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EXHIBIT 4.2
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amended and Restated LOAN AND SECURITY AGREEMENT dated as of
December 22, 1998 (the "Agreement"), is entered into between HORIZON
PHARMACEUTICAL CORPORATION, a Delaware corporation (the "Borrower"), whose
address is ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, and LASALLE
NATIONAL BANK, a national banking association (the "Bank"), whose address is ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
In consideration of the mutual agreements hereinafter set forth, the
Borrower and the Bank hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. For the purposes of this Agreement, the
following capitalized words and phrases shall have the meanings set forth below.
"Business Day" shall mean any day other than a Saturday,
Sunday or a legal holiday on which banks are authorized or required to be closed
for the conduct of commercial banking business in Chicago, Illinois.
"Borrowing Base Amount" shall mean:
(a) an amount of up to 80% of the net amount (after
deduction of such reserves and allowances as the Bank deems proper and
necessary) of the Eligible Accounts; plus
(b) the lesser of (i) (a) 50% of the Non-Sample Inventory
plus (b) the lesser of 30% of Sample Inventory or $125,000, (calculated
as the lower of cost or market value computed on a first-in/first-out
basis, after deduction of such reserves and allowances as the Bank
deems proper and necessary), or (ii) the amount available for advance
on Eligible Accounts as set forth of (a) above.
"Code" shall mean the United States Bankruptcy Code, as now
existing or hereafter amended.
"Collateral" shall have the meaning set forth in Section 6.1.
"Default Rate" shall mean the Prime Rate plus 2% per annum.
"Depreciation" shall mean the total amounts added to
depreciation, amortization, obsolescence, valuation and other proper reserves,
as reflected on the Borrower's financial statement and determined in accordance
with GAAP.
"EBITDA" shall mean, for any period, the sum of the following:
(a) Net Income (excluding extraordinary and unusual items and income or loss
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attributable to equity in any affiliated or subsidiary corporations) for such
period, plus (b) Interest Charges, plus (c) income taxes payable or accrued,
plus (d) Depreciation for such period, plus (e) all other non-cash charges,
minus (f) that portion of net income arising out of the sale of assets outside
of the ordinary course of business (to the extend not previously excluded under
clause (a) of this definition), in each case to the extent included in
determining Net Income for such period.
"Eligible Accounts" shall mean those Accounts of the Borrower
which:
(a) are genuine in all respects and have arisen in the
ordinary course of the Borrower's business from (i) the performance of
services by the Borrower, which services have been fully performed,
acknowledged and accepted by the Account Debtor or (ii) the sale or
lease of Goods by the Borrower, including C.O.D. sales, which Goods
have been completed in accordance with the Account Debtor's
specifications (if any) and delivered to and accepted by the Account
Debtor, and the Borrower has possession of, or has delivered to the
Bank at the Bank's request, shipping and delivery receipts evidencing
such shipment;
(b) are evidenced by an invoice delivered to the Account
Debtor thereunder, are due and payable within zero (0) days after the
date of the invoice or shipment of the Inventory referred to in the
invoice, whichever is later, and are not more than ninety (90) days
past due;
(c) do not arise from a "sale on approval" or a "sale or
return";
(d) have not arisen out of contracts with the United
States or any state, county, city or other governmental body, or any
department, agency or instrumentality thereof;
(e) are not due from an Account Debtor which is a
director, officer, employee, agent, subsidiary, parent or affiliate of
the Borrower,
(f) do not arise in connection with a sale to an Account
Debtor who is not a resident or citizen of and is located within the
United States of America;
(g) do not arise in connection with a sale to an Account
Debtor who is located within a state which requires the Borrower, as a
precondition to commencing or maintaining an action in the courts of
that state, either to (i) receive a certificate of authority to do
business and be in good standing in such state, or (ii) file a notice
of business activities or similar report, with such state's taxing
authority, unless (A) the Borrower has taken one of the actions
described in clauses (i) or (ii), (B) the failure to take one of the
actions described in either clause (i) or (ii) may be cured
retroactively by the Borrower at its election, or (C) the Borrower has
proven to the satisfaction of the Bank that it is exempt from any such
requirements under such state's laws;
(h) do not arise out of a contract or order which, by its
terms, forbids or makes void or unenforceable the assignment by the
Borrower to the Bank of the Account arising with respect thereto and
are not unassignable to the Bank for any other reason;
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(i) are the valid, legally enforceable and unconditional
obligation of the Account Debtor, are not the subject of any setoff,
counterclaim, credit, allowance or adjustment by the Account Debtor, or
of any claim by the Account Debtor denying liability thereunder in
whole or in part, and the Account Debtor has not refused to accept
and/or has not returned or offered to return any of the Goods or
services which are the subject of such Account;
(j) are not subject to any assignment, claim, lien,
security interest or encumbrance whatsoever, other than the security
interest of the Bank;
(k) no proceedings or actions are pending or threatened
against the Account Debtor which might result in any material adverse
change in its financial condition or in its ability to pay any Account
in full, and
(l) are otherwise not unacceptable to the Bank for any
other reason.
An Account which is an Eligible Account shall cease to be an Eligible
Account whenever it ceases to meet any one of the foregoing requirements.
If invoices representing twenty five percent (25%) or more of the
unpaid net amount of all Accounts from any one Account Debtor are unpaid more
than ninety (90) days after the due date of such invoices, then all Accounts
relating to such Account Debtor shall cease to be Eligible Accounts.
"Eligible Inventory" shall mean all Sample Inventory and
Non-Sample Inventory of the Borrower which:
(a) is not subject to any assignment, claim, lien,
security interest or encumbrance whatsoever, other than the security
interest of the Bank,
(b) is held for sale, lease or furnishing under contracts
of service, and is (except as the Bank may otherwise consent in
writing) new and unused;
(c) is not now and shall not at any time hereafter be
stored with a bailee, warehouseman or similar party without (i) the
Bank's prior written approval, and (ii) delivery to the Bank by such
party, non-negotiable warehouse receipts therefor in the Bank's name or
such other bailee's letter, in form and substance acceptable to the
Bank;
(d) is not unacceptable to the Bank, in its sole and
absolute discretion, due to age, type, category and/or quantity;
(e) is not produced in violation of the Fair Labor
Standards Act and/or subject to the so-called "hot goods" provisions
contained in Title 29 U.S.C. 215(a); and
(f) does not violate the negative covenants and satisfies
the affirmative covenants of the Borrower contained in this Agreement.
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Inventory which is Eligible Inventory shall cease to be Eligible
Inventory whenever it ceases to meet any one of the foregoing requirements.
"Environmental Laws" shall mean all federal, state, district,
local and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, pollution and environmental
matters, as now or at any time hereafter in effect, applicable to the Borrower's
business or facilities owned or operated by the Borrower, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contamination, chemicals, or hazardous, toxic or dangerous
substances, materials or wastes in the environment (including, without
limitation, ambient air, surface water, land surface or subsurface strata) or
otherwise relating to the generation, manufacture, processing, distribution,
use, treatment, storage, disposal transport or handling of Hazardous Materials.
"Event of Default" shall mean any of the events or conditions
set forth in Section 11 hereof.
"Fixed Charge Coverage Ratio" shall mean the ratio of EBITDA
minus capital expenditures for the period measured minus taxes paid for the
period measured, to required payments for the period measured.
"GAAP" shall mean generally accepted accounting principles,
using the accrual basis of accounting and consistently applied.
"Guaranty Obligations" shall mean all obligations of the
Borrower guaranteeing any indebtedness, dividend or other obligation, including
without limitation any indebtedness, dividend or other obligation which may be
issued or incurred at some future time, of any other person or entity (the
"primary obligor") in any manner, whether directly or indirectly, including
obligations incurred through an agreement, contingent or otherwise, by such
person or entity:
(a) to purchase such indebtedness or obligation or any
property or assets constituting security therefor;
(b) to advance or supply funds either (i) for the
purchase or payment of such indebtedness or obligation, or (ii) to maintain
working capital or other balance sheet condition or otherwise to advance or make
available funds for the purchase or payment of such indebtedness or obligation;
(c) to lease property or to purchase securities, property
or services with the purpose or intent of assuring the owner of such
indebtedness or obligation of the ability of the primary obligor to make payment
of the indebtedness or obligation;
(d) otherwise to assure the owner of the indebtedness or
obligation of the primary obligor against loss in respect thereof; or
(e) to induce the issuance of, or in connection with the
issuance of, any letter of credit.
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"Hazardous Materials" shall mean any hazardous, toxic or
dangerous substance, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or any other
similar substances, materials or wastes that are or become regulated under any
Environmental Law (including without limitation, any that are or become
classified as hazardous or toxic under any Environmental Law).
"Indebtedness" shall mean at any time (a) all Liabilities of
the Borrower, (b) all lease obligations of the Borrower in respect of real or
personal property which would, in accordance with GAAP, be required to be
capitalized on the lessee's balance sheet, (c) all other debt, secured or
unsecured, created, issued, incurred or assumed by the Borrower for money
borrowed or for the deferred purchase price of any fixed or capital asset, (d)
indebtedness secured by any mortgage, pledge, lien or security interest existing
on property owned by the Borrower whether or not the Indebtedness secured
thereby has been assumed, and (e) all Guaranty Obligations of the Borrower
whether or not reflected on its balance sheet.
"Indemnified Party" and "Indemnified Parties" shall mean,
respectively, each of the Bank and any parent corporations, affiliated
corporations or subsidiaries of the Bank, and each of their respective officers,
directors, employees, attorneys and agents, and all of such parties and
entities.
"Interest Period" shall mean, with regard to any LIBOR Loan,
successive one, two, three or six month periods as selected from time to time by
the Borrower by notice given to the Bank not less than three Business Days prior
to the first day of each respective Interest Period; provided, however, that:
(i) each such Interest Period occurring after the initial Interest Period of any
LIBOR Loan shall commence on the day on which the preceding Interest Period for
such LIBOR Loan expires, (ii) whenever the List day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day,
provided, however, that if such extension would cause the last day of such
Interest Period to occur in the next following calendar month, then the last day
of such Interest Period shall occur on the immediately preceding Business Day;
(iii) whenever the first day of any Interest Period occurs on a day of a month
for which there is no numerically corresponding day in the calendar month in
which such Interest Period terminates, such Interest Period shall end on the
last Business Day of such calendar month; (iv) if the Term Loan is subject to a
Mandatory Prepayment, the last Business Day of the then current Interest Period
for LIBOR Loans must coincide with the date of the Mandatory Prepayment, and (v)
the final Interest Period must be such that its expiration occurs on or before
the Term Loan Maturity Date.
"Letter of Credit" and "Letters of Credit" shall mean,
respectively, a letter of credit and all such letters of credit issued by the
Bank, in its sole discretion, upon the execution
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and delivery by the Borrower and the acceptance by the Bank of any application
for Letter of Credit, as set forth in Section 2.3 of this Agreement.
"Letter of Credit Obligations" shall mean, at any time, an
amount equal to the aggregate of the original face amounts of all Letters of
Credit minus the sum of (i) the amount of any reductions in the original face
amount of any Letter of Credit which did not result from a draw thereunder, (ii)
the amount of any payments made by the Bank with respect to any draws made under
a Letter of Credit for which the Borrower has reimbursed the Bank, (iii) the
amount of any payments made by the Bank with respect to any draws made under a
Letter of Credit which have been converted to a Revolving Loan as set forth in
Section 2.3, and (iv) the portion of any issued but expired Letter of Credit
which has not been drawn by the beneficiary thereunder. For purposes of
determining the outstanding Letter of Credit Obligations at any time, the Bank's
acceptance of a draft drawn on the Bank pursuant to a Letter of Credit shall
constitute a draw on the applicable Letter of Credit at the time of such
acceptance.
"Liabilities" shall mean at all times all liabilities of the
Borrower that would be shown as such on a balance sheet of the Borrower prepared
in accordance with GAAP.
"LIBOR" shall mean a rate of interest equal to the per annum
rate of interest at which United States dollar deposits in an amount comparable
to the amount of the relevant LIBOR Loan and for a period equal to the relevant
Interest Period are offered generally to the Lender (rounded upward if
necessary, to the nearest 1/16 of 1.00%) in the London Interbank Eurodollar
market at 11:00 a.m. (London time) two Business Days prior to the commencement
of each Interest Period, or as LIBOR is otherwise determined by the Bank in its
sole and absolute discretion, such rate to remain fixed for such Interest
Period. The Bank's determination of LIBOR as provided above shall be conclusive,
absent manifest error.
"LIBOR Loan" or "LIBOR Loans" shall mean that portion, and
collectively those portions, of the aggregate outstanding principal balance of
the Term Loan that will bear interest at LIBOR plus two percent (2%) per annum,
of which at any time and from time to time, the Borrower may identify no more
than three (3) advances of the Term Loan which will bear interest based on
LIBOR, of which any particular LIBOR Loan must be in an amount equal to
$1,000,000 or a higher integral multiple thereof.
"Loans" shall mean, collectively, all Revolving Loans and Term
Loans made by the Bank to the Borrower and all Letters of credit issued by the
Bank for the benefit of the Borrower under and pursuant to this Agreement.
"Loan Documents" shall have the meaning set forth in Section
3.1.
"Mandatory Prepayment" shall have the meaning set forth in
Section 2.2(d).
"Maximum Letter of Credit Obligation" shall mean the lesser of
(a) the Revolving Loan Commitment less the aggregate amount of all Revolving
Loans outstanding at any time, or (b) the Borrowing Base Amount less the
aggregate amount of all Revolving Loans outstanding at any time.
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"Net Income" shall mean, with respect to any period, the
amount shown opposite the caption "Net Income" or a similar caption on the
financial statements of the Borrower, prepared in accordance with GAAP.
"Non-Sample Inventory" shall mean all inventory of the
Borrower that is not Sample Inventory.
"Notes" shall mean the Revolving Note and the Term Note.
"Obligations" shall mean the Loans, as evidenced by the Note,
all interest accrued thereon, any fees due the Bank hereunder, any expenses
incurred by the Bank hereunder and any and all other liabilities and obligations
of the Borrower (and of any partnership in which the Borrower is or may be a
partner) to the Bank, howsoever created, arising or evidenced, and howsoever
owned, held or acquired, whether now or hereafter existing, whether now due or
to become due, direct or indirect, absolute or contingent, and whether several,
joint or joint and several.
"Prime Loan" or "Prime Loans" shall mean that portion, and
collectively, those portions of the aggregate outstanding principal balance of
the Term Loan that will bear interest at the Prime Rate per annum.
"Prime Rate" shall mean the rate per annum in effect from time
to time as set by the Bank and called its Prime Rate. The effective date of any
change in the Prime Rate shall for purposes hereof be the date the rate is
changed by the Bank. The Bank shall not be obligated to give notice of any
change in the Prime Rate.
"Regulatory Change" shall mean the introduction of, or any
change in any applicable law, treaty, rule, regulation or guideline or in the
interpretation or administration thereof by any governmental authority or any
central bank or other fiscal, monetary or other authority having jurisdiction
over the Bank or its lending office.
"Revolving Interest Rate" shall mean the Prime Rate per annum.
"Revolving Loan" or "Revolving Loans" shall mean,
respectively, each direct advance and the aggregate of all such direct advances,
from time to time, made by the Bank to the Borrower under and pursuant to this
Agreement, as set forth in Section 2.1 of this Agreement.
"Revolving Loan Availability" shall mean at any time, tile
lesser of (a) the Revolving Loan Commitment less the Letter of Credit
Obligations, or (b) the Borrowing Base Amount less the Letter of Credit
Obligations.
"Revolving Loan Commitment" shall mean One Million and 00/100
Dollars ($1,000,000.00).
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"Revolving Loan Maturity Date" shall mean May 10, 1999, unless
extended by the Bank pursuant to any modification, extension or renewal note
executed by the Borrower and accepted by the Bank in its sole and absolute
discretion in substitution for the Revolving Note.
"Revolving Note" shall have the meanings set forth in Section
4.1 hereof.
"Sample Inventory" shall mean that inventory of the Borrower
used as promotional material to be distributed to physicians, which is packaged
differently than the Borrower's typical inventory.
"Subordinated Debt" shall mean that portion of the Liabilities
of the Borrower which is subordinated to the Obligations in a manner
satisfactory to the Bank, including but not limited to, rights and time of
payments of principal and interest.
"Term Interest Rate" shall mean the Borrower's option of (i)
the Prime Rate per annum, or (ii) LIBOR plus two percent (2%) per annum.
"Term Loan" shall mean the direct advance or advances, from
time to time in the form of either Prime Loans and/or LIBOR Loans, made by the
Bank to the Borrower in the form of a Term Loan under and pursuant to this
Agreement, as set forth in Section 2.2 of this Agreement.
"Term Loan Commitment" shall mean Two Million Four Hundred
Thousand and 00/100 Dollars ($2,400,000.00).
"Term Loan Maturity Date" shall mean December 22, 2001, unless
extended by the Bank pursuant to any modification, extension or renewal note
executed by the Borrower and accepted by the Bank in its sole and absolute
discretion in substitution for the Term Note.
"Term Note" shall have the meaning set forth in Section 3.1
hereof.
"UCC" shall mean the Uniform Commercial Code in effect in
Illinois from time to time.
1.2 Other Definitions. Capitalized words and phrases used herein
and not otherwise defined herein shall have the respective meanings assigned to
such terms as of the date hereof in the UCC, or as the context may otherwise
require.
2. COMMITMENT OF THE BANK.
2.1 Revolving Loans.
(a) Revolving Loan Commitment. Subject to the terms and
conditions of this Agreement and the other Loan Documents, and in reliance upon
the representations and warranties of the Borrower set forth herein and in the
other Loan Documents, the Bank agrees to make such Revolving Loans at such times
as the Borrower may from time to time request until, but not including, the
Revolving Loan Maturity Date, and in such amounts as the Borrower from
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time request, provided, however, that the aggregate principal balance of all
Revolving Loans outstanding at any time shall not exceed the Revolving Loan
Availability. Revolving Loans made by the Bank may be repaid and, subject to the
terms and conditions hereof, borrowed again up to, but not including the
Revolving Loan Maturity Date unless the Revolving Loans are otherwise terminated
or extended as provided in this Agreement. The Revolving Loans shall be used by
the Borrower for the purpose of working capital.
(b) Revolving Loan Interest and Payments. Except as otherwise
provided in this Section 2.1(b), the principal amount of the Revolving
Loans outstanding from time to time shall bear interest at the
Revolving Interest Rate. Accrued and unpaid interest on the unpaid
balance of all Revolving Loans outstanding from time to time, shall be
due and payable monthly, in arrears, commencing on January 1, 1999 and
continuing on the first day of each calendar month thereafter, and on
the Revolving Loan Maturity Date. Any amount of principal or interest
on the Revolving Loans which is not paid when due, whether at stated
maturity, by acceleration or otherwise, shall bear interest payable on
demand at the Default Rate.
(c) Overadvances. In the event the aggregate outstanding
principal balance of all Revolving Loans and Letter of Credit
Obligations hereunder exceed the Revolving Loan Commitment, the
Borrower shall, without notice or demand of any kind, immediately make
such repayments of the Revolving Loans or take such other actions as
shall be necessary to eliminate such excess.
2.2 Term Loan.
(a) Term Loan Commitment. Subject to the terms and
conditions of this Agreement and the other Loan Documents, and in
reliance upon the representations and warranties of the Borrower set
forth herein and in the other Loan Documents, the Bank agrees to make a
Term Loan equal to the Term Loan Commitment. The Term Loan shall be
available to the Borrower in up to three (3) principal advances. The
Term Loan shall be used by the Borrower for acquisition financing. The
Term Loan may be prepaid in whole or in part at any time without
penalty, but shall be due in full on the Term Loan Maturity Date,
unless the credit extended under the Term Loan is otherwise terminated
or extended as provided in this Agreement.
(b) Term Loan Interest and Payments. Except as otherwise
provided in this Section 2.2(b), the principal amount of the Term Loan
outstanding from time to time shall bear interest at the Term Interest
Rate. Accrued and unpaid interest on that portion of the unpaid
principal balance of the Term Loan outstanding from time to time which
is a Prime Loan, shall be due and payable monthly, in arrears,
commencing on January 1, 1999 and continuing on the first day of each
calendar month thereafter, and on the Term Loan Maturity Date. Accrued
and unpaid interest on that portion of the unpaid principal balance of
the Term Loan outstanding from time to time which is a LIBOR Loan shall
be payable on (i) the last Business day of each Interest Period,
commencing on the first such date to occur after the date hereof,
provided that if a six month LIBOR period is selected,
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interest shall also be payable on the last day of the third month of
the Interest Period, (ii) on the date of any principal repayment of a
LIBOR Loan, and (iii) on the Term Loan Maturity Date. Any amount of
principal or interest on the Term Loan which is not paid when due,
whether at stated maturity, by acceleration or otherwise, shall bear
interest payable on demand at the Default Rate.
(c) Term Loan Principal Payments. The outstanding
principal balance of the Term Loan shall be repaid in equal monthly
principal installments of Forty Thousand and 00/100 Dollars
($40,000.00), together with an additional amount representing accrued
interest as set forth above, beginning on March 1, 1999, and continuing
on the first day of each month thereafter, with a final payment of all
outstanding principal and accrued interest due on the Term Loan
Maturity Date. Principal amounts repaid on the Term Note may not be
borrowed again. Also, if the Borrower chooses not to convert any
portion of the Term Loan which is a LIBOR Loan to a Prime Loan as
provided in Section 2.3(b) and 2.3(c), then such portion of the Term
Loan shall be immediately due and payable on the last Business Day of
the then existing Interest Period or on such earlier date as required
by law, all without further demand, presentment, protest or notice of
any kind, all of which are hereby waived by the Borrower.
(d) Mandatory Prepayment. If the outstanding principal
balance of the Term Loan is greater than Two Million and 00/100 Dollars
($2,000,000.00) on August 1, 1999, the Borrower shall immediately make
a principal repayment in an amount sufficient to reduce the principal
amount of the Term Loan to a maximum amount of Two Million and 00/100
Dollars ($2,000,000.00). This mandatory repayment shall not affect
principal repayment obligations set forth in Section 2.2(c).
2.3 Additional LIBOR Loan Provisions.
(a) LIBOR Loan Prepayments. The principal balance of any
LIBOR Loan may not be prepaid in whole or in part at any time. If, for
any reason, a LIBOR Loan is paid prior to the last Business Day of any
Interest Period, the Borrower agrees to indemnify the Bank against any
loss (including any loss on redeployment of the funds repaid), cost or
expense incurred by the Bank as a result of such prepayment.
(b) LIBOR Unavailability. If the Bank determines in good
faith (which determination shall be conclusive, absent manifest error)
prior to the commencement of any Interest Period that (i) United States
dollar deposits of sufficient amount and maturity for funding any LIBOR
Loan are not available to the Bank in the London Interbank Eurodollar
market in the ordinary course of business, or (ii) by reason of
circumstances affecting the London Interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the rate of
interest to be applicable to the relevant LIBOR Loan, the Bank shall
promptly notify the Borrower thereof and, so long as the foregoing
conditions continue, the Term Loan may not be advanced as a LIBOR Loan
thereafter. In addition, at the Borrower's option, each existing LIBOR
Loan shall be immediately (i) converted to a Prime Loan on the last
Business Day of the then existing Interest, or (ii) due and
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payable on the last Business Day of the then existing Interest Period,
without further demand, presentment, protest or notice of any kind, all
of which are hereby waived by the Borrower.
(c) Regulatory Change. In addition, if, after the date
hereof, a Regulatory Change shall, in the reasonable determination of
the Bank, make it unlawful for the Bank to make or maintain the LIBOR
Loans, then the Bank shall promptly notify the Borrower and the Term
Loan may not be advanced as a LIBOR Loan thereafter. In addition, at
the Borrower's option, each existing LIBOR Loan shall be immediately
(i) converted to a Prime Loan on the last Business Day of the then
existing Interest Period or on such earlier date as required by law, or
(ii) due and payable on the last Business Day of the then existing
Interest Period or on such earlier date as required by law, all without
further demand, presentment, protest or notice of any kind, all of
which are hereby waived by the Borrower.
(d) LIBOR Loan Indemnity. If any Regulatory Change
(whether or not having the force of law) shall (a) impose, modify or
deem applicable any assessment, reserve, special deposit or similar
requirement against assets held by, or deposits in or for the account
of or loans by, or any other acquisition of funds or disbursements by,
the Bank; (b) subject the Bank or any LIBOR Loan to any tax, duty,
charge, stamp tax or fee or change the basis of taxation of payments to
the Bank of principal or interest due from the Borrower to the Bank
hereunder (other than a change in the taxation of the overall net
income of the Bank); or (c) impose on the Bank any other condition
regarding such LIBOR Loan or the Bank's funding thereof, and the Bank
shall determine (which determination shall be conclusive, absent
manifest error) that the result of the foregoing is to increase the
cost to the Bank of making or maintaining such LIBOR Loan or to reduce
the amount of principal or interest received by the Bank hereunder,
then the Borrower shall pay to the Bank, on demand, such additional
amounts as the Bank shall, from time to time, determine are sufficient
to compensate and indemnify the Bank for such increased cost or reduced
amount.
2.4 Interest and Fee Computation; Collection of Funds. Except as
otherwise set forth herein, all interest and fees shall be calculated on the
basis of a year consisting of 360 days and shall be paid for the actual number
of days elapsed. Principal payments submitted in funds not immediately available
shall continue to bear interest until collected. If any payment to be made by
the Borrower hereunder or under the Note shall become due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in computing any interest in respect of
such payment.
2.5 Letters of Credit. Subject to the terms and conditions of this
Agreement and upon the execution and delivery by the Borrower and the acceptance
by the Bank, in its sole and absolute discretion, of an application for letter
of credit, the Bank agrees to issue for the account of the Borrower out of the
Revolving Loan Availability, such Letters of Credit in the standard form of the
Bank and otherwise in form and substance acceptable to the Bank, from time to
time during the term of this Agreement, provided that the Letter of Credit
Obligations may not at any
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time exceed the Maximum Letter of Credit Obligation and provided, further, that
no Letter of Credit shall have an expiration date later than the Revolving Loan
Maturity Date. The amount of any payments made by the Bank with respect to draws
made by a beneficiary under a Letter of Credit for which the Borrower has failed
to reimburse the Bank upon the earlier of (i) the Bank's demand for repayment,
or (ii) five (5) days from the date of such payment to such beneficiary by the
Bank, shall be deemed to have been converted to a Revolving Loan as of the date
such payment was made by the Bank to such beneficiary. Upon the occurrence of an
Event of a Default and at the option of the Bank, all Letter of Credit
Obligations shall be converted to Revolving Prime Loans, all without demand,
presentment, protest or notice of any land, all of which are hereby waived by
the Borrower.
3. CONDITIONS OF BORROWING.
Notwithstanding any other provision of this Agreement, the Bank shall
not be required to disburse or make all or any portion of the Loans if any of
the following conditions have occurred.
3.1 Loan Documents. The Borrower fails to execute and deliver to
the Bank the following Loan Documents (collectively, the "Loan Documents"), all
of which must be satisfactory to the Bank and the Bank's counsel in form,
substance and execution:
(a) Loan Agreement. This Agreement duly executed by the
Borrower.
(b) Revolving Note. A Revolving Note duly executed by the
Borrower, in the form attached hereto as Exhibit A.
(c) Term Note. A Term Note duly executed by the Borrower,
in the form attached hereto as Exhibit B.
(d) Landlord Waiver. A Landlord Waiver executed by
Diversified Healthcare Services, Inc., in the form attached hereto as
Exhibit C.
(e) Subordination Agreement. Subordination Agreement
dated as of the date of this Agreement, from each holder of
Subordinated Debt, in the form attached hereto as Exhibit E.
(f) Resolutions. Resolutions of the board of directors
and/or shareholders of the Borrower authorizing the execution of this
Agreement and the Loan Documents.
(g) Additional Documents. Such other certificates,
financial statements, schedules, resolutions, opinions of counsel,
notes and other documents which are provided for hereunder or which the
Bank shall require.
3.2 Event of Default. If any Event of Default, or any event which,
with notice or lapse of time, or both would constitute an Event of Default, has
occurred and is continuing.
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3.3 Material Adverse Changes. If, since the date of this
Agreement, there has been, in the Bank's sole and complete discretion, a
material adverse change in the financial condition or affairs of the Borrower.
3.4 Litigation. If any litigation or governmental proceeding has
been instituted against the Borrower or any of its officers or shareholders
which in the discretion of the Bank, reasonably exercised, shall adversely
affect the financial condition or continued operation of the Borrower.
3.5 Representations and Warranties. If any representation or
warranty of the Borrower contained herein or in any Loan Document shall be
untrue or incorrect as of the date of any advance as though made on such date,
except to the extent such representation or warranty expressly relates to an
earlier date.
4. NOTES EVIDENCING LOANS.
4.1 Revolving Note. The Revolving Loans and the Letter of Credit
Obligations shall be evidenced by a single Revolving Note (together with any and
all renewal, extension, modification or replacement notes executed by the
Borrower and delivered to the Bank and given in substitution therefor, the
"Revolving Note") in the form of Exhibit A attached hereto, duly executed by the
Borrower and payable to the order of the Bank. At the time of the initial
disbursement of a Revolving Loan and at each time an additional Revolving Loan
shall be requested hereunder or a repayment made in whole or in part thereon, an
appropriate notation thereof shall be made on the books and records of the Bank.
All amounts recorded shall be, absent demonstrable error, conclusive and binding
evidence of (i) the principal amount of the Revolving Loans advanced hereunder
and the amount of all Letter of Credit Obligations, (ii) any unpaid interest
owing on the Revolving Loans, and (iii) all amounts repaid on the Revolving
Loans or the Letter of Credit Obligations. The failure to record any such amount
or any error in recording such amounts shall not, however, limit or otherwise
affect the obligations of the Borrower under the Revolving Note to repay the
principal amount of the Revolving Loans, together with all interest accruing
thereon.
4.2 Term Note. The Term Loan shall be evidenced by a single Term
Note (together with any and all renewal extension, modification or replacement
notes executed by the Borrower and given in substitution therefor, the "Term
Note") in the form of Exhibit B attached hereto, duly executed by the Borrower
and payable to the order of the Bank. At the time of the initial disbursement of
the Term Loan, at each time an additional disbursement is made under the Term
Loan or a repayment made in whole or in part thereon, an appropriate notation
thereof shall be made on the books and records of the Bank. All amounts recorded
shall be, absent demonstrable error, conclusive and binding evidence of (i) the
principal amount of the Term Loan advanced hereunder, (ii) any unpaid interest
owing on the Term Loan and (iii) all amounts repaid on the Term Loan. The
failure to record any such amount or any error in recording such amounts shall
not, however, limit or otherwise affect the obligations of the Borrower under
the Term Note to repay the principal amount of the Term Loan, together with all
interest accruing thereon.
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5. MANNER OF BORROWING.
Each Revolving Loan shall be made available to the Borrower upon its
written or verbal request, from any person whose authority to so act has not
been revoked by the Borrower in writing previously received by the Bank. A
request for a Revolving Loan must be received by no later than 11:00 a.m.
Chicago, Illinois time, on the day it is to be funded. The proceeds of each
Revolving Loan shall be made available at the office of the Bank by credit to
the account of the Borrower or by other means requested by the Borrower and
acceptable to the Bank.
The Term Loan shall be made available to the Borrower, upon its written
or verbal request, from any person whose authority to so act has not been
revoked by the Borrower in writing previously received by the Bank. The Term
Loan may be advanced either as a Prime Loan or a LIBOR Loan, provided, however,
that at any time and from time to time, the Borrower may identify no more than
three (3) Term Loan advances which may be LIBOR Loans. A request for a Prime
Loan must be received by no later than 11:00 a.m. Chicago, Illinois time, on the
day it is to be funded. A request for a LIBOR Loan must be (i) received by no
later than 11:00 a.m. Chicago, Illinois time, three (3) days before the day it
is to be funded, and (ii) in an amount equal to $100,000.00 or a higher integral
multiple thereof. If for any reason the Borrower shall fail to select timely an
Interest Period for an existing LIBOR Loan, then such LIBOR Loan shall be
immediately converted to a Prime Loan on the last Business Day of the then
existing Interest Period, all without demand, presentment, protest or notice of
any kind, all of which are hereby waived by the Borrower. The proceeds of each
Prime Loan or LIBOR Loan shall be made available at the office of the Bank by
credit to the account of the Borrower or by other means requested by the
Borrower and acceptable to the Bank.
Each Letter of Credit shall be issued by the Bank upon the execution by
the Borrower and the acceptance by the Bank, in its sole discretion, of the
Bank's standard application therefor and the payment by the Borrower of the
Bank's usual and customary fees in connection therewith. All standby Letters of
Credit issued under and pursuant to this Agreement shall bear an annual fee
equal to 1.50% of the face amount of such standby Letter of Credit which fee,
along with any other applicable fees or interest, shall be payable in accordance
with the Bank's standard letter of credit fee schedule. All Letters of Credit
other than standby Letters of Credit shall bear such fees and interest and
contain such other terms as set forth in the Bank's standard letter of credit
fee schedule.
The Bank is authorized to rely on the telephonic, telecopy or
telegraphic loan requests which the Bank believes in its good faith judgment to
emanate from a properly authorized representative of the Borrower, whether or
not that is in fact the case. The Borrower does hereby irrevocably confirm,
ratify and approve all such advances by the Bank and does hereby indemnify the
Bank against losses and expenses (including court costs, attorneys' and
paralegals' fees) and shall hold the Bank harmless with respect thereto.
6. SECURITY FOR THE OBLIGATIONS.
6.1 Security for Obligations. As security for the payment of the
Obligations, the Borrower does hereby pledge, assign, transfer and deliver to
the Bank and does hereby grant to
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the Bank a continuing and unconditional security interest in and to any and all
property of the Borrower, of any kind or description, tangible or intangible,
whether now existing or hereafter arising or acquired, including, but not
limited to, the following (all of which property, along with the products and
proceeds therefrom, are individually and collectively referred to as the
"Collateral"):
(a) all property of, or for the account of, the Borrower
now or hereafter coming into the possession, control or custody of, or
in transit to, the Bank or any agent or bailee for the Bank or any
parent, affiliate or subsidiary of the Bank or any participant with the
Bank in the Loans, (whether for safekeeping, deposit, collection,
custody, pledge, transmission or otherwise), including all earnings,
dividends, interest, or other rights in connection therewith and the
products and proceeds therefrom, including the proceeds of insurance
thereon; and
(b) the additional property of the Borrower, whether now
existing or hereafter arising or acquired, and wherever now or
hereafter located, together with all additions and accessions thereto,
substitutions for, and replacements, products and proceeds therefrom,
and all of the Borrower's books and records relating thereto,
identified and set forth as follows:
(i) All Accounts (whether or not Eligible Accounts) and
all Goods whose sale, lease or other disposition by
the Borrower has given rise to Accounts and have been
returned to, or repossessed or stopped in transit by,
the Borrower, or rejected or refused by an Account
Debtor;
(ii) All Inventory (whether or not Eligible Inventory);
(iii) All Goods (other than Inventory), including, without
limitation, Equipment, vehicles, furniture and
Fixtures;
(iv) All Investment Property;
(v) All Chattel Paper, Instruments, Documents and General
Intangibles; and
(vi) All insurance policies and proceeds insuring the
foregoing property or any part thereof, including
unearned premiums.
6.2 Possession of Collateral. Until an Event of Default has
occurred hereunder, the Borrower shall be entitled to possession or use of the
Collateral. The cancellation or surrender of the Note, upon payment or
otherwise, shall not affect the right of the Bank to retain the Collateral for
any other of the Obligations.
6.3 Financing Statements. The Borrower shall, at the Bank's
request, at any time and from time to time, execute and deliver to the Bank such
financing statements and other documents and do such acts as the Bank deems
necessary in order to establish and maintain valid, attached and perfected first
security interests in the Collateral in favor of the Bank, free
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and clear of all liens, claims and rights of third parties whatsoever (except as
otherwise specifically set forth in Section 8.2 hereof).
6.4 Additional Collateral. The Borrower shall deliver to the Bank
immediately upon its demand, such other collateral as the Bank may from time to
time request, should the value of the Collateral in the Bank's sole and absolute
discretion, decline, deteriorate, depreciate or become impaired, and does hereby
grant to the Bank a continuing security interest in such other collateral which,
when pledged, assigned and transferred to the Bank shall be and become part of
the Collateral. The Bank's security interests in each of the foregoing
Collateral shall be valid, complete and perfected whether or not covered by a
specific assignment.
6.5 Preservation of the Collateral. The Bank may, but is not
required to, take such action from time to time as the Bank deems appropriate to
maintain or protect the Collateral. The Bank shall have exercised reasonable
care in the custody and preservation of the Collateral if it takes such action
as the Borrower shall reasonably request in writing; provided, however, that
such request shall not be inconsistent with the Bank's status as a secured
party, and the failure of the Bank to comply with any such request shall not be
deemed a failure to exercise reasonable care. In addition, any failure of the
Bank to preserve or protect any rights with respect to the Collateral against
prior or third parties, or to do any act with respect to preservation of the
Collateral, not so requested by the Borrower, shall not be deemed a failure to
exercise reasonable care in the custody or preservation of the Collateral. The
Borrower shall have the sole responsibility for taking such action as may be
necessary, from time to time, to preserve all rights of the Borrower and the
Bank in the Collateral against prior or third parties. Without limiting the
generality of the foregoing, where Collateral consists in whole or in part of
securities, the Borrower represents to, and covenants with, the Bank that the
Borrower has made arrangements for keeping informed of changes or potential
changes affecting the securities (including, but not limited to, rights to
convert or subscribe, payment of dividends, reorganization or other exchanges,
tender offers and voting rights), and the Borrower agrees that the Bank shall
have no responsibility or liability for informing the Borrower of any such or
other changes or potential changes or for taking any action or omitting to take
any action with respect thereto.
7. REPRESENTATIONS AND WARRANTIES.
To induce the Bank to make the Loans, the Borrower makes the following
representations and warranties to the Bank, each of which shall be true and
correct as of the date of the execution and delivery of this Agreement, and
which shall survive the execution and delivery of this Agreement:
7.1 Organization. The Borrower is a corporation duly organized,
existing and in good standing under the laws of the State of Delaware, with full
and adequate corporate power to carry on and conduct its business as presently
conducted, and is duly licensed or qualified in all foreign jurisdictions
wherein the nature of its activities require such qualification or licensing.
7.2 Authorization; Validity. The Borrower has full right, power
and authority to enter into this Agreement, to make the borrowings and execute
and deliver the Loan Documents as provided herein and to perform all of its
duties and obligations under this Agreement and the
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Loan Documents. The execution and delivery of this Agreement and the Loan
Documents will not, nor will the observance or performance of any of the matters
and things herein or therein set forth, violate or contravene any provision of
law or of the articles of incorporation or bylaws of the Borrower. All necessary
and appropriate corporate action has been taken on the part of the Borrower to
authorize the execution and delivery of this Agreement and the Loan Documents.
This Agreement and the Loan Documents are valid and binding agreements and
contracts of the Borrower in accordance with their respective terms.
7.3 Compliance With Laws. The nature and transaction of the
Borrower's business and operations and the use of its properties and assets,
including, but not limited to, the Collateral or any real estate owned or
occupied by the Borrower, do not and during the term of the Loans shall not,
violate or conflict with any applicable law, statute, ordinance, rule,
regulation or order of any kind or nature, including, without limitation, the
provisions of the Fair Labor Standards Act or any zoning, land use, building,
noise abatement, occupational health and safety or other laws, any building
permit or any condition, grant, easement, covenant, condition or restriction,
whether recorded or not.
7.4 Environmental Laws and hazardous Substances. The Borrower
represents, warrants and agrees with the Bank that (i) the Borrower has not
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Materials, on or off any of the premises of the
Borrower (whether or not owned by it) in any manner which at any time violates
any Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder, (ii) the operations of the Borrower comply in all
material respects with all Environmental Laws and all licenses, permits,
certificates, approvals and similar authorizations thereunder, (iii) there has
been no investigation, proceeding, complaint, order, directive, claim, citation
or notice by any governmental authority or any other person or entity, nor is
any pending or, to the best of the Borrower's knowledge, threatened, and the
Borrower shall immediately notify the Bank upon becoming aware of any such
investigation, proceeding, complaint, order, directive, claim, citation or
notice, and shall take prompt and appropriate actions to respond thereto, with
respect to any non-compliance with, or violation of, the requirements of any
Environmental Law by the Borrower or the release, spill or discharge, threatened
or actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material or any other environmental, health or safety matter, which affects the
Borrower or its business, operations or assets or any properties at which the
Borrower has transported, stored or disposed of any Hazardous Materials, (iv)
the Borrower has no material liability, contingent or otherwise, in connection
with a release, spill or discharge, threatened or actual, of any Hazardous
Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Material; and (v)
without limiting the generality of the foregoing, the Borrower shall, following
determination by the Bank that there is non-compliance, or any condition which
requires any action by or on behalf of the Borrower in order to avoid any
non-compliance, with any Environmental Law, at the Borrower's sole expense,
cause an independent environmental engineer acceptable to the Bank to conduct
such test of the relevant site as are appropriate, and prepare and deliver a
report setting forth the result of such tests, a proposed plan for remediation
and an estimate of the costs thereof.
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7.5 Absence of Breach. The execution, delivery and performance of
this Agreement, the Loan Documents and any other documents or instruments to be
executed and delivered by the Borrower in connection with the Loans shall not:
(i) violate any provisions of law or any applicable regulation, order, writ,
injunction or decree of any court or governmental authority, or (ii conflict
with, be inconsistent with, or result in any breach or default of any of the
terms, covenants, conditions, or provisions of any indenture, mortgage, deed of
trust, instrument, document, agreement or contract of any kind to which the
Borrower is a party or by which the Borrower or any of its property or assets
may be bound.
7.6 Collateral Representations. The Borrower is the sole owner of
the Collateral, free from any lien, security interest or encumbrance of any
kind, other than the lien of the Bank.
7.7 Financial Statements. All financial statements submitted to
the Bank have been prepared in accordance with GAAP on a basis, except as
otherwise noted therein, consistent with the previous fiscal year and truly and
accurately reflect the financial condition of the Borrower and the results of
the operations for the Borrower as of such date and for the periods indicated.
Since the date of the most recent financial statement submitted by the Borrower
to the Bank, there has been no material adverse change in the financial
condition or in the assets or liabilities of the Borrower, or any changes except
those occurring in the ordinary course of business.
7.8 Litigation and Taxes. There is no litigation or governmental
proceeding pending, or threatened, against the Borrower, which, if adversely
determined, would result in any material adverse change in the financial
condition or properties, business or operations of the Borrower. The Borrower
has duly filed all applicable income or other tax returns and has paid all
income or other taxes when due. There is no controversy or objection pending, or
threatened in respect of any tax returns of the Borrower.
7.9 Event of Default. No Event of Default has occurred and is
continuing, and no event has occurred and is continuing which, with the lapse of
time, the giving of notice, or both, would constitute such an Event of Default
under this Agreement or any of the Loan Documents and the Borrower is not in
default (without regard to grace or cure periods) under any contract or
agreement to which it is a party.
7.10 ERISA Obligations. The Borrower has promptly paid and
discharged all obligations and liabilities arising under the Employee Retirement
Income Security Act of 1974 ("ERISA") of a character which if unpaid or
unperformed might result in the imposition of a lien against any of its
properties or assets.
7.11 Adverse Circumstances. No condition, circumstance, event,
agreement, document, instrument, restriction, litigation or proceeding (or
threatened litigation or proceeding or basis therefor) exists which could
adversely affect the validity or priority of the liens and security interests
granted to the Bank under the Loan Documents, which could materially adversely
affect the ability of the Borrower to perform its obligations under the Loan
Documents, which would constitute a default under any of the Loan Documents or
which would constitute such a default with the giving of notice or lapse of time
or both.
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7.12 Lending Relationship. The Borrower acknowledges and agrees
that the relationship hereby created with the Bank is and has been conducted on
an open and arm's length basis in which no fiduciary relationship exists and
that the Borrower has not relied and is not relying on any such fiduciary
relationship in executing this Agreement and in consummating the Loans. The Bank
represents that it will receive the Note payable to its order as evidence of a
bank loan.
7.13 Business Loan. The Loans, including interest rate, fees and
charges as contemplated hereby, (i) are business loans within the purview of 815
ILCS 205/4(1)(c), as amended from time to time, (ii) are an exempted transaction
under the Truth In Lending Act, 12 U.S.C. 1601 et seq., as amended from time to
time, and (iii) do not, and when disbursed shall not violate the provisions of
the Illinois usury laws, any consumer credit laws or the usury laws of any state
which may have jurisdiction over this transaction, the Borrower or any property
securing the Loans.
7.14 Compliance with Regulation U. No portion of the proceeds of
the Loans nor any Letter of Credit shall be used by the Borrower, or any
affiliates of the Borrower, either directly or indirectly, for the purpose of
purchasing or carrying any margin stock, within the meaning of Regulation U as
adopted by the Board of Governors of the Federal Reserve System.
7.15 Complete Information. This Agreement and all financial
statements, schedules, certificates, confirmations, agreements, contracts, and
other materials submitted to the Bank in connection with or in furtherance of
this Agreement by or on behalf of the Borrower fully and fairly state the
matters with which they purport to deal, and neither misstate any material fact
nor, separately or in the aggregate, fail to state any material fact necessary
to make the statements made not misleading.
7.16 Place of Business. The principal place of business of the
Borrower is ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and the
Borrower shall promptly notify the Bank of any change in such location. The
Borrower will not remove or permit the Collateral to be removed from such
location without the prior written consent of the Bank, except for Inventory
sold in the usual and ordinary course of the Borrower's business or inventory
stored at Diversified Healthcare Services, Inc. located at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
7.17 Year 2000 Compliance. The Borrower and its subsidiaries have
reviewed the areas within their business and operations which could be adversely
affected by, and have developed or are developing a program to address on a
timely basis, the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower or its subsidiaries may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999), and have made related appropriate inquiry
of material suppliers and vendors. Based on such review and program, the
Borrower believes that the Year 2000 Problem will not have a material adverse
effect on the Borrower.
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8. NEGATIVE COVENANTS.
8.1 Indebtedness. The Borrower shall not, either directly or
indirectly, create, assume, incur or have outstanding any Indebtedness
(including purchase money indebtedness), or become liable, whether as endorser,
guarantor, surety or otherwise, for any debt or obligation of any other person,
firm or corporation, except:
(a) the Obligations;
(b) endorsement for collection or deposit of any
commercial paper secured in the ordinary course of business;
(c) obligations of the Borrower for taxes, assessments,
municipal or other governmental charges;
(d) obligations of the Borrower for accounts payable,
other than for money borrowed, incurred in the ordinary course of
business;
(e) obligations existing on the date hereof which are
disclosed on the financial statements referred to in Section 7.7;
(f) Guaranty Obligations of the Borrower to ▇▇▇▇▇
Industries, for the obligations of Elge, Inc., in an amount not to
exceed Eight Thousand Four Hundred Dollars ($8,400);
(g) other obligations of the Borrower to ▇▇▇▇▇ Industries
pursuant to that certain Agreement dated January 1, 1999 by and between
the Borrower and ▇▇▇▇▇ Industries; such Agreement must be reasonably
acceptable to the Bank and shall not be amended without the prior
written consent of the Bank; and
(h) additional indebtedness of the Borrower which is
previously approved in writing by the Bank, which approval may be
granted or denied by the Bank in its sole and absolute discretion.
8.2 Encumbrances. The Borrower shall not, either directly or
indirectly, create, assume, incur or suffer or permit to exist any mortgage,
pledge, encumbrance, security interest, assignment, lien or charge of any kind
or character upon any asset of the Borrower, whether owned at the date hereof or
hereafter acquired except:
(a) liens for taxes, assessments or other governmental
charges not yet due or which are being contested in good faith by
appropriate proceedings in such a manner as not to make the property
forfeitable;
(b) liens, charges and encumbrances incidental to the
conduct of its business or the ownership of its property and assets
which were not incurred in connection with the borrowing of money or
the obtaining of an advance or credit, and which do not in the
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aggregate materially detract from the value of its property or assets
or materially impair the use thereof in the operation of its business;
(c) liens arising out of judgments or awards against the
Borrower with respect to which it shall concurrently therewith be
prosecuting a timely appeal or proceeding for review and with respect
to which it shall have secured a stay of execution pending such appeal
or proceedings for review;
(d) pledges or deposits to secure obligations under
worker's compensation laws or similar legislation;
(e) good faith deposits in connection with lending
contracts or leases to which the Borrower is a party;
(f) deposits to secure public or statutory obligations of
the Borrower;
(g) liens existing on the date hereof and disclosed on
the financial statements referred to in Section 7.7; and
(h) liens and security interests granted to the Bank
hereunder.
8.3 Investments. The Borrower shall not, either directly or
indirectly, make or have outstanding any new investments (whether through
purchase of stocks, obligations or otherwise) in, or loans or advances to, any
other person, firm or corporation, or acquire all or any substantial part of the
assets or business of any other person, firm or corporation except:
(a) investments in direct obligations of the United
States;
(b) investments in certificates of deposit issued by the
Bank or any bank with assets greater than One Hundred Million Dollars
($ 100,000,000.00);
(c) investments in Prime Commercial Paper (for purposes
hereof, Prime Commercial Paper shall mean short-term unsecured
promissory notes sold by large corporations and rated A-1/P-1 by
Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., and
▇▇▇▇▇'▇ Investment Service, Inc.); or
(d) additional investments of the Borrower which are
previously approved in writing by the Bank, which approval may be
granted or denied by the Bank in its sole and absolute discretion.
8.4 Transfer; Merger. The Borrower shall not, either directly or
indirectly, merge, consolidate, sell, transfer, lease, encumber or otherwise
dispose of all or any part of its property or business or all or any substantial
part of its assets, or sell or discount (with or without recourse) any of its
notes or Accounts.
8.5 Distributions. The Borrower shall not, either directly or
indirectly, purchase or redeem any shares of its stock, declare or pay any
dividends (other than stock dividends),
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whether in cash or otherwise, or set aside any funds for any such purpose or
make any distribution to its shareholders. Notwithstanding the foregoing,
Borrower may (i) repurchase stock of employees leaving the Borrower, and (ii)
purchase treasury stock in an amount not to exceed $50,000.
8.6 Use of Proceeds. Neither the Borrower nor any affiliate of the
Borrower, shall use any portion of the proceeds of the Loans nor have any Letter
of Credit issued, either directly or indirectly, for the purpose of purchasing
any securities underwritten by ABN AMRO Incorporated, an affiliate of the Bank.
9. AFFIRMATIVE COVENANTS.
9.1 Compliance with Bank Regulatory Requirements. Upon demand by
the Bank, the Borrower shall reimburse the Bank for the Bank's additional costs
and/or reductions in the amount of principal or interest received or receivable
by the Bank if at any time after the date of this Agreement any law, treaty or
regulation or any change in any law, treaty or regulation or the interpretation
thereof by any governmental authority charged with the administration thereof or
any central bank or other fiscal, monetary or other authority having
jurisdiction over the Bank or the Loans, whether or not having the force of law,
shall impose, modify or deem applicable any reserve (except reserve requirements
taken into account in calculating the interest rate) and/or special deposit
requirement against or in respect of assets held by or deposits in or for the
account of the Loans by the Bank or impose on the Bank any other condition with
respect to this Agreement or the Loans, the result of which is to either
increase the cost to the Bank of making or maintaining the Loans or to reduce
the amount of principal or interest received or receivable by the Bank with
respect to such Loans. Said additional costs and/or reductions will be those
which directly result from the imposition of such requirement or condition on
the making or maintaining of such Loans. All Loans shall be deemed to be match
funded for the purposes of the Bank's determination in the previous sentence.
Notwithstanding the foregoing, the Borrower shall not be required to pay any
such additional costs which could be avoided by the Bank with the exercise of
reasonable conduct and diligence.
9.2 Corporate Existence. The Borrower shall at all times preserve
and maintain its corporate existence, rights, franchises and privileges, and
shall at all times continue as a going concern in the business which the
Borrower is presently conducting.
9.3 Maintain Property. The Borrower shall at all times maintain,
preserve and keep its plant, properties and Equipment, including, but not
limited to, any Collateral, in good repair, working order and condition, normal
wear and tear excepted, and shall from time to time make all needful and proper
repairs, renewals, replacements, and additions thereto so that at all times the
efficiency thereof shall be fully preserved and maintained. The Borrower shall
permit the Bank to examine and inspect such plant, properties and Equipment,
including, but not limited to, any Collateral at all reasonable times.
9.4 Maintain Insurance. The Borrower shall at all times insure and
keep insured in insurance companies acceptable to the Bank, all insurable
property owned by it which is of a character usually insured by companies
similarly situated and operating like properties, against
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loss or damage from fire and such other hazards or risks as are customarily
insured against by companies similarly situated and operating like properties;
and shall similarly insure employers' public and professional liability risks.
Prior to the date of the funding of the Note, the Borrower shall deliver to the
Bank a certificate setting forth in summary form the nature and extent of the
insurance maintained by the Borrower pursuant to this Section 9. All such
policies of insurance must be satisfactory to the Bank in relation to the amount
and term of the Obligations and type and value of the Collateral and assets of
the Borrower, shall identify the Bank as lender's loss payee and as an
additional insured. In the event the Borrower either fails to provide the Bank
with evidence of the insurance coverage required by this Section or at any time
hereafter shall fail to obtain or maintain any of the policies of insurance
required above, or to pay any premium in whole or in part relating thereto, then
the Bank, without waiving or releasing any obligation or default by the Borrower
hereunder, may at any time (but shall be under no obligation to so act), obtain
and maintain such policies of insurance and pay such premium and take any other
action with respect thereto, which the Bank deems advisable. This insurance
coverage (i) may, but need not, protect the Borrower's interest in the such
property, including, but not limited to the Collateral and (ii) may not pay any
claim made by, or against, the Borrower in connection with such property,
including, but not limited to the Collateral. The Borrower may later cancel any
such insurance purchased by the Bank, but only after providing the Bank with
evidence that the Borrower has obtained the insurance coverage required by this
Section. The costs of such insurance obtained by the Bank, through and including
the effective date such insurance coverage is canceled or expires, shall be
payable on demand by the Borrower to the Bank, together with interest at the
Default Rate on such amounts until repaid and any other charges by the Bank in
connection with the placement of such insurance. The costs of such insurance,
which may be greater than the cost of insurance which the Borrower may be able
to obtain on its own, together with interest thereon at the Default Rate and any
other charges by the Bank in connection with the placement of such insurance may
be added to the total Obligations due and owing.
9.5 Tax Liabilities. The Borrower shall at all times pay and
discharge all property and other taxes, assessments and governmental charges
upon, and all claims (including claims for labor, materials and supplies)
against the Borrower or any of its properties, Equipment or Inventory, before
the same shall become delinquent and before penalties accrue thereon.
9.6 ERISA Liabilities. The Borrower shall at all times promptly
pay and discharge all ERISA obligations and liabilities of a character which if
unpaid or unperformed might result in the imposition of a lien against any of
its properties or assets and will promptly notify the Bank of (i) the occurrence
of any reportable event (as defined in ERISA) which might result in the
termination by the Pension Benefit Guaranty Corporation ("PBGC") of any employee
benefit plan (the "Plan") covering any officers or employees of the Borrower,
any benefits of which are, or are required to be, guaranteed by PBGC, (ii)
receipt of any notice from PBGC of its intention to seek termination of the Plan
or appointment of a trustee therefor, and (iii) its intention to terminate or
withdraw from the Plan. The Borrower shall not terminate any such Plan or
withdraw therefrom unless it shall be in compliance with all of the terms and
conditions of this Agreement after giving effect to any liability to PBGC
resulting from such termination or withdrawal.
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9.7 Financial Statements. The Borrower shall at all times maintain
a standard and modern system of accounting, on the accrual basis of accounting
and in all respects in accordance with GAAP, and shall furnish to the Bank or
its authorized representatives such information regarding the business affairs,
operations and financial condition of the Borrower, including, but not limited
to:
(a) as soon as available, and in any event, within ninety
(90) days after the close of each of its fiscal years, a copy of the
annual audited financial statements of the Borrower, including balance
sheet, statement of income and, retained earnings, statement of cash
flows for the fiscal year then ended and such other information
(including information) as the Bank may reasonably request in
reasonable detail prepared by an independent certified public
accountant acceptable to the Bank, containing an unqualified opinion;
and
(b) as soon as available, and in any event, within thirty
(30) days following the end of each month, a copy of the financial
statements of the Borrower regarding such month, including balance
sheet, statement of income and retained earnings, statement of cash
flows for the month then ended and such other information (including
nonfinancial information) as the Bank may request in reasonable detail,
prepared and certified as accurate by the Borrower.
No change with respect to such accounting principles shall be made by
the Borrower without giving prior notification to the Bank. The Borrower
represents and warrants to the Bank that the financial statements delivered to
the Bank at or prior to the execution and delivery of this Agreement and to be
delivered at all times thereafter accurately reflect and will accurately reflect
the financial condition of the Borrower. The Bank shall have the right at all
times during business hours to inspect the books and records of the Borrower and
make extracts therefrom. The Borrower agrees to advise the Bank immediately of
any material adverse change in the financial condition, the operations or any
other status of the Borrower.
9.8 Supplemental Financial Statements. The Borrower shall
immediately upon receipt thereof, provide to the Bank copies of interim and
supplemental reports if any, submitted to the Borrower by independent
accountants in connection with any interim audit or review of the books of the
Borrower.
9.9 Borrowing Base Certificate. The Borrower shall, within twenty
(20) days after the end of each month, deliver to the Bank a Borrowing Base
Certificate in the form attached hereto as Exhibit D, certified to as accurate
by the Borrower.
9.10 Aged Accounts Schedule. The Borrower shall, within twenty (20)
days after the end of each month, deliver to the Bank an aged schedule of the
Accounts of the Borrower, listing the name and amount due from each Account
Debtor and showing the aggregate amounts due from (a) 0-30 days, (b) 31-60 days,
(c) 61-90 days and (d) more than 90 days, and certified to as accurate by the
Borrower.
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9.11 Covenant Compliance Report. The Borrower shall within thirty
(30) days after the end of each fiscal quarter, deliver to the Bank a
computation in such detail as the Bank shall specify, showing compliance by the
Borrower with the financial covenants set forth in Section 10, and certified to
as accurate by the Borrower.
9.12 Inventory Reports. The Borrower shall, within twenty (20) days
after the end of each month, deliver to the Bank an inventory report, certified
to as accurate by the Borrower, and within such time as the Bank may specify,
such other schedules and reports as the Bank may require.
9.13 Other Reports. The Borrower shall, within such period of time
as the Bank may specify, deliver to the Bank such other schedules and reports as
the Bank may reasonably require.
9.14 Field Audits. The Borrower shall allow the Bank, at the
Borrower's sole expense, which shall not exceed Four Thousand Dollars ($4,000)
in any twelve (12) month period, to conduct an annual field examination of the
Accounts and Inventory of the Borrower, the results of which must be
satisfactory to the Bank in the Bank's sole and absolute discretion.
9.15 Notice of Proceedings. The Borrower shall, immediately after
knowledge thereof shall have come to the attention of any officer of the
Borrower, give written notice to the Bank of all threatened or pending actions,
suits, and proceedings before any court or governmental department, commission,
board or other administrative agency which may have a material effect on the
business, property or operations of the Borrower.
9.16 Notice of Default. The Borrower shall, immediately after the
commencement thereof, give notice to the Bank in writing of the occurrence of an
Event of Default or of any event which, with the lapse of time, the giving of
notice or both, would constitute an Event of Default hereunder.
9.17 Banking Relationship. The Borrower shall utilize the Bank as
its primary bank of account and depository for all financial services, including
all receipts, disbursements and related services.
9.18 Year 2000 Reporting. Any and all financial statements required
to be provided by the Borrower and/or its subsidiaries to the Bank herein shall:
(i) include a statement that the Year 2000 remediation efforts of the Borrower
and its subsidiaries are proceeding as scheduled, and (ii) indicate whether an
auditor, regulator, or third party consultant has issued a management letter or
other communication regarding the Year 2000 exposure, program or progress of the
Borrower and/or its subsidiaries.
10. FINANCIAL COVENANTS.
10.1 Net Worth plus Subordinated Debt. As of the end of each of its
fiscal quarters the Borrower shall maintain a Net Worth (as defined by GAAP)
plus subordinated Debt in an amount as follows: for the quarter ending December
31, 1998 of not less than Nine Hundred Sixty One Thousand Dollars ($961,000);
and for the quarter ended March 31, 1999 and each
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fiscal quarter thereafter of not less than Two Million Five Hundred Thousand
Dollars ($2,500,000), provided that such amount shall increase by an amount
equal to seventy-five percent (75%) of the Borrower's Net Income at each fiscal
year end.
10.2 Leverage. As of the end of each of its fiscal quarters, the
Borrower shall maintain a ratio of Liabilities to Net worth plus Subordinated
Debt of not greater than 2.25 to 1.00 until June 30, 1999, at which such ratio
shall not exceed 1.75 to 1.00.
10.3 EBITDA. As of the end of each of its fiscal quarters, the
Borrower shall maintain a minimum EBITDA according to the following schedule:
QUARTER ENDED MINIMUM EBITDA
------------- --------------
March 31, 1999 $ 200,000
June 30, 1999 $ 400,000
September 30, 1999 $ 600,000
December 31, 1999 and continuing thereafter $1,200,000
10.4 Fixed Charge Coverage Ratio. As of the end of each of its
fiscal quarters, the Borrower shall maintain a Fixed Charge Coverage Ratio of
not less than 1.25 to 1.00.
10.5 Additional Equity. As of August 1, 1999, the Borrower's Net
Worth shall be at least Five Million Dollars ($5,000,000) greater than the
Borrower's Net Worth on December 31, 1998.
11. EVENTS OF DEFAULT.
The Borrower, without notice or demand of any kind, shall be in default
under this Agreement upon the occurrence of any of the following events (each an
"Event of Default").
11.1 Nonpayment of Obligations. Any amount due and owing on the
Note or any of the Obligations, whether by its terms or as otherwise provided
herein, is not paid when due.
11.2 Misrepresentation. Any oral or written warranty,
representation, certificate or statement in this Agreement, the Loan Documents
or any other agreement with the Bank shall be false when made or at any time.
11.3 Nonperformance. Any failure to perform or default in the
performance of any covenant, condition or agreement contained in this Agreement.
11.4 Default under Loan Documents. A default under any of the other
Loan Documents which is not cured within (3) days of its occurrence, all of
which covenants, conditions and agreements contained therein are hereby
incorporated in this Agreement by express reference, shall be and constitute an
Event of Default under this Agreement and any other of the Obligations.
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11.5 Default under Other Agreements. Any default in any payment of
principal or interest for any other obligation beyond any period of grace
provided with respect thereto or in the performance of any other term, condition
or covenant contained in any agreement (including, but not limited to an
agreement in connection with the deferred purchase price of property) under
which any such obligation is created, the effect of which default is to cause or
permit the holder of such obligation to cause such obligation to become due
prior to its stated maturity.
11.6 Assignment for Creditors. The Borrower, any guarantor,
accommodation endorser, third party pledgor, or any other party liable with
respect to the Obligations (each, an "Obligor"), makes an assignment for the
benefit of creditors, fails to pay, or admits in writing its inability to pay
its debts as they mature; or if a trustee of any substantial part of the assets
of any Obligor is applied for or appointed, and in the case of such trustee
being appointed in a proceeding brought against such Obligor, the Obligor, by
any action or failure to act indicates its approval or consent to, or
acquiescence in such appointment and such appointment is not vacated, stayed on
appeal or otherwise shall not have ceased to continue in effect within thirty
(30) days after the date of such appointment
11.7 Bankruptcy. Any proceeding involving any Obligor, is commenced
by or against such Obligor under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law or statute of
the federal government or any state government, and in the case of any such
proceeding being instituted against such Obligor, (i) such Obligor, by any
action or failure to act indicates its approval of, consent to or acquiescence
therein, or (ii) an order shall be entered approving the petition in such
proceedings and such order is not vacated, stayed on appeal or otherwise shall
not have ceased to continue in effect within thirty (30) days after the entry
thereof.
11.8 Judgments. The entry of any judgment, decree, levy,
attachment, garnishment or other process, or the filing of any lien against any
Obligor which is not fully covered by insurance.
11.9 Change in Control. Any sale, conveyance, assignment or other
transfer, directly or indirectly, of any ownership interest of the Borrower,
which results in any change in the identity of the individuals or entities
previously in control of the Borrower or the grant of a security interest in any
ownership interest of any individual or entity, directly or indirectly
controlling the Borrower, which could result in a change in the identity of the
individuals or entities previously in control of the Borrower. For the purpose
hereof, the terms "control" or "controlling" shall mean the possession of the
power to direct, or cause the direction of, the management and policies of the
Borrower by contract or voting of securities.
11.10 Collateral Impairment. The entry of any judgment, decree,
levy, attachment, garnishment or other process, or the filing of any lien
against, any of the Collateral or any collateral under a separate security
agreement securing any of the Obligations, or the loss, theft destruction,
seizure or forfeiture, or the occurrence of any deterioration or impairment of
any of the Collateral or any of the collateral under any security agreement
securing any of the Obligations, or any decline or depreciation in the value or
market price thereof (whether actual or
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reasonably anticipated), which causes the Collateral, in the sole opinion of the
Bank acting in good faith, to become unsatisfactory as to value or character, or
which causes the Bank to reasonably believe that it is insecure and that the
likelihood for repayment of the Obligations is or will soon be impaired, time
being of the essence. The cause of such deterioration, impairment, decline or
depreciation shall include, but is not limited to, the failure by the Borrower
to do any act deemed necessary by the Bank to preserve and maintain the value
and collectability of the Collateral.
11.11 Death of Individual. The death of any Obligor who is a natural
person.
11.12 Material Adverse Event. The occurrence of any material adverse
event which causes a change in the financial condition of the Borrower, or which
would have a material adverse effect on the business of the Borrower.
12. REMEDIES.
Upon the occurrence of an Event of Default, the Bank shall have all
rights, powers and remedies set forth in the Loan Documents, in any written
agreement or instrument (other than this Agreement or the Loan Documents)
relating to any of the Obligations or any security therefor, or as otherwise
provided at law or in equity. Without limiting the generality of the foregoing,
the Bank may, at its option upon the occurrence of an Event of Default, declare
its commitments to the Borrower to be terminated and all Obligations to be
immediately due and payable; provided, however, that upon the occurrence of an
Event of Default under either Section 11.6. "Assignment for Creditors", or
Section 11.7, "Bankruptcy", all commitments of the Bank to the Borrower shall be
immediately terminated and all Obligations shall be automatically due and
payable, all without demand, notice or further action of any kind required on
the part of the Bank. The Borrower hereby waives any and all presentment,
demand, notice of dishonor, protest, and all other notices and demands in
connection with the enforcement of Bank's rights under the Loan Documents, and
hereby consents to, and waives notice of release, with or without consideration,
of any of the Borrower or any Collateral, notwithstanding anything contained
herein or in the Loan Documents to the contrary. In addition to the foregoing:
12.1 Possession and Assembly of Collateral. The Bank may, without
notice, demand or legal process of any kind, take possession of any or all of
the Collateral (in addition to Collateral of which the Bank already has
possession), wherever it may be found, and for that purpose may pursue the same
wherever it may be found, and may enter into any of the Borrower's premises
where any of the Collateral may be or is supposed to be, and search for, take
possession of, remove, keep and store any of the Collateral until the same shall
be sold or otherwise disposed of and the Bank shall have the right to store the
same in any of the Borrower's premises without cost to the Bank. At the Bank's
request, the Borrower will at the Borrowers' sole expense, assemble the
Collateral and make it available to the Bank at a place or places to be
designated by the Bank which is reasonably convenient to the Bank and the
Borrower.
12.2 Sale of Collateral. The Bank may sell any or all of the
Collateral at public or private sale, upon such terms and conditions as the Bank
may deem proper, and the Bank may
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purchase any or all of the Collateral at any such sale. The Bank may apply the
net proceeds, after deducting all costs, expenses, attorneys' and paralegals'
fees incurred or paid at any time in the Collection, protection and sale of the
Collateral and the Obligations, to the payment of the Note and/or any of the
other Obligations, returning the excess proceeds, if any, to the Borrower. The
Borrower shall remain liable for any amount remaining unpaid after such
application, with interest. Any notification of intended disposition of the
Collateral required by law shall be conclusively deemed reasonably and properly
given if given by the Bank at least five (5) calendar days before the date of
such disposition. The Borrower hereby confirms, approves and ratifies all acts
and deeds of the Bank relating to the foregoing, and each part thereof.
12.3 UCC and Offset Rights. The Bank may exercise, from time to
time, any and all rights and remedies available to it under the UCC or under any
other applicable law in addition to, and not in lieu of, any rights and remedies
expressly granted in this Agreement or in any other agreements between any
Obligor and the Bank, and may, without demand or notice of any kind, appropriate
and apply toward the payment of such of the Obligations, whether matured or
immatured, including costs of collection and attorneys' and paralegals' fees,
and in such order of application as the Bank may, from time to time, elect, any
indebtedness of the Bank to any Obligor, however created or arising, including,
but not limited to, balances, credits, deposits, accounts or moneys of such
Obligor in the possession, control or custody of, or in transit to the Bank. The
Borrower, on behalf of itself and each Obligor, hereby waives the benefit of any
law that would otherwise restrict or limit the Bank in the exercise of its
right, which is hereby acknowledged, to appropriate at any time hereafter any
such indebtedness owing from the Bank to any Obligor.
12.4 Additional Remedies. The Bank shall have the right and power
to:
(a) instruct the Borrower, at its own expense, to notify
any parties obligated on any of the Collateral, including, but not
limited to, any Account Debtors, to make payment directly to the Bank
of any amounts due or to become due thereunder, or the Bank may
directly notify such obligors of the security interest of the Bank,
and/or of the assignment to the Bank of the Collateral and direct such
obligors to make payment to the Bank of any amounts due or to become
due with respect thereto, and thereafter, collect any such amounts due
on the Collateral directly from such persons obligated thereon;
(b) enforce collection of any of the Collateral
including, but not limited to, any Accounts, by suit or otherwise, or
make any compromise or settlement with respect to any of the
Collateral, or surrender, release or exchange all or any part thereof,
or comprise, extend or renew for any period (whether or not longer than
the original period) any thereunder;
(c) take possession or control of any proceeds and
products of any of the Collateral, including the proceeds of insurance
thereon;
(d) extend, renew or modify for one or more periods
(whether or not longer than the original period) the Note, any other of
the Obligations, any obligation of any nature of any other obligor with
respect to the Note or any of the Obligations;
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(e) grant releases, compromises or indulgences with
respect to the Note, any of the Obligations, any extension or renewal
of any of the Obligations, any security therefor, or to any other
obligor with respect to the Note or any of the Obligations;
(f) transfer the whole or any part of securities which
may constitute Collateral into the name of the Bank or the Bank's
nominee without disclosing, if the Bank so desires, that such
securities so transferred are subject to the security interest of the
Bank, and any corporation, association, or any of the managers or
trustees of any trust issuing any of said securities, or any transfer
agent, shall not be bound to inquire, in the event that the Bank or
said nominee makes any further transfer of said securities, or any
portion thereof, as to whether the Bank or such nominee has the right
to make such further transfer, and shall not be liable for transferring
the same;
(g) vote the Collateral;
(h) make an election with respect to the Collateral under
Section 1111 of the Code or take action under Section 364 or any other
section of the Code; provided, however, that any such action of the
Bank as set forth herein shall not, in any manner whatsoever, impair or
affect the liability of the Borrower hereunder, nor prejudice, waive,
nor be construed to impair, affect, prejudice or waive the Bank's
rights and remedies at law, in equity or by statute, nor release,
discharge, nor be consumed to release or discharge, the Borrower, any
guarantor or other person, firm, corporation or other entity liable to
the Bank for the Obligations; and
(i) at any time, and from time to time, accept additions
to, releases, reductions, exchanges or substitution of the Collateral,
without in any way altering, impairing, diminishing or affecting the
provisions of this Agreement, the Loan Documents, or any of the other
Obligations, or the Banks rights hereunder, under the Note or under any
of the other Obligations.
The Borrower hereby ratifies and confirms whatever the Bank may do with
respect to the Collateral and agrees that the Bank shall not be liable for any
error of judgment or mistakes of fact or law with respect to actions taken in
good faith in connection with the Collateral.
12.5 Attorney-in-Fact. The Borrower hereby irrevocably makes,
constitutes and appoints the Bank (and any officer of the Bank or any person
designated by the Bank for that purpose) as the Borrower's true and lawful proxy
and attorney-in-fact (and agent-in-fact) in the Borrower's name, place and
stead, with full power of substitution, to (i) take such actions as are
permitted in this Agreement, (ii) execute such financing statements and other
documents and to do such other acts as the Bank may require to perfect and
preserve the Bank's security interest in, and to enforce such interests in the
Collateral, and (iii) carry out any remedy provided for in this Agreement,
including, without limitation, endorsing the Borrower's name to checks, drafts,
instruments and other items of payment, and proceeds of the Collateral,
executing change of address forms with the postmaster of the United States Post
Office serving the address of the Borrower, changing the address of the Borrower
to that of the Bank, opening all envelopes addressed to the Borrower and
applying any payments contained therein to the Obligations. The
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Borrower hereby acknowledges that the constitution and appointment of such proxy
and attorney-in-fact are coupled with an interest and are irrevocable. The
Borrower hereby ratifies and confirms all that said attorney-in-fact may do or
cause to be done by virtue of any provision of this Agreement.
12.6 Application of Proceeds. The Bank will within three (3)
business days after receipt of cash or solvent credits from collection of items
of payment, proceeds of Collateral or any other source, apply the whole or any
part thereof against the Obligations secured hereby. The Bank shall further have
the exclusive right to determine how, when and what application of such payments
and such credits shall be made on the Obligations, and such determination shall
be conclusive upon the Borrower. Any proceeds of any disposition by the Bank of
all or any part of the Collateral may be first applied by the Bank to the
payment of expenses incurred by the Bank in connection with the Collateral,
including attorneys' fees and expenses.
12.7 No Waiver. No Event of Default shall be waived by the Bank
except in writing. No failure or delay on the part of the Bank in exercising any
right, power or remedy hereunder shall operate as a waiver of the exercise of
the same or any other right at any other time; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
There shall be no obligation on the part of the Bank to exercise any remedy
available to the Bank in any order. The remedies provided for herein are
cumulative and not exclusive of any remedies provided at law or in equity. The
Borrower agrees that in the event that the Borrower fails to perform, observe or
discharge any of its Obligations or liabilities under this Agreement or any
other agreements with the Bank, no remedy of law will provide adequate relief to
the Bank, and further agrees that the Bank shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
13. MISCELLANEOUS.
13.1 Obligations Absolute. None of the following shall affect the
Obligations of the Borrower to the Bank under this Agreement or the Banks rights
with respect to the Collateral:
(a) acceptance or retention by the Bank of other property
or any interest in property as security for the Obligations;
(b) release by the Bank of the Borrower or all or any
part of the Collateral or of any party liable with respect to the
Obligations;
(c) release, extension, renewal, modification or
substitution by the Bank of the Note, or any note evidencing any of the
Obligations, or the compromise of the liability of any guarantor of the
Obligations; or
(d) failure of the Bank to resort to any other security
or to pursue the Borrower or any other obligor liable for any of the
Obligations before resorting to remedies against the Collateral.
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13.2 Entire Agreement. This Agreement (i) is valid, binding and
enforceable against the Borrower and the Bank in accordance with its provisions
and no conditions exist as to its legal effectiveness; (ii) constitutes the
entire agreement between the parties; and (iii) is the final expression of the
intentions of the Borrower and the Bank. No promises, either expressed or
implied, exist between the Borrower and the Bank, unless contained herein. This
Agreement supersedes all negotiations, representations, warranties, commitments
offers, contacts (of any kind or nature, whether oral or written) prior to or
contemporaneous, with the execution hereof.
13.3 Amendments: Waivers. No amendment, modification, termination,
discharge or waiver of any provision of this Agreement or of the Loan Documents,
or consent to any departure by the Borrower therefrom shall in any event be
effective unless the same shall be in writing and signed by the Bank, and then
such waiver or consent shall be effective only for the specific purpose for
which given.
13.4 WAIVER OF DEFENSES. THE BORROWER, ON BEHALF OF ITSELF AND ANY
GUARANTORS OF ANY OF THE OBLIGATIONS, WAIVES EVERY PRESENT AND FUTURE DEFENSE,
CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH THE BORROWER MAY NOW HAVE OR
HEREAFTER MAY HAVE TO ANY ACTION BY THE BANK IN ENFORCING THIS AGREEMENT. THE
BORROWER WAIVES ANY IMPLIED COVENANT OF GOOD FAITH AND RATIFIES AND CONFIRMS
WHATEVER THE BANK MAY DO PURSUANT TO THE TERMS OF TIES AGREEMENT. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL ACCOMMODATION TO
THE BORROWER.
13.5 WAIVER OF JURY TRIAL. THE BANK AND THE BORROWER, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, THE RIGHT TO TRIAL
BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER
OBLIGATIONS, THE COLLATERAL, OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO
BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR
COURSE OF DEALING IN WHICH THE BANK AND THE BORROWER ARE ADVERSE PARTIES. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK GRANTING ANY FINANCIAL
ACCOMMODATION TO THE BORROWER.
13.6 LITIGATION. TO INDUCE THE BANK TO MAKE THE LOANS, THE BORROWER
IRREVOCABLY AGREES THAT ALL ACTIONS ARISING, DIRECTLY OR INDIRECTLY, AS A RESULT
OR CONSEQUENCE OF THIS AGREEMENT, THE NOTE, ANY OTHER AGREEMENT WITH THE BANK OR
THE COLLATERAL, SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS HAVING SITES IN
THE CITY OF CHICAGO, ILLINOIS. THE BORROWER HEREBY CONSENTS TO THE EXCLUSIVE
JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT HAVING ITS SITES IN SAID
CITY, AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS. THE BORROWER
HEREBY WAIVES PERSONAL SERVICE OF ANY
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33
AND ALL PROCESS AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE BORROWER AS SET FORTH
HEREIN THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF COURT OR
OTHERWISE.
13.7 Assignability. The Bank may at any time assign the Bank's
rights in this Agreement, the Note, the Obligations, or any part thereof and
transfer the Bank's rights in any or all of the Collateral, and the Bank
thereafter shall be relieved from all liability with respect to such Collateral.
In addition, the Bank may at any time sell one or more participations in the
Loans. The Borrower may not sell or assign this Agreement, or any other
agreement with the Bank or any portion thereof, either voluntarily or by
operation of law, without the prior written consent of the Bank. This Agreement
shall be binding upon the Bank and the Borrower and their respective legal
representatives and successors. All references herein to the Borrower shall be
deemed to include any successors, whether immediate or remote. In the case of a
joint venture or partnership, the term "Borrower" shall be deemed to include all
joint venturers or partners thereof, who shall be jointly and severally liable
hereunder.
13.8 Confidentiality. The Borrower and the Bank hereby agree and
acknowledge that any and all information relating to the Borrower which is (i)
furnished by the Borrower to the Bank (or to any affiliate of the Bank), and
(ii) non-public, confidential or proprietary in nature, shall be kept
confidential by the Bank or such affiliate in accordance with applicable law,
provided, however, that such information and other credit information relating
to the Borrower may be distributed by the Bank or such affiliate to the Bank's
or such affiliate's directors, officers, employees, attorneys, affiliates,
auditors and regulators, and upon the order of a court or other governmental
agency having jurisdiction over the Bank or such affiliate, to any other party.
The Borrower and the Bank further agree that this provision shall survive the
termination of this Agreement.
13.9 Notices. Except as otherwise provided herein, the Borrower
waives all notices and demands in connection with the enforcement of the Bank's
rights hereunder. All notices, requests, demands and other communications
provided for hereunder shall be in writing, sent by certified or registered
mail, postage prepaid, by facsimile, telegram or delivered in person, and
addressed as follows:
If to the Borrower: Horizon Pharmaceutical Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
----------------------------------
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34
If to the Bank:
LaSalle National Bank
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this subsection. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances.
13.10 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one and the same instrument.
13.11 Facsimile Signatures. The Bank is hereby authorized to rely
upon and accept as an original any Loan Documents or other communication which
is sent to the Bank by facsimile, telegraphic or other electronic transmission
(each, a "Communication") which the Bank in good faith believes has been signed
by Borrower and has been delivered to the Bank by a properly authorized
representative of the Borrower, whether or not that is in fact the case.
Notwithstanding the foregoing, the Bank shall not be obligated to accept any
such Communication as an original and may in any instance require that an
original document be submitted to the Bank in lieu of, or in addition to, any
such Communication.
13.12 Binding Effect. This Agreement shall become effective upon
execution by the Borrower and the Bank. If this Agreement is not dated or
contains any blanks when executed by the Borrower, the Bank is hereby
authorized, without notice to the Borrower, to date this Agreement as of the
date when it was executed by the Borrower, and to complete any such blanks
according to the terms upon which this Agreement is executed.
13.13 Governing Law. This Agreement, the Loan Documents and the Note
shall be delivered and accepted in and shall be deemed to be contracts made
under and governed by the internal laws of the State of Illinois (but giving
effect to federal laws applicable to national banks), and for all purposes shall
be construed in accordance with the laws of such State, without giving effect to
the choice of law provisions of such State.
13.14 Enforceability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be prohibited
by, unenforceable or invalid under any jurisdiction, such provision shall as to
such jurisdiction, be severable and be ineffective to the extent of such
prohibition or validity, without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.
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35
13.15 Survival of Borrower Representations. All covenants,
agreements, representations and warranties made by the Borrower herein shall,
notwithstanding any investigation by the Bank, be deemed material and relied
upon by the Bank and shall survive the making and execution of this Agreement
and the Loan Documents and the issuance of the Note, and shall be deemed to be
continuing representations and warranties until such time as the Borrower has
fulfilled all of its Obligations to the Bank, and the Bank has been paid in
full. The Bank, in extending financial accommodations to the Borrower, is
expressly acting and relying on the aforesaid representations and warranties.
13.16 Extensions of Bank's Commitment and Notes. This Agreement
shall secure and govern the terms of any extensions or renewals of the Bank's
commitment hereunder and the Notes pursuant to the execution of any
modification, extension or renewal note executed by the Borrower and accepted by
the Bank in its sole and absolute discretion in substitution for any Note or
Notes.
13.17 Time of Essence. Time is of the essence in making payments
of all amounts due the Bank under this Agreement and in the performance and
observance by the Borrower of each covenant, agreement, provision and term of
this Agreement.
13.18 Indemnification. The Borrower agrees to defend (with counsel
satisfactory to the Bank), protect, indemnify and hold harmless each indemnified
Party from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and distributions
of any kind or nature (including, without limitation, the disbursements and the
reasonable fees of counsel for each Indemnified Party thereto, which shall also
include, without limitation, attorneys' fees and time charges of attorneys who
may be employees of the Bank, any parent corporation or affiliated corporation
of the Bank), which may be imposed on, incurred by, or asserted against, any
Indemnified Party (whether direct, indirect or consequential and whether based
on any federal, state or local laws or regulations, including, without
limitation, securities, Environmental Laws and commercial laws and regulations,
under common law or in equity, or based on contract or otherwise) in any manner
relating to or arising out of this Agreement or any of the Loan Documents, or
any act, event or transaction related or attendant thereto, the preparation,
execution and delivery of this Agreement and the Loan Documents, including, but
not limited to, the making or issuance and management of the Loans or any
Letters of Credit, the use or intended use of the proceeds of the Loans or any
Letters of Credit, the enforcement of the Bank's rights and remedies under this
Agreement, the Loan Documents, the Note, any other instruments and documents
delivered hereunder, or under any other agreement between the Borrower and the
Bank; provided, however, that the Borrower shall not have any obligations
hereunder to any Indemnified Party with respect to matters caused by or
resulting from the willful misconduct or gross negligence of such Indemnified
Party. To the extent that the undertaking to indemnify set forth in the
preceding sentence may be unenforceable because it violates any law or public
policy, the Borrower shall satisfy such undertaking to the maximum extent
permitted by applicable law. Any liability, obligation, loss, damage, penalty,
cost or expense covered by this indemnity shall be paid to each Indemnified
Party on demand, and, failing prompt payment, shall together with interest
thereon at the Default Rate from the date incurred by each Indemnified Party
until paid by the Borrower, be added to
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36
the Obligations of the Borrower and be secured by the Collateral. The provisions
of this section shall survive the satisfaction and payment of the other
Obligations and the termination of this Agreement
13.19 Documentation Costs. The Borrower shall reimburse the Bank for
all attorney's fees (including fees for in-house counsel) and other
documentation costs incurred by the Bank in preparation of this Agreement and
other loan documents, or in perfecting the Bank's security interest granted
hereunder.
13.20 Construction. As used herein, all provisions shall include the
masculine, feminine, neuter, singular and plural thereof, wherever the context
and facts require such construction and in particular the word "Borrower" shall
be so construed.
13.21 Amended and Restated Agreement. This Amended and Restated Loan
and Security Agreement is issued in substitution for that certain Loan and
Security Agreement between the Borrower and the Bank dated May 11, 1998.
IN WITNESS WHEREOF, the Borrower and the Bank have executed this
Amended and Restated Loan and Security Agreement as of the date first above
written.
HORIZON PHARMACEUTICAL
CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
-------------------------------
LASALLE NATIONAL BANK
By:
---------------------------------
Name:
-------------------------------
Title:
-------------------------------
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37
EXHIBIT A
REVOLVING NOTE
$1,000,000.00 Date: December 22, 1998
Due: May 10, 1999
On or before May 10, 1999 (the "Maturity Date"), HORIZON PHARMACEUTICAL
CORPORATION, a Georgia corporation (the "Borrower"), whose address is ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, for value received, promises
to Pay to the order of LASALLE NATIONAL BANK, a national banking association
(hereinafter, together with any holder hereof, called "Bank"), whose address is
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, the principal sum of One
Million and 00/100 Dollars ($1,000,000.00) or, if less, the aggregate unpaid
principal amount of all Revolving Loans (as hereinafter defined) made by the
Bank to the Borrower.
The unpaid principal amount hereof shall bear interest at the rate or
rates set forth in that certain Amended and Restated Loan and Security Agreement
between the Borrower and the Bank dated December 22, 1998 (the "Loan
Agreement"), and shall be payable from the date hereof on the aggregate unpaid
principal amount of all loans made by the Bank to the Borrower as set forth in
the Loan Agreement.
Principal and interest shall be paid to the Bank at its address set
forth above or at such other place as the holder of this Note shall designate in
writing to the Borrower.
This Note is executed pursuant to the Loan Agreement, as amended from
time to time. The terms and conditions of the Revolving Loan (as defined in the
Loan Agreement), which is evidenced by this Note, are set forth in the Loan
Agreement. Capitalized words and phrases not otherwise defined herein shall have
the meanings assigned thereto in the Loan Agreement.
The Borrower, without notice or demand of any kind except as provided
for in the Loan Agreement, shall be in default hereunder upon the occurrence of
any Event of Default set forth in the Loan Agreement, and without demand or
notice of any kind, the entire unpaid amount of all Obligations (as defined in
the Loan Agreement) shall become immediately due and payable, and the Bank may
take any action or avail itself of any remedy set forth in the Loan Agreement.
Except for such notices as may be required under the terms of the Loan
Agreement, the Borrower waives presentment, demand, notice, protest, and all
other demands, or notices, in connection with the delivery, acceptance,
performance, default, or enforcement of this Note, and assents to any extension
or postponement of the time of payment or any other indulgence.
This Note is made under and governed by the internal laws of the State
of Illinois.
This Revolving Note is issued in substitution for, but not in repayment
of that certain $1,000,000 Revolving Note of the Borrower payable to the Bank,
dated as of May 11, 1998, and is not and shall not be deemed to constitute a
novation therefor.
38
IN WITNESS WHEREOF, the Borrower has executed this Revolving Note as of
the date set forth above.
HORIZON PHARMACEUTICAL
CORPORATION
By:
-------------------------------
Name:
------------------------------
Title:
----------------------------
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39
EXHIBIT B
TERM NOTE
$2,400,000.00 Date: December 22, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ Due: December 22, 2001
For value received, HORIZON PHARMACEUTICAL CORPORATION, a Delaware
corporation (the "Borrower"), whose address is ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇, promises to pay to the order of LASALLE NATIONAL BANK,
a national banking association (the "Bank"), whose address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, on or before December 22, 2001, or such earlier
date as set forth in that certain Amended and Restated Loan and Security
Agreement between the Borrower and the Bank dated December 22, 1998 (the "Loan
Agreement"), the principal sum of Two Million Four Hundred Thousand and 00/100
Dollars ($2,400,000.00) or such lesser amount as may be outstanding from time to
time.
The Borrower further promises to pay the Bank (i) principal payments at
the times and in the amounts as set forth in the Loan Agreement, and (ii)
interest on the aggregate principal amount outstanding, from time to time, from
the date hereof until paid in full at the rates and times set forth in the Loan
Agreement.
All payments of principal and interest hereunder shall be made in
lawful money of the United States of America in immediately available funds at
the office of the Bank set forth above, or at such other place as may be
designated by the holder to the Borrower in writing.
This Note evidences indebtedness incurred under the Loan Agreement, to
which reference is hereby made for a statement of additional terms and
conditions of this Note, including but not limited to the terms and conditions
under which the due date of this Note or any payment hereon may be accelerated.
The holder of this Note is entitled to all of the rights and benefits provided
for in the Loan Agreement.
All parties hereto, whether as makers, endorsers or otherwise,
severally waive presentment, demand, protest and notice of dishonor in
connection with this Note.
IN WITNESS WHEREOF, the parties hereto execute this Note as of the date
first above written.
HORIZON PHARMACEUTICAL CORPORATION
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
40
EXHIBIT C
LANDLORD WAIVER
THIS LANDLORD WAIVER dated as of December 22, 1998, is by DIVERSIFIED
HEALTHCARE SERVICES, INC. (the "Landlord") and is to and for the benefit of
LASALLE NATIONAL BANK (the "Bank"), whose address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
RECITALS:
A. The Landlord is the owner of real property commonly known as
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Premises").
B. Horizon Pharmaceutical Corporation (the "Tenant") stores or
may store inventory and/or other property on the Premises.
C. The Tenant has granted to the Bank a first security interest
in certain property which may from time to time be located in and on the
Premises as security for any and all loans which the Bank may make to the Tenant
from time to time.
D. The Bank is willing to make such loans only if the Landlord
waives any claims, demands or rights which the Landlord may have or acquire with
respect to such property.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Landlord agrees as follows:
1. The Landlord hereby waives any and all liens, claims, demands
or rights, however arising, including without limitation, the right to levy,
distrain, ▇▇▇, execute or sell for unpaid rent, which the Landlord now has or
may hereafter acquire with respect to any or all of the property of the Tenant,
or in which the Tenant has an interest (whether such property is now or
hereafter located on or in the Premises), including, without limitation,
machinery, equipment, furniture, fixtures, inventory and goods or merchandise
and all additions, replacements and substitutions therefor, and all of the
proceeds thereof.
2. The Landlord agrees that the Bank, through its authorized
representatives, may enter upon the Premises at any time and from time to time
for purposes of removing any or all of the property of the Tenant or conduct a
sale or sales of the property on the Premises and that the Bank shall have no
obligation to the Landlord except the obligation to pay the Landlord a
reasonable rental for the Premises for the period after which the Bank notified
the Landlord of its intent to possess the property.
41
3. The Landlord warrants to the Bank that the Tenant has complied
with all obligations owed to the Landlord by the Tenant, including without
limitation the payment of all rent as and when due. The Landlord agrees to give
the Bank written notice of the occurrence of any event which, with the giving of
notice or passage of time or both, could result in the creation of the right of
the Landlord to terminate any lease covering all or any part of the Premises or
to accelerate any rent due thereunder.
4. The laws of Illinois shall govern the validity, interpretation
and enforcement of this Waiver.
IN WITNESS WHEREOF, the undersigned has executed this Waiver on the
date first above appearing.
Diversified Healthcare Services, Inc.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Consented to:
Horizon Pharmaceutical Corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
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EXHIBIT D
BORROWING BASE CERTIFICATE
Date: _____________________
Reference is made to the Loan and Security Agreement dated as of
December 22, 1998 (the "Loan Agreement") between Horizon Pharmaceutical
Corporation (the "Borrower") and LaSalle National Bank (the "Bank"), as amended
from time to time. All terms used in this Certificate are used with the meaning
ascribed to such terms in the Loan Agreement.
Accounts Receivable
-------------------
1. Total Accounts Receivable at _________, __ $ _________
2. Less: Ineligibles $(_________)
3. Total Eligible Receivables $ _________
4. % of Advance 80%
5. Accounts Receivable Borrowing Base $ _________
Inventory
---------
6. Total Sample Inventory at _________, __ $ _________
7. Less: Ineligibles and Reserves $(_________)
8. Eligible Sample Inventory $ _________
9. % of Advance 30%
10. Initial Advance on Sample Inventory $ _________
11. Maximum Sample Inventory Advance $ 125,000
12. Sample Inventory Borrowing Base (lesser of 10 or 11) $ _________
13. Non-Sample Inventory Value $ _________
14. Less: Ineligibles and Reserves $ _________
15. Eligible Non-Sample Inventory $ _________
16. % of Advance 50%
17. Initial Advance on Non-Sample Inventory $ _________
18. Initial Inventory Borrowing Base (12+17) $ _________
19. Inventory Cap (amount shown on line 5) $ _________
20. Inventory Borrowing Base (lesser of 18 or 19) $ _________
21. Total Borrowing Base Amount (5+20) $ _________
22. Revolving Line of Credit Outstanding $ _________
23. Revolving Loan Collateral Excess $ _________
(Shortfall) (21-22) $ _________
The undersigned hereby certifies that the above information and
computations are true and accurate and hereby represents and warrants that as of
the date hereof, (i) no event of default has occurred and is continuing, (ii)
the representations and warranties of the Borrower set forth in the
43
Loan Agreement are true and correct in all material respects as of the date
hereof, and (iii) the Borrower is in compliance with covenants set forth in the
Loan Agreement.
Horizon Pharmaceutical Corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
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44
EXHIBIT E
SUBORDINATION AGREEMENT
This Agreement is entered into as of December 22, 1998, by and among
_____________________ (the "Undersigned"), LASALLE NATIONAL BANK, a national
banking association (the "Bank") and HORIZON PHARMACEUTICAL CORPORATION (the
"Debtor").
WHEREAS, Debtor is indebted or may be indebted in the future to the
Bank in the approximate amount of $3,400,000 as evidenced by that certain
$2,400,000 Term Note of the Debtor payable to the Bank, dated December 22, 1998,
as amended, renewed, modified or replaced from time to time, and that certain
$1,000,000 Revolving Note of the Debtor payable to the Bank, dated December 22,
1998, as amended, renewed, modified or replaced from time to time (the "Notes");
and
WHEREAS, the Undersigned desires the Bank to extend or continue the
extension of credit to Debtor from time to time as Bank, in its sole discretion,
may determine, and Bank has required, as a condition to the extension or
continuation of such credit whatsoever that all present and future indebtedness
due the Undersigned from the Debtor is subordinated in the manner hereinafter
set forth; and
WHEREAS, the Undersigned is personally and financially interested in
the Debtor and the extension or continuation of the extension of credit, as
aforesaid, by Bank is necessary to the operation of the business of the Debtor
and will inure to the personal and financial benefit of the Undersigned.
NOW, THEREFORE, FOR VALUE RECEIVED, it is agreed that the preceding
provisions and preambles are an integral part hereof and that this Agreement
shall be construed in light thereof, and in consideration of the extension or
continuation of such credit by Bank to Debtor, as Bank may, in its sole
discretion, determine, and for other good and valuable considerations to the
Undersigned, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
1. Subordination. The Undersigned hereby:
(A) Subordinates all indebtedness now or at any time or times
hereafter existing and owing by Debtor to the Undersigned, whether such
indebtedness is absolute or contingent, direct or indirect and howsoever
evidenced, including all interest thereon (collectively, the "Undersigned's
Claims") to any and all debts, demands, claim, liabilities or causes of action
for which Debtor may now or at any time or times hereafter in any way be liable
to Bank under any agreement, instrument, documents executed and delivered or
made by Debtor to Bank (collectively, the "Bank Loans");
45
(B) Subordinates all security interests, liens, encumbrances and
claims which in any way secure the payment to the Undersigned of the
Undersigned's Claim (the "Undersigned Collateral") to all security interests,
liens, encumbrances and claims which in any way secure the payment of Bank Loans
(the "Bank Collateral"). All covenants, conditions and agreements contained in
any security agreement from the Debtor to the Bank are hereby incorporated
herein by express reference and a default thereunder shall be and constitute a
default under this Agreement;
(C) Agrees to instruct Debtor not to pay, and the Undersigned
agrees not to accept any payment of or assert or seek to enforce against Debtor,
the Undersigned Claims, including but not limited to repayment of any of the
Undersigned's Claims upon the maturity thereof provided that this Section shall
not prohibit the conversion of the Undersigned's Claim into stock of the Debtor
as provided for in that certain Subordinated Note Agreement between the
Undersigned and the Debtor, dated as of December __,1998, provided that such
conversion shall not be permitted during the occurrence of an event of default
under any of the loan documents evidencing any of the Bank Loans;
(D) Agrees that insolvency or bankruptcy in any manner whatsoever
of the Debtor shall not impair or affect this Agreement, and hereby irrevocably
authorizes Bank: (i) to collect, receive, enforce and accept any and all sums or
distributions of any kind that may become due, payable or distributable on or in
respect of the Undersigned's Claim or the Undersigned's Collateral whether paid
directly by Debtor or paid or distributed in any bankruptcy, receivership,
reorganization or dissolution proceedings or otherwise, and (ii) in Bank's sole
discretion, to make and present claims therefor, in any such proceedings, either
in Bank's name or in the name of the Undersigned, and agrees that in case any
such sums or distributions come into the Undersigned's possession or control,
the Undersigned shall promptly turn the same over to Bank in kind;
(E) Agrees not to join in any petition of bankruptcy or in any
creditors agreement affecting the Debtor's assets and grants to Bank an
irrevocable proxy to vote the Undersigned's Claims in any proceeding or
transaction, and agrees to execute all documents requested by Bank to facilitate
the exercise of such proxy;
(F) Agrees not to bring any suit or action to enforce the payment
of any of the Undersigned's Claim until the Bank Loans have been satisfied in
full and agrees that the Bank may intervene in any suit or action brought by the
Undersigned in violation of this Agreement and may interpose this Agreement as a
bar to such suit or action, and Debtor may also interpose this Agreement as a
bar to any suit or action by the Undersigned in violation hereof, provided that
this Section shall not prohibit the conversion of the Undersigned's Claims into
stock of the Debtor as provided for in that certain Subordinated Note Agreement
between the Undersigned and the Debtor, dated as of December __, 1998, provided
that such conversion shall not be permitted during the occurrence of an event of
default under any of the loan documents evidencing any of the Bank Loans; and
(G) Agrees to turn over to Bank any sum or sums at any time paid
to, or received by or on behalf of; the Undersigned in violation of the terms of
this Agreement.
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46
2. Representations. The Undersigned represents, warrants and
agrees with the Bank as follows:
(a) The Undersigned has not assigned or transferred the
Undersigned's Claims or the Undersigned's Collateral or any interest therein, to
any person, firm, association, corporation or party, and the Undersigned shall
make no such assignment or transfer thereof, and
(b) All agreements, instruments and documents evidencing the
Undersigned's Claims and the Undersigned's Collateral will be endorsed with a
proper notice of this Agreement substantially in the following manner.
"This Subordinated Note/Subordinated Note Agreement is subordinated to
all indebtedness now or hereafter owing by maker to LaSalle National
Bank, as provided in the Subordination Agreement dated as of December
22, 1998."
3. Continuing Agreement. (a) This Agreement shall constitute a
continuing agreement of Subordination, and Bank may lend, or continue to lend
monies, without notice to the Undersigned, extend credit and make other
accommodations to or for the account of the Debtor on the faith hereof, until
written notice of revocation of this Agreement shall be actually delivered to
Bank by the Undersigned. Any such notice of revocation shall not impair or
affect this Agreement in relation to any obligations or liabilities of Debtor
then existing or any obligations or liabilities created thereafter pursuant to
any previous commitment of Bank to Debtor, or any extensions or renewals of any
such commitment of Bank to Debtor, or any extensions or renewals of any such
obligations or liabilities, and as to all such obligations and liabilities and
extensions or renewals thereof, this Agreement shall continue effective until
the same shall have been fully discharged with interest.
(b) The Undersigned agrees that Bank, at any time, and from time
to time, either before or after any such notice of revocation, may enter into
such agreement or agreements with Debtor as Bank may deem proper to extend the
time of payment, renew or otherwise alter the terms of all or any of the
obligations or liabilities of Debtor to Bank or affecting any security
underlying any or all of such obligations or liabilities or may exchange, sell
or surrender or otherwise deal with any such security, or may release any
balance of funds of Debtor with Bank without notice to the Undersigned and
without in any way impairing or affecting this Agreement.
(c) The Bank, in its sole discretion, shall have the sole and
exclusive right and power, without notice to the Undersigned, to extend credit
or loan money to the Debtor; make renewals or extensions of indebtedness; loan
additional money to the Debtor after the creation of any indebtedness; modify
any of the terms of any loan agreement, note or other instrument relating to or
evidencing any of the Debtor to Bank, including, but not limited to, the sole
right to release or substitute Bank Collateral and the sole right to release
guarantors; and to deal in any manner whatsoever with any indebtedness payable
to Bank and any security or guaranty therefor.
4. Acceleration. If the Debtor or the Undersigned, or both,
violate any provision of this Agreement, or if any subordinate indebtedness is
accelerated, Bank may (but need not), by
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notice in writing delivered to the Undersigned, advise the Undersigned that all
indebtedness of the Debtor to the Bank has become immediately due and payable.
5. Further Assurances. The Undersigned agrees to furnish all
assignments, including assignment of financing statements under the Uniform
Commercial Code, and all documents requested by Bank to facilitate the
enforcement by Bank of its rights and remedies hereunder.
6. Payments in Trust. Any and all funds or other property
received by the Undersigned on any and all of the Undersigned Claims in
violation of the terms of this Agreement shall be received and held by the
Undersigned as trustee for Bank and shall be paid over to Bank in kind on
account of the Bank Loans.
7. Reliance. The Undersigned consents and agrees that all
obligations and liabilities of Debtor to Bank shall be deemed to have been made
or incurred at the request of the Undersigned and in reliance upon this
Agreement, provided, however, that neither the foregoing provision nor any other
provision contained in this Agreement shall be deemed or construed to
constitute, either directly or by implication, a guaranty by the Undersigned of
any debts, obligations or liabilities incurred by Debtor to Bank.
8. Expenses. The Undersigned agrees to pay all costs, legal
expenses and attorneys' and paralegals' fees of every kind, paid or incurred by
Bank in enforcing its rights hereunder, including, but not limited to,
litigation instituted in a State or Federal Court, as hereinafter provided
(including proceedings under the United States Bankruptcy Code) in enforcing its
rights in connection with this Agreement, or in defending against any defense,
cause of action, counterclaim, setoff or crossclaim based on any act of
commission or omission by Bank with respect to the Bank Loans or collateral for
Bank Loans promptly on demand of Bank or other person paying or incurring the
same.
9. Choice of Law. The Agreement has been delivered to the Bank at
its office set forth on the first page hereof, and shall be construed and the
rights, remedies and liabilities of the parties shall be determined in
accordance with the laws of the State of Illinois, in which state it shall be
performed by the Undersigned.
10. Forum. TO INDUCE BANK TO AFFORD FINANCIAL ACCOMMODATIONS TO
THE DEBTOR, THE UNDERSIGNED IRREVOCABLY AGREES THAT ALL ACTIONS ARISING DIRECTLY
OR INDIRECTLY AS A RESULT OR IN CONSEQUENCE OF THIS AGREEMENT SHALL BE
INSTITUTED AND LITIGATED ONLY IN COURTS HAVING SITUS IN THE CITY OF CHICAGO,
ILLINOIS, AND THE UNDERSIGNED HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION AND
VENUE OF ANY STATE OR FEDERAL COURT LOCATED AND HAVING ITS SITUS IN SAID CITY,
AND WAIVES ANY OBJECTION BASED ON FORUM NONCONVENIENS. THE UNDERSIGNED HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
DIRECTED TO THE UNDERSIGNED AT THE
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ADDRESS INDICATED IN BANKS RECORDS IN THE MANNER PROVIDED BY APPLICABLE STATUTE,
LAW, RULE OF COURT OR OTHERWISE.
11. Waiver. THE UNDERSIGNED WAIVES EVERY DEFENSE, CAUSE OF ACTION,
COUNTERCLAIM OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE, OR HEREAFTER MAY
HAVE, TO ANY ACTION BY BANK IN ENFORCING THIS AGREEMENT AND RATIFIES AND
CONFIRMS WHATEVER BANK MAY DO PURSUANT TO THE TERMS HEREOF. BANK AND THE
UNDERSIGNED, AND EACH OF THEM, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
IRREVOCABLY, THE RIGHT EITHER OR ANY MAY HAVE TO TRIAL BY JURY WITH RESPECT TO
ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH OR ANY COURSE OF CONDUCT OR COURSE OF DEALING, IN WHICH BANK AND THE
UNDERSIGNED ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
BANK MAKING BANK'S LOANS.
12. Interpretation. Wherever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
13. Remedies. No delay on the part of Bank in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by Bank of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy; nor shall any
modification, termination, discharge or waiver of any of the provisions be
binding upon Bank except as expressly set forth in a writing duly signed and
delivered on behalf of Bank.
14. Integration. This Agreement (i) is valid, binding and
enforceable in accordance with its provisions, and no conditions exist to the
legal effectiveness of this Agreement; (ii) contains the entire Agreement
between the Undersigned and Bank, (iii) is the final expression of their
intentions; and (iv) supersedes all negotiations, representations, warranties,
commitments, offers, contracts (of any kind or nature, whether oral or written)
prior to or contemporaneous with the execution hereof. No prior or
contemporaneous representations, warranties, understandings, offers or
agreements of any kind or nature, whether oral or written, have been made by
Bank or relied upon by the Undersigned in connection with the execution hereof.
No modification, discharge, termination or waiver of any of the provisions of
this Agreement shall be binding on Bank unless expressly set forth in a writing
duly signed and delivered on behalf of Bank.
15. No Fiduciary. The Undersigned specifically acknowledges and
agrees that the relationship hereby created with Bank is and has been conducted
on an open arm's length business basis in which no fiduciary relationship
exists, and that the Undersigned has not relied and is not relying on any
fiduciary relationship in the execution and delivery of this Agreement.
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16. Authorization. The Undersigned hereby represents and warrants
to Bank that the execution and delivery of this Agreement has been duly
authorized by resolutions heretofore adopted by its Board of Directors and
shareholders in accordance with law and its bylaws, a certificate with respect
thereto being hereto attached and by express reference made part hereof that
said resolutions have not been amended nor rescinded, are in full force and
effect, and that the officer or officers executing and delivering this Agreement
for and on behalf of the Undersigned are duly authorized so to act. Bank in
accepting this Agreement is expressly relying upon the aforesaid representations
and warranties.
17. Successors. The provisions hereof shall be continuing,
irrevocable and binding upon the Undersigned and upon the successors and assigns
of the Undersigned and shall inure to the benefit of Bank and its successors and
assigns.
18. Debtor Consent. (a) Debtor hereby consents to this Agreement
and agrees to abide hereby and to keep, observe and perform the several matters
and things herein intended to be kept, observed and performed by it, and
specifically agrees not to make any payments contrary to the intention and terms
of this Agreement.
(b) A breach of any of the terms and conditions of this Agreement
shall constitute a default in any and all Bank Loans made by Bank to Debtor.
SIGNED AND DELIVERED by the parties as of the date first above appearing.
HORIZON PHARMACEUTICAL CORPORATION
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
LASALLE NATIONAL BANK
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
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