplemented, restated or
otherwise modified and in effect from time to time.
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1.3 ACCOUNTING TERMS. Except as expressly provided to the contrary herein,
all accounting terms shall be interpreted and all accounting determinations
shall be made in accordance with GAAP, except as otherwise specifically provided
for herein. To the extent any change in GAAP affects any computation or
determination required to be made pursuant to this Credit Agreement, such
computation or determination shall be made as if such change in GAAP had not
occurred unless Borrower and Lender agree in writing on an adjustment to such
computation or determination to account for such change in GAAP.
ARTICLE 2.
THE RLC
2.1 RLC COMMITMENT. Subject to the conditions herein set forth, Lender
agrees to make the RLC available to or for the benefit of Borrower, and Borrower
agrees to draw upon the RLC, in the manner and upon the terms and conditions
herein expressed, amounts that, in the aggregate, shall not exceed the lesser of
the following (the "Maximum RLC Loan Amount"):
(a) The RLC Commitment, less the Outstanding LC Balance.
(b) The Borrowing Base.
2.2 REVOLVING LINE OF CREDIT.
(a) Subject to the terms and conditions set forth in this Credit
Agreement, the RLC shall be a revolving line of credit, against which
RLC Advances may be made to Borrower, repaid by Borrower and new RLC
Advances made to Borrower, as Borrower may request, provided that (i)
no RLC Advance shall be made if an Event of Default shall be
continuing, (ii) no RLC Advance shall be made that would cause the
outstanding principal balance of the RLC to exceed the Maximum RLC
Loan Amount, and (iii) no RLC Advance shall be made on or after the
RLC Maturity Date.
(b) The RLC shall be evidenced by the RLC Note.
2.3 RLC PAYMENTS. The RLC shall bear interest and be payable to Lender
upon the following terms and conditions:
(a) Interest shall accrue on the unpaid principal of an RLC
Advance at the Variable Rate.
(b) All interest shall be computed on the basis of a 360-day year
and accrue on a daily basis for the actual number of days elapsed. All
accrued and unpaid interest through the end of the preceding month
shall be due and payable on each Payment Date.
(c) The entire unpaid principal balance, all accrued and unpaid
interest, and all other amounts payable under the RLC Note shall be
due and payable in full on the RLC Maturity Date.
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(d) Each request for an RLC Advance shall be substantially in the
form attached hereto as Exhibit "A" from an Authorized Officer and
shall, in addition to complying with the other requirements in this
Credit Agreement, specify the date and amount of the requested RLC
Advance. Each request for an RLC Advance shall be irrevocable and
binding on the Borrower once the request is received by Lender.
Borrower shall indemnify Lender against any cost, loss or expense
incurred by Lender as a result of Borrower's failure to fulfill, on or
before the date specified for an RLC Advance in any request for an RLC
Advance, the conditions to such RLC Advance set forth herein,
including any cost, loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by
Lender to fund such RLC Advance when such RLC Advance, as a result of
such failure, is not made on the date so specified.
(e) If any payment of interest and/or principal is not received
by Lender within ten (10) days of when such payment is due, then in
addition to the remedies conferred upon Lender under the Credit
Documents, a late charge of five percent (5%) of the amount of the
installment due and unpaid will be added to the delinquent amount to
compensate Lender for the expense of handling the delinquency for any
payment past due in excess of ten (10) days, regardless of any notice
and cure period.
(f) Upon the occurrence of an Event of Default and after
maturity, including maturity upon acceleration, the unpaid principal
balance, all accrued and unpaid interest and all other amounts payable
hereunder shall bear interest at the Default Rate.
2.4 EXCESS BALANCE PAYMENT. There shall be due and payable from Borrower
to Lender, and Borrower shall repay to Lender, within five (5) days of written
demand from Lender, from time to time, any amount by which the outstanding
principal balance of the RLC exceeds the Maximum RLC Loan Amount.
2.5 CONDITIONS. Lender shall have no obligation to make any RLC Advance
unless and until all of the conditions and requirements of this Credit Agreement
are fully satisfied. However, Lender in its sole and absolute discretion may
elect to make one or more RLC Advances prior to full satisfaction of one or more
such conditions and/or requirements. Notwithstanding that such an RLC Advance or
RLC Advances are made, such unsatisfied conditions and/or requirements shall not
be waived or released thereby. Borrower shall be and continue to be obligated to
fully satisfy such conditions and requirements, and Lender, at any time, in
Lender's sole and absolute discretion, may stop making RLC Advances until all
conditions and requirements are fully satisfied.
2.6 OTHER RLC ADVANCES BY LENDER. Lender, after giving fifteen (15) days
prior written notice to Borrower to allow for corrective action, from time to
time, may make RLC Advances in any amount in payment of accrued and unpaid (i)
insurance premiums, taxes, assessments, liens or encumbrances existing against
property encumbered by the Security Documents, (ii) any charges and expenses
that are the obligation of Borrower under this Credit Agreement or any Security
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Document, and (iii) any charges or matters necessary to preserve the property
encumbered by the Security Documents or to cure any still existing Event of
Default.
2.7 ASSIGNMENT. Borrower shall have no right to any RLC Advance other than
to have the same disbursed by Lender in accordance with the disbursement
provisions contained in this Credit Agreement. Any assignment or transfer,
voluntary or involuntary, of this Credit Agreement or any right hereunder shall
not be binding upon or in any way affect Lender without its written consent;
Lender may make RLC Advances under the disbursement provisions herein,
notwithstanding any such assignment or transfer.
2.8 ISSUANCE OF LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Credit Agreement,
(i) Lender agrees from time to time before the RLC Maturity Date to
issue Letters of Credit for the account of the Borrower. Each
reference in this Credit Agreement to the "Issue" or "Issuance" or
other forms of such words in relation to Letters of Credit shall be
deemed to include any extension or renewal of a Letter of Credit.
(b) Each Letter of Credit shall (i) by its terms be issued in a
Stated Amount; (ii) have a Stated Expiry Date no later than the RLC
Maturity Date; (iii) expire or be terminated by the beneficiary
thereunder on or before its Stated Expiry Date; (iv) not cause the RLC
Balance after the issuance of said Letter of Credit to exceed the RLC
Commitment; and (v) not cause the Outstanding LC Balance after the
issuance of said Letter of Credit to exceed the lesser of (1) the
Maximum LC Commitment or (2) the Assigned Account Amount.
(c) In addition to the conditions otherwise specified in this
Section, the obligation of Lender to issue a Letter of Credit shall be
subject to the further condition precedent that the following
statements shall be correct, and each of the application for such
Letter of Credit and the issuance of such Letter of Credit shall
constitute a representation and warranty by Borrower that on the date
of the issuance of such Letter of Credit such statements are correct:
(i) The representations and warranties in Article 6 are
correct on and as of the date of the issuance of such Letter
of Credit, before and after giving effect to such issuance,
as though made on and as of such date;
(ii) No Event of Default has occurred and is
continuing; and
(iii) The conditions in Section 2.2(a) and 2.8(b) are
satisfied as of the date of issuance of the Letter of
Credit, before and after giving effect to such issuance.
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2.9 ISSUANCE PROCEDURE FOR LETTER OF CREDIT.
(a) By delivery to Lender of an Issuance Request on or before
9:00 a.m. (Phoenix, Arizona time) three (3) Banking Days prior to the
requested Issuance Date, and the execution of such applications and
agreements as Lender may reasonably request, Borrower may request the
issuance of a Letter of Credit in such form as Borrower may reasonably
request. Each Issuance Request shall include the form of the Letter of
Credit, the amount and other terms thereof. Subject to the terms and
conditions of this Credit Agreement, Lender will issue such Letter of
Credit on the Issuance Date specified in the Issuance Request
submitted in connection therewith. Lender and Borrower agree that all
Letters of Credit issued pursuant to the terms of this Article shall
be subject to the terms and conditions, and entitled to the benefits,
of this Credit Agreement and the other Credit Documents.
(b) At the time of delivery by Borrower to Lender of an Issuance
Request, in the event that after giving effect to such Issuance
Request the Outstanding LC Balance would exceed the Assigned Account
Amount, Borrower shall deliver to Lender one or more time certificates
of deposit accounts together with an executed Assignment of Time
Certificate of Deposit in the form of Exhibit "E" hereto for each such
Time Certificate of Deposit Account.
2.10 LETTER OF CREDIT FEES. Upon issuance of a Letter of Credit Borrower
agrees to pay to Lender a non-refundable LC Issuance Fee. Borrower agrees to pay
the LC Draw Fee upon each draw against a Letter of Credit. Borrower further
agrees to pay to Lender a charge for all reasonable expenses of Lender in
connection with the issuance, amendment, modification or negotiation of the
Letter of Credit.
2.11 DISBURSEMENTS. Lender will notify Borrower of the presentment for
payment of a Letter of Credit by any beneficiary thereto, together with notice
of the date (the "Disbursement Date") such payment shall be made. Subject to the
terms and provisions of the Letter of Credit, Lender shall make such payment (a
"Disbursement") to the beneficiary of the Letter of Credit. Each such
Disbursement shall be deemed to be an RLC Advance hereunder.
2.12 REIMBURSEMENT OBLIGATIONS OF BORROWER. Borrower's obligation to
reimburse the Lender with respect to each Disbursement (including interest
thereon) in respect of any Letter of Credit shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim, or
defense to payment which Borrower may have or have had against Lender or the
beneficiary thereof, including any defense based upon the occurrence of any
Event of Default, any draft, demand or certificate or other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient, the failure of any Disbursement to conform to the terms of the
Letter of Credit (if, in Lender's good faith opinion, such Disbursement is
determined to be appropriate) or any non-application or misapplication by the
beneficiary of the proceeds of such Disbursement, or the legality, validity,
form, regularity or enforceability of the Letter of Credit; PROVIDED, HOWEVER,
that nothing herein shall adversely affect the right of Borrower to commence any
proceeding against Lender for any wrongful Disbursement made by Lender under the
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Letter of Credit as a result of acts or omissions constituting gross negligence
or willful misconduct on the part of Lender.
2.13 NATURE OF REIMBURSEMENT OBLIGATIONS. Borrower shall assume all risks
of the acts, omissions or misuse of any Letter of Credit by the beneficiary
thereof. Lender (except to the extent of its own gross negligence or willful
misconduct) shall not be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Letter of Credit or any document submitted by any
party in connection with the issuance of any Letter of Credit, even if
such document should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting
to transfer or assign any Letter of Credit;
(c) failure of any beneficiary of any Letter of Credit to comply
fully with conditions required in order to demand payment under a
Letter of Credit;
(d) errors, omissions, interruption or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or
otherwise; or
(e) any loss or delay in the transmission or otherwise of any
document or draft required by or from a beneficiary of a Letter of
Credit in order to make a Disbursement under a Letter of Credit or of
the proceeds thereof.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted Lender hereunder. In furtherance and extension, and not
in limitation or derogation of any of the foregoing, any action taken or omitted
to be taken by Lender in good faith shall be binding upon the Borrower and shall
not put Lender under any resulting liability to Borrower.
2.14 CERTAIN REQUIREMENTS. Lender shall be under no obligation to Issue any
Letter of Credit if:
(a) any order, judgment or decree of any Governmental Authority
or arbitrator shall by its terms purport to enjoin or restrain Lender
from Issuing such Letter of Credit, or any requirement of law
applicable to Lender or any request or directive (with which it is
customary for banks in the relevant jurisdiction to comply whether or
not having the force of law) from any Governmental Authority with
jurisdiction over Lender shall prohibit, or request that Lender
refrain from, the Issuance of letters of credit generally or such
Letter of Credit in particular or shall impose upon Lender with
respect to such Letter of Credit any restriction, reserve, or capital
requirement (for which Lender is not otherwise compensated hereunder)
not in effect on the Closing Date, or shall impose upon Lender any
unreimbursed loss, cost, or expense which was not applicable on the
Closing Date and which Lender in good ▇▇▇▇▇ ▇▇▇▇▇ material to it;
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(b) Lender has received written notice that one or more of the
applicable conditions contained in Article 5 is not then satisfied;
(c) the Stated Expiry Date of any requested Letter of Credit is
not in accord with the requirements of Section 2.8(b)(ii);
(d) any requested Letter of Credit does not provide for drafts,
or is not otherwise in form and substance acceptable to Lender, or the
Issuance of a Letter of Credit shall violate any applicable policies
of Lender; or
(e) such Letter of Credit is to be denominated in a currency
other than Dollars.
2.15 DRAWINGS AND REIMBURSEMENTS.
(a) In the event of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, Lender will promptly notify the
Borrower. Lender shall honor any Disbursement request under any Letter of
Credit only if (i) such request is delivered to Lender by the beneficiary
of such Letter of Credit, and (ii) such request is accompanied by the
original documents required by the Letter of Credit for any Disbursement.
Except as otherwise provided herein, the Borrower shall reimburse Lender
prior to 11:00 a.m. (Phoenix, Arizona local time) on each date that any
amount is paid by Lender under any Letter of Credit (each such date, an
"Honor Date"), in an amount equal to the amount so paid by Lender.
(b) In the event that the Borrower is required but fails to reimburse
Lender for the full amount of any drawing under any Letter of Credit by
11:00 a.m. (Phoenix, Arizona local time) on the Honor Date, Lender shall
(subject to paragraph (d)) be deemed to have made an RLC Advance to the
Borrower in that amount.
2.16 ROLE OF LENDER. Borrower agrees that, in paying any drawing under a
Letter of Credit, Lender shall not have any responsibility to obtain any
document (other than any sight draft and certificates expressly required by the
Letter of Credit) or to ascertain or inquire as to the validity or accuracy of
any such document or the authority of the Person executing or delivering any
such document.
ARTICLE 3.
PAYMENTS AND FEES PROVISIONS
3.1 PAYMENTS.
(a) All payments and prepayments by the Borrower of principal of
and interest on the Note and all fees, expenses and any other
Obligation payable to Lender in connection with the Loans shall be
nonrefundable and made in Dollars or immediately available funds to
Lender not later than 2:00 p.m. (Phoenix, Arizona local time) on the
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dates called for under this Credit Agreement, at the office of Lender
in Phoenix, Arizona. Funds received after such hour shall be deemed to
have been received by Lender on the next Banking Day.
(b) Unless otherwise required by applicable law, payments will be
applied first to accrued, unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs, late charges and
other charges; provided, however, upon delinquency or other default,
Lender reserve the right to apply payments among principal, interest,
late charges, collection costs and other charges at its discretion.
(c) Interest shall be due and payable on the Loans on each
Payment Date and on the Maturity Date.
(d) Whenever any payment to be made hereunder shall be stated to
be due on a day which is not a Banking Day, such payment shall be made
on the next succeeding Banking Day, and such extension of time shall
in such case be included in the computation of interest, commission or
fee, as the case may be.
(e) Borrower authorizes Lender to collect all interest, fees,
costs, and/or expenses due under this Credit Agreement by charging
Borrower's demand deposit account number 1891718866 with Lender, or
any other demand deposit account maintained by Borrower with Lender,
for the full amount thereof. Should there be insufficient funds in any
such demand deposit account to pay all such sums when due, the full
amount of such deficiency shall be immediately due and payable by
Borrower.
3.2 COMMITMENT FEE. Borrower agrees to pay to Lender on the Closing Date a
fee (the "Commitment Fee") in the amount of Two Thousand And No/100 Dollars
($2,000.00).
3.3 LETTER OF CREDIT FEES.
(a) Borrower agrees to pay Lender a fee (the "LC Issuance Fee")
equal to One and One-Quarter Percent (1.25%) of the face value of each
Letter of Credit issued by Lender for the account of Borrower pursuant
to Section 2.10 hereof.
(b) Borrower agrees to pay Lender a fee (the "LC Draw Fee") equal
to One Quarter of One Percent (0.25%) of the amount of each draw on a
Letter of Credit issued by Lender for the account of Borrower pursuant
to Section 2.10 hereof.
(c) Borrower agrees to pay Lender a charge for all reasonable
expenses of Lender in connection with the issuance, amendment,
modification or negotiation of each Letter of Credit.
3.4 COMPUTATIONS. All fees and interest on the Note shall be computed on
the basis of a year of 360-days/year and accrue on a daily basis for the actual
number of days elapsed.
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3.5 MAINTENANCE OF ACCOUNTS. Lender shall maintain, in accordance with its
usual practice, an account or accounts evidencing the indebtedness of the
Borrower and the amounts payable and paid from time to time hereunder. In any
legal action or proceeding in respect of this Credit Agreement, the entries made
in the ordinary course of business in such account or accounts shall be evidence
of the existence and amounts of the obligations of the Borrower therein
recorded. The failure to record any such amount shall not, however, limit or
otherwise affect the obligations of the Borrower hereunder to repay all amounts
owed hereunder, together with all interest accrued thereon as provided in the
Note.
ARTICLE 4.
SECURITY
4.1 SECURITY. So long as the Loan is outstanding, Borrower shall cause the
Loan and Borrower's obligations under this Credit Agreement to be secured at all
times by the following:
(a) a valid and effective security agreement (the "Security
Agreement"), duly executed and delivered by or on behalf of Borrower,
granting Lender a valid and enforceable security interest in all of
its personal property as described therein, subject to no prior Liens
except for Permitted Liens; and
(b) by a valid and effective intellectual property security
agreement (the "IP Security Agreement") duly executed and delivered by
or on behalf of Borrower, granting Lender a valid and enforceable
security interest in all of its intellectual property described
therein, subject to no prior Liens except for Permitted Liens.
4.2 OUTSTANDING LC BALANCE. So long as there is an Outstanding LC Balance,
the amount of such Outstanding LC Balance shall be secured by time certificate
of deposit accounts such that the Assigned Account Amount at all times exceeds
the Outstanding LC Balance.
4.3 SECURITY DOCUMENTS. All of the documents required by this Article 4
shall be in form satisfactory to Lender and Lender's counsel, and, together with
any Financing Statements for filing and/or recording, and any other items
required by Lender to fully perfect and effectuate the liens and security
interests of Lender contemplated by the Security Agreement, and this Credit
Agreement, may heretofore or hereinafter be referred to as the "Security
Documents."
4.4 ZENSANO LIEN. Lender hereby agrees that the security interest granted
by Gum Tech pursuant to the Security Agreement shall be, as to the 40% ownership
interest in Gel Tech subject to a security interest granted by Gum Tech to
Zensano, Inc. (the "Zensano Lien"), subordinate to the Zensano Lien.
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ARTICLE 5.
CONDITIONS PRECEDENT
The obligation of Lender to make any Loan and to make each and any Advance
hereunder is subject to the full prior satisfaction at each such time of each of
the following conditions precedent:
5.1 INITIAL ADVANCE. Prior to its making the initial Advance unless
otherwise provided hereinbelow, Lender shall have received the following each in
form and substance satisfactory to Lender:
(a) THIS CREDIT AGREEMENT. This Credit Agreement, duly executed
and delivered to Lender by Borrower.
(b) THE RLC NOTE. The RLC Note, duly executed, drawn to the order
of Lender and otherwise as provided in Article 2 hereof.
(c) ORGANIZATIONAL DOCUMENTS. A copy of the current organization
documents of Borrower, including all amendments thereto, certified as
current and complete by the appropriate authority of the state of
Borrower's formation, together with evidence of its good standing in
the state of formation and in every other state in which it is doing
business or the conduct of its business requires such standing for the
enforcement of material contracts.
(d) SECRETARY CERTIFICATE. A certificate of the secretary of Gum
Tech, signed by the duly appointed secretary thereof and issued as of
the Closing Date, certifying that (i) attached thereto is a true and
complete copy of its organizational documents in effect on the date of
passage of the authorizations described immediately below and at all
subsequent times to and including the date of the certificate, (ii)
attached thereto is a true and complete copy of any of its resolutions
or authorizations authorizing the Loan, the execution, delivery, and
performance of this Credit Agreement, the Note, the Credit Documents,
and all advances of credit hereunder, and that such resolutions have
not been modified, rescinded, or amended and are in full force and
effect, (iii) no change has been made to its charter documents other
than as reflected in the certified copies submitted in connection with
the delivery of this Credit Agreement or as approved in writing by
Lender, and (iv) set forth therein and appropriately identified are
the names, current official titles, and signatures of its officers
authorized to sign this Credit Agreement and other documents to be
delivered hereunder and/or to act as Authorized Person hereunder.
(e) BORROWING AUTHORIZATION. A Borrowing Authorization executed
by the members and manager of Gel Tech, authorizing the RLC, the
execution, delivery, and performance of this Credit Agreement, the
Note, the Credit Documents, and all advances of credit hereunder.
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(f) SECURITY AGREEMENT. Security Agreements, duly executed and
delivered to Lender by Borrower.
(g) IP SECURITY AGREEMENT. IP Security Agreements, duly executed
and delivered to Lender by Borrower and, if required by Lender, filed
with the US Patent Office.
(h) COMPLIANCE CERTIFICATE. A Compliance Certificate
substantially in the form of Exhibit "B" attached hereto, indicating
that Borrower is in compliance with the Financial Covenants as of
March 31, 2002.
(i) FEES AND COSTS. Payment of the Commitment Fee and costs of
the Lender.
(j) FINANCING STATEMENTS. Financing Statements.
(k) ACCOUNTS RECEIVABLE. A listing and aging of the accounts
receivable of Borrower as of March 31, 2002.
(l) BORROWER'S FINANCIAL STATEMENTS. Borrower's March 31, 2002
financial statements. Lender acknowledges having received the
financial statements.
(m) LANDLORD AND WAREHOUSE WAIVERS. To the extent required by
Lender, (i) lien waivers substantially in the form of Exhibit "D-1"
attached hereto, executed by the landlord of each leased premises
where collateral is located, if any; and, (ii) lien waivers
substantially in the form of Exhibit "D-2" attached hereto, executed
by the owner of each warehouse where collateral is located.
(n) ADDITIONAL INFORMATION. Such other information and documents
as may reasonably be required by Lender or Lender's counsel.
5.2 NO EVENT OF DEFAULT. No Event of Default known to Borrower shall have
occurred and be continuing, or result from Lender's making of any Loan.
5.3 NO MATERIAL ADVERSE EFFECT. Since the date of the most recent
financial statements provided to Lender by Borrower, no change shall have
occurred in the business or financial condition of Borrower that could have a
Material Adverse Effect.
5.4 REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in Article 6 hereof shall be true and correct in all material
respects, with the same force and effect as though made on and as of the Closing
Date (other than those of such representations which by their express terms
speak to a date prior to that date, which representations shall, in all material
respects, be true and correct as of such respective date).
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ARTICLE 6.
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loan, Borrower represents and warrants to
Lender that:
6.1 RECITALS. The recitals and statements of intent appearing in this
Credit Agreement are true and correct.
6.2 ORGANIZATION AND GOOD STANDING. It is duly organized, validly existing
and in good standing in all states and/or countries in which the nature of its
business and property makes such qualifications necessary or appropriate. It has
the corporate or limited liability power and authority (as applicable) to own
its properties and assets and to transact the business in which it is engaged
and is or will be qualified in those states and/or countries wherein the nature
of its proposed business and property will make such qualifications necessary or
appropriate in the future.
6.3 AUTHORIZATION AND POWER. It has the corporate or limited liability
power and requisite authority (as applicable) to execute, deliver and perform
this Credit Agreement, the Note and the other Credit Documents to be executed by
it; it is duly authorized to, and has taken all action, corporate or otherwise,
necessary to authorize it to, execute, deliver and perform this Credit
Agreement, the Note and such other Credit Documents and is and will continue to
be duly authorized to perform this Credit Agreement, the Note and such other
Credit Documents.
6.4 SECURITY DOCUMENTS. The liens, security interests and assignments
created by the Security Documents will, when granted, be valid, effective and
enforceable liens, security interests and assignments, except to the extent (if
any) otherwise agreed in writing by Lender.
6.5 NO CONFLICTS OR CONSENTS. Neither the execution and delivery of this
Credit Agreement, the Note or the other Credit Documents to which it is a party,
nor the consummation of any of the transactions herein or therein contemplated,
nor compliance with the terms and provisions hereof or with the terms and
provisions thereof, (a) will materially contravene or conflict with: (i) any
provision of law, statute or regulation to which it is subject, (ii) any
judgment, license, order or permit applicable to it, (iii) any indenture, credit
agreement, mortgage, deed of trust, or other agreement or instrument to which it
is a party or by which it may be bound, or to which it may be subject, or (b)
will violate any provision of its organizational documents. No consent,
approval, authorization or order of any court or Governmental Authority or other
Person is required in connection with the execution and delivery by it of the
Credit Documents or to consummate the transactions contemplated hereby or
thereby, or if required, such consent, approval, authorization or order shall
have been obtained.
6.6 NO LITIGATION. Except as expressly disclosed in Gum Tech's Annual
Report on Form 10-K for the year ended December 31, 2001 as filed with the
Securities and Exchange Commission or as otherwise disclosed in writing to
Lender, there are no actions, suits or legal, equitable, arbitration or
administrative proceedings pending, or to Borrower's actual knowledge overtly
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threatened, against Borrower that would, if adversely determined, have a
Material Adverse Effect.
6.7 FINANCIAL CONDITION. It has delivered to Lender copies of the
Borrower's most recent financial statements. Such financial statements, in all
material respects, fairly and accurately present the financial position of
Borrower as of such date, have been prepared in accordance with GAAP and neither
contain any untrue statement of a material fact nor fail to state a material
fact required in order to make such financial statement not misleading. Since
the date thereof, Borrower has not discovered any obligations, liabilities or
indebtedness (including contingent and indirect liabilities and obligations or
unusual forward or long-term commitments) which in the aggregate are material
and adverse to the financial position or business of Borrower that should have
been but were not reflected in such financial statements. No changes having a
Material Adverse Effect have occurred in the financial condition or business of
Borrower since the date of such financial statements.
6.8 TAXES. It has filed or caused to be filed all returns and reports
which are required to be filed by any jurisdiction, and has paid or made
provision for the payment of all taxes, assessments, fees or other governmental
charges imposed upon its properties, income or franchises, as to which the
failure to file or pay would have a Material Adverse Effect, except such
assessments or taxes, if any, which are being contested in good faith by
appropriate proceedings.
6.9 NO STOCK PURCHASE. No part of the proceeds of any financial
accommodation made by Lender in connection with this Credit Agreement will be
used to purchase or carry "margin stock," as that term is defined in Regulation
U, or to extend credit to others for the purpose of purchasing or carrying such
margin stock.
6.10 ADVANCES. Each request for an Advance or for the extension of any
financial accommodation by Lender whatsoever shall constitute an affirmation
that the representations and warranties contained herein are, true and correct
as of the time of such request. All representations and warranties made herein
shall survive the execution of this Credit Agreement, all advances of proceeds
of the Loans and the execution and delivery of all other documents and
instruments in connection with the Loans and/or this Credit Agreement, so long
as Lender has any commitment to lend hereunder and until the Loans have been
paid in full and all of Borrower's obligations under this Credit Agreement, the
Note and all Security Documents have been fully discharged.
6.11 ENFORCEABLE OBLIGATIONS. This Credit Agreement, the Note and the other
Credit Documents are the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, except
as limited by bankruptcy, insolvency or other laws or equitable principles of
general application relating to the enforcement of creditors' rights.
6.12 NO DEFAULT. No event or condition has occurred and is continuing that
constitutes an Event of Default.
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6.13 SIGNIFICANT DEBT AGREEMENTS. It is not in default in any material
respect under any Significant Debt Agreement.
6.14 ERISA. (a) No Reportable Event has occurred and is continuing with
respect to any Plan; (b) PBGC has not instituted proceedings to terminate any
Plan; (c) neither the Borrower, any member of the Controlled Group, nor any
duly-appointed administrator of a Plan (i) has incurred any liability to PBGC
with respect to any Plan other than for premiums not yet due or payable or (ii)
has instituted or intends to institute proceedings to terminate any Plan under
Section 4041 or 4041A of ERISA; and (d) each Plan of Borrower has been
maintained and funded in all material respects in accordance with its terms and
in all material respects in accordance with all provisions of ERISA applicable
thereto. Neither the Borrower nor any of its Subsidiaries participates in, or is
required to make contributions to, any Multi-employer Plan (as that term is
defined in Section 3(37) of ERISA).
6.15 COMPLIANCE WITH LAW. It is in substantial compliance with all laws,
rules, regulations, orders, writs, injunctions and decrees that are applicable
to it, or its properties, noncompliance with which would have a Material Adverse
Effect.
6.16 SOLVENT. It (both before and after giving effect to the Loan
contemplated hereby) is solvent, has assets having a fair value in excess of the
amount required to pay its probable liabilities on its existing debts as they
become absolute and matured, and has, and will have, access to adequate capital
for the conduct of its business and the ability to pay its debts from time to
time incurred in connection therewith as such debts mature.
6.17 INVESTMENT COMPANY ACT. It is not, and is not directly or indirectly
controlled by, or acting on behalf of, any person which is, an "Investment
Company" within the meaning of the Investment Company Act of 1940, as amended.
6.18 TITLE. It has good and marketable title to the Collateral, subject to
the Permitted Liens.
6.19 SURVIVAL OF REPRESENTATIONS, ETC. All representations and warranties
by Borrower herein shall survive the making of the Loan and the execution and
delivery of the Note; any investigation at any time made by or on behalf of
Lender shall not diminish Lender's right to rely on the representations and
warranties herein.
6.20 ENVIRONMENTAL MATTERS. Except as previously disclosed to Lender in
writing, it, to the best of its knowledge after due investigation, is in
compliance in all material respects with all applicable environmental, health
and safety statutes and regulations and Borrower does not have any material
contingent liability in connection with any improper treatment, disposal or
release into the environment of any hazardous or toxic waste or substance.
6.21 LICENSES, TRADENAMES. It, as of the date hereof, possesses all
necessary trademarks, tradenames, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with valid trademarks, tradenames, copyright patents and license rights of
others (other than routine objections that Borrower files from time to time in
connection with pending trademark applications of other Persons).
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6.22 PERMITS. Debtor has obtained and there remain in full force and effect
all material licenses, permits, consents, approvals and authorizations necessary
or appropriate for the management and operation of such improvements for their
intended purpose that are obtainable as of the date hereof.
6.23 PRIOR REVOLVING LINE OF CREDIT. Borrower confirms that Gel Tech
currently has no outstanding loans from Lender as of the date hereof. If at the
Closing Date Gel Tech has any outstanding loans from Lender, proceeds will be
disbursed from the Loan to pay the outstanding balance of such loans and any
obligation of Lender to advance proceeds under such loans shall be terminated.
ARTICLE 7.
AFFIRMATIVE COVENANTS
Until payment in full of the Loans and the complete performance of the
Obligation, and so long as Lender has any commitment to make any Advance
hereuner, Borrower agrees that:
7.1 FINANCIAL STATEMENTS, REPORTS AND DOCUMENTS. It shall deliver, or
cause to be delivered, to Lender each of the following:
(a) ANNUAL STATEMENTS OF GUM TECH. As soon as available and in
any event within ninety (90) days after the close of each fiscal year
of Gum Tech, audited financial statements of Gum Tech on a
consolidating and consolidated basis, including its balance sheet as
of the close of such fiscal year and statements of income of Gum Tech
for such fiscal year, in each case setting forth in comparative form
the figures for the preceding fiscal year, all in reasonable detail
and accompanied by an unqualified opinion thereon of independent
public accountants of recognized national standing selected by Gum
Tech and acceptable to Lender, to the effect that such financial
statements have been prepared in accordance with GAAP.
(b) QUARTERLY STATEMENTS OF GUM TECH. As soon as available, and
in any event within thirty (30) days after the end of each fiscal
quarter of Gum Tech, company-prepared financial statements of Gum Tech
on a consolidating and consolidated basis, including its balance sheet
as of the close of such fiscal quarter and statements of income of Gum
Tech for such fiscal quarter, in each case setting forth in
comparative form the figures for the preceding fiscal quarter, all in
reasonable detail and prepared in accordance with GAAP.
(c) MONTHLY REPORT OF ACCOUNTS. As soon as available, and in any
event within thirty (30) days after the end of each month, listings
and agings of Borrower's accounts payable and accounts receivable, for
the prior month, all in reasonable detail and prepared in accordance
with GAAP.
(d) COMPLIANCE CERTIFICATE OF BORROWER. As soon as available, and
in any event within thirty (30) days after the close of each fiscal
quarter, a certificate signed by the Authorized Person of the
Borrower, substantially in the form of Exhibit "B" attached hereto
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certifying that after a review of the activities of Borrower during
such period, Borrower has observed, performed and fulfilled each and
every obligation and covenant contained herein and no Event of Default
exists under any of the same or, if any Event of Default shall have
occurred, specifying the nature and status thereof, and stating that
all financial statements of Gum Tech or Borrower delivered to Lender
during the respective period pursuant to Sections 7.1(a), 7.1(b) and
7.1(c) hereof, to his/her knowledge, fairly present in all material
respects the financial position of the Gum Tech and the results of its
operations at the dates and for the periods indicated, and have been
prepared in accordance with GAAP, together with a calculation of the
Financial Covenants.
(e) BORROWING BASE CERTIFICATE. As soon as available, and in any
event within thirty (30) days after the end of each month, a Borrowing
Base Certificate substantially in the form attached hereto as Exhibit
"C".
(f) OTHER INFORMATION. Such other information concerning the
business, properties or financial condition of Borrower as Lender
shall reasonably request.
7.2 MAINTENANCE OF EXISTENCE AND RIGHTS; CONDUCT OF BUSINESS; MANAGEMENT.
It will preserve and maintain its existence and all of its rights, privileges,
licenses, permits, franchises and other rights necessary or desirable in the
normal conduct of its business, conduct its business in an orderly and efficient
manner consistent with good business practices and maintain professional
management of its business.
7.3 OPERATIONS AND PROPERTIES. It will keep in good working order and
condition, ordinary wear and tear excepted, all of its assets and properties
which are necessary to the conduct of its business.
7.4 AUTHORIZATIONS AND APPROVALS. It will maintain, at its own expense,
all such governmental licenses, authorizations, consents, permits and approvals
as may be required to enable it to comply with its obligations hereunder and
under the other Credit Documents and to operate its businesses as presently or
hereafter duly conducted.
7.5 COMPLIANCE WITH LAW. It will comply with all applicable laws, rules,
regulations, and all final, nonappealable orders of any Governmental Authority
applicable to it or any of its property, business operations or transactions,
including without limitation, any environmental laws applicable to it, a breach
of which could result in a Material Adverse Effect.
7.6 PAYMENT OF TAXES AND OTHER INDEBTEDNESS. It will pay and discharge (i)
all income taxes and payroll taxes, (ii) all taxes, assessments, fees and other
governmental charges imposed upon it or upon its income or profits, or upon any
property belonging to it, before delinquent, which become due and payable, (iii)
all lawful claims (including claims for labor, materials and supplies), which,
if unpaid, might become a Lien upon any of its property, and (iv) all of its
Indebtedness as it becomes due and payable, except as prohibited hereunder;
provided, however, that it shall not be required to pay any such tax,
assessment, charge, levy, claims or Indebtedness if and so long as the amount,
applicability or validity thereof shall currently be contested in good faith by
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appropriate actions and appropriate accruals and reserves therefor have been
established in accordance with GAAP.
7.7 COMPLIANCE WITH SIGNIFICANT DEBT AGREEMENTS AND OTHER AGREEMENTS. It
will comply in all material respects with (i) all Significant Debt Agreements,
and (ii) all agreements and contracts to which it is a party, a breach of which
could result in a Material Adverse Effect.
7.8 COMPLIANCE WITH CREDIT DOCUMENTS. It will comply with any and all
covenants and provisions of this Credit Agreement, the Note and all other Credit
Documents.
7.9 NOTICE OF DEFAULT. It will furnish to Lender immediately upon becoming
actually aware of the existence of any event or condition that constitutes an
Event of Default, a written notice specifying the nature and period of existence
thereof and the action which it is taking or proposes to take with respect
thereto.
7.10 OTHER NOTICES. It will promptly notify Lender of (a) any Material
Adverse Effect, (b) any waiver, release or default under any Significant Debt
Agreement, (c) any claim not covered by insurance against Borrower or any of
Borrower's properties not covered by insurance which has, or which Borrower
reasonably believes to have, a monetary value of more than Fifty Thousand
Dollars ($50,000.00), and (d) the commencement by or before any Governmental
Authority of, and any material determination in, any litigation or proceeding,
except litigation or proceedings which, if adversely determined, would not have
a Material Adverse Effect.
7.11 BOOKS AND RECORDS; ACCESS; AUDITS. Upon three (3) Banking Days notice
from Lender, it will give any authorized representative of Lender access during
normal business hours to, and permit such representative to examine, copy or
make excerpts from, any and all books, records and documents in its possession
of and relating to the Loans, and to inspect any of its properties. It will
maintain complete and accurate books and records of its transactions in
accordance with good accounting practices. In addition, so long as no Event of
Default has occurred and is continuing, it will give any authorized
representative of Lender access during normal business hours to conduct a
minimum of one (1) collateral audit per year and the costs of such audit shall
be for the account of the Borrower.
7.12 ERISA COMPLIANCE. With respect to its Plans, it shall (a) at all times
comply with the minimum funding standards set forth in Section 302 of ERISA and
Section 412 of the Code or shall have duly obtained a formal waiver of such
compliance from the proper authority; (b) at Lender's request, within thirty
(30) days after the filing thereof, furnish to Lender copies of each annual
report/return (Form 5500 Series), as well as all schedules and attachments
required to be filed with the Department of Labor and/or the Internal Revenue
Service pursuant to ERISA, in connection with each of its Plans for each year of
the plan; (c) notify Lender within a reasonable time of any fact, including, but
not limited to, any Reportable Event arising in connection with any of its
Plans, which constitutes grounds for termination thereof by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Plan, together with a statement, if requested by Lender, as to
the reason therefor and the action, if any, proposed to be taken with respect
thereto; and (d) furnish to Lender within a reasonable time, upon Lender's
request, such additional information concerning any of its Plans as may be
reasonably requested.
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7.13 FURTHER ASSURANCES. It will make, execute or endorse, and acknowledge
and deliver or file or cause the same to be done, all such notices,
certifications and additional agreements, undertakings or other assurances, and
take any and all such other action, as Lender may, from time to time, deem
reasonably necessary or proper to fully evidence the Loan.
7.14 INSURANCE. It shall maintain in full force and effect at all times all
insurance coverages required under the terms of this Credit Agreement and/or the
Security Documents to which it is a party. In addition, it shall maintain in
full force and effect at all times:
(a) Policies of all risk coverage insurance covering all tangible
personality in which Lender has been granted or obtained a security
interest to secure the Obligation, in coverage amounts not less than,
from time to time, the fair market value thereof.
(b) Policies of insurance evidencing personal liability and
property damage liability coverages in amounts not less than
$1,000,000.00 (combined single limit for bodily injury and property
damage), and an umbrella excess liability coverage in an amount not
less than $2,000,000.00 shall be in effect with respect to Borrower.
(c) Policies of workers' compensation insurance in amounts and
with coverages as legally required.
(d) Such other insurance as Lender may require, which may
include, without limitation, earthquake insurance, rent abatement
and/or business loss.
Without limitation of the foregoing, it shall at all times maintain insurance
coverages in scope and amount not less than, and not less extensive than, the
scope and amount of insurance coverages customary in the trades or businesses in
which it is from time to time engaged. All of the aforesaid insurance coverages
shall be issued by insurers reasonably acceptable to Lender.
Copies of all policies of insurance evidencing such coverages in effect
from time to time and showing Lender as an additional insured and loss payee
shall be delivered to Lender within fifteen (15) days of the Closing Date and
upon reasonable notice upon issuance of new policies thereafter. From time to
time, promptly upon Lender's request, it shall provide evidence satisfactory to
Lender (i) that required coverage in required amounts is in effect, and (ii)
that Lender is shown as an additional insured and loss payee with respect to all
such coverages, as Lender's interest may appear, by standard (non-attribution)
loss payable endorsement, additional insured endorsement, insurer's certificate
or other means acceptable to Lender in its reasonable discretion. At Lender's
option, it shall deliver to Lender certified copies of all such policies of
insurance in effect from time to time, to be retained by Lender so long as
Lender shall have any commitment to lend hereunder and/or any portion of the
Obligation shall be outstanding or unsatisfied. All such insurance policies
shall provide for at least thirty (30) days prior written notice of the
cancellation or modification thereof to Lender.
7.15 DEPOSIT ACCOUNTS. Gel Tech shall maintain its principal depository
accounts with Lender.
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ARTICLE 8.
NEGATIVE COVENANTS
Until payment in full of the Loan and the performance of the Obligation,
Borrower shall not, without receiving the prior express written consent of
Lender:
8.1 EXISTENCE. Dissolve or liquidate, or merge or consolidate with or into
any other entity, or turn over the management or operation of its property,
assets or business to any other Person or make any substantial change in the
character of its business. Notwithstanding the foregoing sentence, Lender
acknowledges that, subject to the receipt of requisite shareholder approval, Gum
Tech intends to reincorporate under the laws of the State of Delaware and, in
connection therewith, change its name to "Matrixx Initiatives, Inc." by merging
with and into its wholly-owned Delaware subsidiary corporation, Matrixx
Initiatives, Inc. (such reincorporation and name change, including the
effectuating merger transaction, hereinafter referred to as the "Delaware
Reincorporation" and such merged corporation hereinafter referred to as the
"Merged Corporation"). Lender agrees that the Delaware Reincorporation, as
described herein, shall not require Lender's consent provided that after giving
effect to the Delaware Reincorporation, the Merged Corporation shall be in
compliance with all Financial Covenants; Gum Tech however agrees (i) to notify
Lender of the Delaware Reincorporation within five (5) Banking Days thereof,
(ii) to provide evidence to Lender of the Merged Corporation 's assumption of
Gum Tech's obligations hereunder, (iii) to provide Lender with copies of the
Merged Corporation's organizational documents and good standing certificate, and
(iv) to cause the Merged Corporation to execute a Security Agreement and an IP
Security Agreement and such other documents as Lender may reasonably request.
Lender further acknowledges that Gum Tech has provided to Lender copies of the
Certificate of Incorporation and Bylaws of Matrixx Initiatives, Inc., which are
the organizational documents that will replace Gum Tech's existing Articles of
Incorporation and Bylaws at the effective time of the Delaware Reincorporation,
and Lender accepts such documents.
8.2 AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. Amend its organizational
documents if the result thereof could result in the occurrence directly or
indirectly of a Material Adverse Effect.
8.3 MARGIN STOCK. Use any proceeds of the Loan, or any proceeds of any
other or future financial accommodation from Lender for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying any "margin stock"
as that term is defined in Regulation U or to reduce or retire any indebtedness
undertaken for such purposes within the meaning of said Regulation U, and will
not use such proceeds in a manner that would involve Borrower in a violation of
Regulation U or of any other Regulation of the Board of Governors of the Federal
Reserve System, nor use such proceeds for any purpose not permitted by Section 7
of the Exchange Act, or any of the rules or regulations respecting the
extensions of credit promulgated thereunder.
8.4 DISTRIBUTIONS. Declare or pay any dividends or make any distributions
of any kind.
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8.5 LIENS. On and after the date hereof, create, issue, assume or suffer
to exist Liens upon the Collateral, except Permitted Liens.
8.6 TRANSFER COLLATERAL. Assign, transfer or convey any of its right,
title and interest in the Collateral, other than (i) sales of inventory in the
ordinary course of business, (ii) expenditures or dispositions of cash or other
Collateral to acquire business assets at commercially reasonable prices, and
(iii) expenditures of cash or other Collateral to pay ordinary operating
expenses as and when incurred.
8.7 MERGER; SALE OF ASSETS. Other than with respect to the Delaware
Reincorporation (as defined in Section 8.1 hereof), (i) sell, lease, transfer or
dispose of all or substantially all of the Collateral to another entity; (ii)
cause, solicit or promote the consolidation or merger of Gum Tech with or into
another entity or the consolidation or merger of another entity with or into Gum
Tech; or (iii) permit any other entity to consolidate with or merge into Gel
Tech.
8.8 INDEBTEDNESS. Incur in any fiscal year, in the aggregate, more than
Five Hundred Thousand And No/100 Dollars ($500,000.00) of indebtedness from any
Person other than an Affiliate or Lender.
8.9 FINANCIAL COVENANTS. Permit the breach of any of the covenants set
forth in Schedule 8.9 hereto.
ARTICLE 9.
EVENTS OF DEFAULT
9.1 EVENTS OF DEFAULT. An "Event of Default" shall exist if any one or
more of the following events (herein collectively called "Events of Default")
shall occur and be continuing:
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(a) Borrower shall fail to pay any principal of, or interest on,
the Note when the same shall become due or payable and such failure
continues for ten (10) Banking Days after notice thereof to Borrower.
(b) Any failure or neglect to perform or observe any of the
covenants, conditions, provisions or agreements of Borrower contained
herein, or in any of the other Credit Documents (other than a failure
or neglect described in one or more of the other provisions of this
Section 9.1) and such failure or neglect either cannot be remedied or,
if it can be remedied, it continues unremedied for a period of thirty
(30) days after written notice thereof to Borrower.
(c) Any warranty, representation or statement contained in this
Credit Agreement or any of the other Credit Documents, or which is
contained in any certificate or statement furnished or made to Lender
pursuant hereto or in connection herewith or with the Loans, shall be
or shall prove to have been false when made or furnished.
(d) The occurrence of any material "event of default" or
"default" by Borrower under any Credit Document, or any agreement, now
or hereafter existing, to which Lender or an Affiliate of Lender, and
Borrower or an Affiliate of Borrower are a party.
(e) Borrower shall (i) fail to pay any Indebtedness of Borrower
(other than the Note) due under any Significant Debt Agreement, or any
interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) or within any
applicable grace period, (ii) fail to perform or observe any term,
covenant, or condition on its part to be performed or observed under
any agreement or instrument relating to such Indebtedness, within any
applicable grace period when required to be performed or observed, if
the effect of such failure to perform or observe is to accelerate the
maturity of such Indebtedness, or any such Indebtedness shall be
declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled prepayment), prior to the stated maturity
thereof, or (iii) allow the occurrence of any material event of
default with respect to such Indebtedness.
(f) Any one or more of the Credit Documents shall have been
determined to be invalid or unenforceable against Borrower executing
the same in accordance with the respective terms thereof, or shall in
any way be terminated or become or be declared ineffective or
inoperative, so as to deny Lender the substantial benefits
contemplated by such Credit Document or Credit Documents.
(g) Borrower shall (i) apply for or consent to the appointment of
a receiver, trustee, custodian, intervenor or liquidator of itself or
of all or a substantial part of its assets, (ii) file a voluntary
petition in bankruptcy or admit in writing that it is unable to pay
its debts as they become due, (iii) make a general assignment for the
benefit of creditors, (iv) file a petition or answer seeking
reorganization of an arrangement with creditors or to take advantage
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of any bankruptcy or insolvency laws, (v) file an answer admitting the
material allegations of, or consent to, or default in answering, a
petition filed against it in any bankruptcy, reorganization or
insolvency proceeding, or (vi) take corporate action for the purpose
of effecting any of the foregoing
(h) An involuntary petition or complaint shall be filed against
Borrower, seeking bankruptcy or reorganization of Borrower, or the
appointment of a receiver, custodian, trustee, intervenor or
liquidator of Borrower, or all or substantially all of its assets, and
such petition or complaint shall not have been dismissed within sixty
(60) days of the filing thereof; or an order, order for relief,
judgment or decree shall be entered by any court of competent
jurisdiction or other competent authority approving a petition or
complaint seeking reorganization of Borrower, appointing a receiver,
custodian, trustee, intervenor or liquidator of Borrower, or all or
substantially all of its assets, and such order, judgment or decree
shall continue unstayed and in effect for a period of sixty (60) days.
(i) Any final judgment(s) (excluding those the enforcement of
which is suspended pending appeal) for the payment of money in excess
of the sum of $250,000 in the aggregate (other than any judgment
covered by insurance where coverage has been acknowledged by the
insurer) shall be rendered against Borrower, and such judgment or
judgments shall not be satisfied, settled, bonded or discharged at
least ten (10) days prior to the date on which any of its assets could
be lawfully sold to satisfy such judgment.
(j) Either (i) proceedings shall have been instituted to
terminate, or a notice of termination shall have been filed with
respect to, any Plans (other than a Multi-Employer Pension Plan as
that term is defined in Section 4001(a)(3) of ERISA) by Borrower, any
member of the Controlled Group, PBGC or any representative of any
thereof, or any such Plan shall be terminated, in each case under
Section 4041 or 4042 of ERISA, and such termination shall give rise to
a liability of the Borrower or the Controlled Group to the PBGC or the
Plan under ERISA having an effect in excess of $100,000 or (ii) a
Reportable Event, the occurrence of which would cause the imposition
of a lien in excess of $100,000 under Section 4062 of ERISA, shall
have occurred with respect to any Plan (other than a Multi-Employer
Pension Plan as that term is defined in Section 4001(a)(3) of ERISA)
and be continuing for a period of sixty (60) days.
(k) Any of the following events shall occur with respect to any
Multi-Employer Pension Plan (as that term is defined in Section
4001(a)(3) of ERISA) to which Borrower contributes or contributed on
behalf of its employees and Lender determines in good faith that the
aggregate liability likely to be incurred by Borrower, as a result of
any of the events specified in Subsections (i), (ii) and (iii) below,
will have an effect in excess of $100,000; (i) Borrower incurs a
withdrawal liability under Section 4201 of ERISA; (ii) any such plan
is "in reorganization" as that term is defined in Section 4241 of
ERISA; or (iii) any such Plan is terminated under Section 4041A of
ERISA.
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(l) A Change of Control of the Borrower unless approved by
Lender, which approval will not be unreasonably withheld.
(m) The dissolution, liquidation, sale, transfer, lease or other
disposal of all or substantially all of the assets or business of
Borrower.
(n) Any failure to observe any of the Financial Covenants.
(o) The occurrence of any adverse change in the, business,
operations, assets or financial condition of Borrower, taken as a
whole, that Lender in its reasonable discretion deems material, or if
Lender in good faith shall believe that the prospect of payment or
performance of the Loans is impaired.
(p) A material default by Borrower under any lease of real
property or under any contract which would have a Material Adverse
Effect.
9.2 REMEDIES UPON EVENT OF DEFAULT. If an Event of Default shall have
occurred and be continuing, then Lender may, at its sole option, exercise any
one or more of the following rights and remedies, and any other remedies
provided in any of the Credit Documents, as Lender in its sole discretion may
deem necessary or appropriate, all of which remedies shall be deemed cumulative,
and not alternative:
(i) Cease making Advances or extensions of financial
accommodations in any form to or for the benefit of
Borrower,
(ii) Declare the principal of, and all interest then
accrued on, the Note and any other liabilities hereunder to
be forthwith due and payable, whereupon the same shall
become immediately due and payable without presentment,
demand, protest, notice of default, notice of acceleration
or of intention to accelerate or other notice of any kind
all of which Borrower hereby expressly waives, anything
contained herein or in the Note to the contrary
notwithstanding,
(iii) Reduce any claim to judgment, and/or
(iv) Without notice of default or demand, pursue and
enforce any of Lender' rights and remedies under the Credit
Documents, or otherwise provided under or pursuant to any
applicable law or agreement; provided, however, that if any
Event of Default specified in Sections 9.1(g) and 9.1(h)
shall occur, the principal of, and all interest on, the Note
and other liabilities hereunder shall thereupon become due
and payable concurrently therewith, without any further
action by Lender and without presentment, demand, protest,
notice of default, notice of acceleration or of intention to
accelerate or other notice of any kind, all of which
Borrower hereby expressly waives.
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Upon the occurrence and during the continuance of any Event of Default,
Lender is hereby authorized at any time and from time to time, with five (5)
Banking Days notice to Borrower, to setoff and apply any and all moneys,
securities or other property of Borrower and the proceeds therefrom, now or
hereafter held or received by or in transit to Lender or its agents, from or for
the account of Borrower, whether for safe keeping, custody, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general or special) and credits of Borrower, and any and all claims of Borrower
against Lender at any time existing. The rights of Lender under this Section 9.2
are in addition to other rights and remedies (including, without limitation,
other rights of setoff) which Lender may have.
9.3 PERFORMANCE BY LENDER. Should Borrower fail to perform any covenant,
duty or agreement with respect to the payment of taxes, obtaining licenses or
permits, or any other requirement contained herein or in any of the Credit
Documents within the period provided herein, if any, for correction of such
failure, Lender may, with five (5) days prior notice, at its option, perform or
attempt to perform such covenant, duty or agreement on behalf of Borrower. In
such event, Borrower shall, at the request of Lender, promptly pay any amount
expended by Lender in such performance or attempted performance to Lender at its
office in Phoenix, Arizona, together with interest thereon at the Default Rate,
from the date of such expenditure until paid. Notwithstanding the foregoing, it
is expressly understood that Lender does not assume any liability or
responsibility for the performance of any duties of Borrower hereunder or under
any of the Credit Documents or other control over the management and affairs of
Borrower.
ARTICLE 10.
MISCELLANEOUS
10.1 MODIFICATION. All modifications, consents, amendments or waivers of
any provision of any Credit Document, or consent to any departure by Borrower
therefrom, shall be effective only if the same shall be in writing and accepted
by Lender.
10.2 WAIVER. No failure to exercise, and no delay in exercising, on the
part of Lender, any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other further exercise
thereof or the exercise of any other right. The rights of Lender hereunder and
under the Credit Documents shall be in addition to all other rights provided by
law. No modification or waiver of any provision of this Credit Agreement, the
Note or any Credit Documents, nor consent to departure therefrom, shall be
effective unless in writing and no such consent or waiver shall extend beyond
the particular case and purpose involved. No notice or demand given in any case
shall constitute a waiver of the right to take other action in the same, similar
or other instances without such notice or demand.
10.3 PAYMENT OF EXPENSES. Borrower shall pay all costs and expenses of
Lender (including, without limitation, the attorneys' fees of Lender's legal
counsel) incurred by Lender in connection with the documentation of the Loans,
and the preservation and enforcement of Lender's rights under this Credit
Agreement, the Note, and/or the other Credit Documents; provided, however, that
notwithstanding the aforesaid, with respect to any legal action between the
parties hereto that is pursued to judgment the prevailing party only shall be
reimbursed by the other party for all costs and expenses (including, without
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limitation, reasonable attorneys' fees and costs) incurred in connection with
the preservation and enforcement of its rights under this Credit Agreement, the
Note and/or other Credit Documents. In addition, Borrower shall pay all costs
and expenses of Lender in connection with the negotiation, preparation,
execution and delivery of any and all amendments, modifications and supplements
of or to this Credit Agreement, the Note or any other Credit Document. Borrower
shall receive a written estimate of all legal fees and related legal costs and
will have an opportunity to review all such estimates prior to its approval,
which shall not be unreasonably withheld.
10.4 NOTICES. Except for telephonic notices permitted herein, any notices
or other communications required or permitted to be given by this Credit
Agreement or any other documents and instruments referred to herein must be (i)
given in writing and personally delivered or mailed by prepaid certified or
registered mail or sent by overnight delivery service, or (ii) made by
telefacsimile delivered or transmitted, to the party to whom such notice or
communication is directed, to the address of such party as follows:
Borrower: GUM TECH INTERNATIONAL, INC.
GEL TECH, L.L.C.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Lender: Comerica Bank-California
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Lending Services
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: Comerica Bank-California
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the party to whom such notice is
directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third (3rd) Banking Day after it is mailed
as aforesaid; or, if transmitted by telefacsimile, on the day that such notice
is transmitted as aforesaid, provided that if such day is not a Banking Day,
then delivery will be deemed to have occurred on the next ensuing Banking Day.
Any party may change its address for purposes of this Credit Agreement by giving
notice of such change to the other parties pursuant to this Section 10.4.
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10.5 GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF JURY TRIAL. The Credit
Documents shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of California, except to the extent
Lender has greater rights or remedies under Federal law, whether as a national
bank or otherwise, in which case such choice of California law shall not be
deemed to deprive Lender of any such rights and remedies as may be available
under Federal law. Each party consents to the personal jurisdiction and venue of
the state courts located in Los Angeles, State of California in connection with
any controversy related to this Agreement, waives any argument that venue in any
such forum is not convenient and agrees that any litigation initiated by any of
them in connection with this Agreement shall be venued in the Superior Court of
Los Angeles County, California. The parties waive any right to trial by jury in
any action or proceeding based on or pertaining to this Agreement or any of the
Credit Documents.
10.6 INVALID PROVISIONS. If any provision of any Credit Document is held to
be illegal, invalid or unenforceable under present or future laws during the
term of this Credit Agreement, such provision shall be fully severable; such
Credit Document shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of such Credit Document; and
the remaining provisions of such Credit Document shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from such Credit Document. Furthermore, in lieu of
each such illegal, invalid or unenforceable provision there shall be added as
part of such Credit Document a provision mutually agreeable to Borrower and
Lender as similar in terms to such illegal, invalid or unenforceable provision
as may be possible and be legal, valid and enforceable.
10.7 BINDING EFFECT. The Credit Documents shall be binding upon and inure
to the benefit of Borrower and Lender and their respective successors, assigns
and legal representatives; provided, however, that Borrower may not, without the
prior written consent of Lender, assign any rights, powers, duties or
obligations thereunder.
10.8 ENTIRETY. The Credit Documents embody the entire agreement between the
parties and supersede all prior agreements and understandings, if any, relating
to the subject matter hereof and thereof.
10.9 HEADINGS. Section headings are for convenience of reference only and
shall in no way affect the interpretation of this Credit Agreement.
10.10 SURVIVAL. All representations and warranties made by Borrower herein
shall survive delivery of the Note and the making of the Loans.
10.11 NO THIRD PARTY BENEFICIARY. The parties do not intend the benefits of
this Credit Agreement to inure to any third party, nor shall this Credit
Agreement be construed to make or render Lender liable to any materialman,
supplier, contractor, subcontractor, purchaser or lessee of any property owned
by Borrower, or for debts or claims accruing to any such persons against
Borrower. Notwithstanding anything contained herein or in the Note, or in any
other Credit Document, or any conduct or course of conduct by any or all of the
parties hereto, before or after signing this Credit Agreement or any of the
other Credit Documents, neither this Credit Agreement nor any other Credit
Document shall be construed as creating any right, claim or cause of action
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against Lender, or any of its officers, directors, agents or employees, in favor
of any materialman, supplier, contractor, subcontractor, purchaser or lessee of
any property owned by Borrower, nor to any other person or entity other than
Borrower.
10.12 TIME. Time is of the essence hereof.
10.13 TERMINATION.
(a) Notwithstanding any other provision of this Credit Agreement,
Borrower may terminate this Credit Agreement at any time before the
RLC Maturity Date (or any extension thereof agreed to by the parties
hereto) by providing at least thirty (30) days' prior written notice
of termination to Lender. In the event Borrower delivers such a
termination notice, this Credit Agreement will terminate and cease to
be of any further force or effect on the latest to occur of (i) the
effective date of termination specified in Borrower's notice, (ii) the
date on which all outstanding Obligations have been satisfied and paid
by Borrower, and (iii) the expiration or termination of all
outstanding Letters of Credit.
(b) Concurrent with the effectiveness of any termination of this
Credit Agreement, each Security Agreement and IP Security Agreement
executed by Borrower in favor of Lender pursuant hereto will terminate
and be of no further force or effect, and Lender shall at such time
forthwith file and register with the applicable governmental or
administrative authorities, including without limitation, the
respective Secretaries of State for Arizona and, if applicable,
Delaware, and the United States Patent and Trademark Office, complete
discharges of any financing statement or other document or instrument
registered by or on behalf of Lender in respect of such Security
Agreements and IP Security Agreements.
10.14 SCHEDULES AND EXHIBITS INCORPORATED. All schedules and exhibits
attached hereto, if any, are hereby incorporated into this Credit Agreement by
each reference thereto as if fully set forth at each such reference.
10.15 COUNTERPARTS. This Credit Agreement may be executed in multiple
counterparts, each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
10.16 PARTICIPATIONS. Lender, at any time, shall have the right to sell,
assign, transfer, negotiate or grant participation interests in the Loans and in
any documents and instruments executed in connection herewith. Borrower hereby
acknowledges and agrees that any such disposition shall give rise to a direct
obligation of Borrower to each such assignee or participant. Lender is
authorized to furnish to any participant or prospective participant any
information or document that Lender may have or obtain regarding the Loans,
Borrower or any guarantor of the Loans.
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IN WITNESS WHEREOF, the undersigned have executed this Credit Agreement as
of the day and year first above written.
GUM TECH INTERNATIONAL, INC., a Utah
corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President, Chief Financial
Officer, Treasurer & Secretary
GEL TECH, L.L.C., an Arizona limited
liability company
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Manager
COMERICA BANK-CALIFORNIA, successor by merger
to Imperial Bank, a California banking
corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Corporate Banking Officer
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