LOAN AND SECURITY AGREEMENT
by and between
MEDNET, MPC CORPORATION
MEDI-MAIL, INC.
FAMILY PHARMACEUTICALS OF AMERICA, INC.
MEDI-CLAIM, INC.
MEDI-PHAR, INC.
and
FOOTHILL CAPITAL CORPORATION
Dated as of December 26, 1995
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT, is entered into as of December 26, 1995,
between FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"),
with a place of business located at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ and Mednet, MPC Corporation, having a chief
executive office at and mailing address of ▇▇▇-▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇, Medi-Mail, Inc. a Nevada corporation, with mailing address of ▇▇▇-▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Family Pharmaceuticals of America, Inc. a South
Carolina corporation, with a mailing address of ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, MediClaim, Inc. a Nevada
corporation with a mailing address of ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ and Medi-Phar, Inc. a Nevada corporation with a mailing address of POB
420954, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, jointly and severally (Mednet, MPC
Corporation, Medi-Mail, Inc., Family Pharmaceuticals of America, Inc.,
MediClaim, Inc. and Medi-Phar, Inc. are collectively and individually, as the
context may require, referred to herein as "Borrower"). Notwithstanding that
each of Medi-Mail, Inc., Family Pharmaceuticals of America, Inc., Medi-Claim,
Inc. and Medi-Phar, Inc. may have separate and distinct mailing addresses, each
of such entities comprising Borrower has a chief executive office, c/o their
parent company Mednet, MPC Corporation of ▇▇▇-▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following
terms shall have the following definitions:
"Account Debtor" means any Person who is or who may become obligated under,
with respect to, or on account of an Account.
"Accounts" means all currently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale of goods or the rendition of services by Borrower, irrespective
of whether earned by performance, and any and all credit insurance, guaranties,
or security therefor.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" as applied to any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agreement" means this Loan and Security Agreement and any extensions,
riders, supplements, notes, amendments, or modifications to or in connection
with this Loan and Security Agreement.
"Authorized Officer" means any officer of Borrower.
"Average Unused Portion of Maximum Amount" means (a) the Maximum Amount
less (b) the sum of: (i) the average Daily Balance of advances made by Foothill
under Section 2.1 that were outstanding during the immediately preceding month,
plus (ii) the average Daily Balance of the undrawn L/Cs and L/C Guarantees
issued by Foothill under Section 2.2 that were outstanding during the
immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. ss. 101 et seq.), as amended, and any successor statute.
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower's Books" means all of Borrower's books and records including:
ledgers; records indicating, summarizing, or evidencing Borrower's properties or
assets (including the Collateral) or liabilities; all information relating to
Borrower's business operations or financial condition; and all computer
programs, disc or tape files, printouts, runs, or other computer prepared
information.
"Borrowing Base" shall mean the sum of the individual borrowing base
calculations which are set forth in Section 2.1 for each of Mednet, MPC
Corporation, Medi-Mail, Inc., Family Pharmaceuticals of America, Inc.,
Medi-Phar, Inc. and Medi-Claim,
Inc.
"Business Day" means any day which is not a Saturday, Sunday,
or other day on which national banks are authorized or required to
close.
"Change of Control" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly,
of more than 20% of the total voting power of all classes of stock then
outstanding of Borrower normally entitled to vote in the election of directors.
"Closing Date" means the date of the initial advance hereunder or the date
of the initial issuance of an L/C or an L/C Guaranty hereunder, whichever occurs
first.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the Accounts; Borrower's Books;
the Equipment; the General Intangibles; the Inventory; the Negotiable
Collateral; any money, or other assets of Borrower which now or hereafter come
into the possession, custody, or control of Foothill; and the proceeds and
products, whether tangible or intangible, of any of the foregoing including
proceeds of insurance covering any or all of the Collateral, and any and all
Accounts, Borrower's Books, Equipment, General Intangibles, Inventory,
Negotiable Collateral, money, deposit accounts, or other tangible or intangible
property resulting from the sale, exchange, collection, or other disposition of
any of the foregoing, or any portion thereof or interest therein, and the
proceeds thereof.
"Consolidated Current Assets" means, as of any date of determination, the
aggregate amount of all current assets of Borrower calculated on a consolidated
basis that would, in accordance with GAAP, be classified on a balance sheet as
current assets.
"Consolidated Current Liabilities" means, as of any date of determination,
the aggregate amount of all current liabilities of Borrower calculated on a
consolidated basis that would, in accordance with GAAP, be classified on a
balance sheet as current liabilities. For purposes of this definition, all
advances outstanding under this Agreement shall be deemed to be current
liabilities without regard to whether they would be deemed to be so under GAAP.
"Daily Balance" means the amount of an Obligation owed at the
end of a given day.
"Dilution Reserve" means, as of the date of any determination of any of the
individual borrowing bases referred to in Section 2.1 of this Agreement, the
amount of five percent (5%), which Foothill has deemed sufficient as a reduction
in the advance rate against Eligible Accounts-Medi-Claim, Inc. and Eligible
Accounts-Mednet, MPC Corporation, Inc., Medi-Mail, Inc., Family Pharmaceuticals
of America, Inc. and Medi-Phar, Inc. for bad debt write-downs, discounts,
advertising, returns, promotions, credits, allowances, contra-accounts and other
offsets which reduce the value of the respective Accounts.
"Early Termination Premium" has the meaning set forth in
Section 3.5.
"Eligible Accounts" shall refer to the Eligible Accounts-Medi-
Claim, Inc. and the Eligible Accounts-Mednet, MPC Corporation,
Inc., Medi-Mail, Inc., Family Pharmaceuticals of America, Inc. and
Medi-Phar, Inc. collectively.
"Eligible Accounts-Medi-Claim, Inc." means those Accounts from which
payments are to be directed and made to a Lockbox Bank from Account Debtors
listed on Schedule A-1 attached hereto, evidenced by a written and signed (by
all parties thereto) contract which has not by its stated terms expired and
which is fully enforceable by Foothill as secured party and assignee of
Medi-Claim, Inc. pursuant to the provisions of this Agreement, the
identification of which is set forth on Schedule A-1 attached hereto, a copy of
which has been submitted to, reviewed by and approved by Foothill in its
reasonable discretion; such Account being created by Borrower in the ordinary
course of its business and arising out of Borrower's rendition of services in
connection with the processing of claims relating to the sale and/or provision
of pharmaceutical medications, drugs or similar goods, that strictly comply with
all of Borrower's representations and warranties to Foothill; that are, and at
all times shall continue to be, acceptable to Foothill in all respects;
provided, however, that standards of eligibility may be fixed and revised from
time to time by Foothill in Foothill's reasonable credit judgment. With respect
to the written contracts referred to above, after the Closing Date all contracts
for Eligible Accounts-Medi-Claim, Inc. shall be in the form attached to Schedule
A-1. Borrower and Lender agree and acknowledge that as of the Closing Date no
advances will be made against Eligible
Accounts-Medi-Claim, Inc. as there are, at such time, no EligibleMedi-Claim,
Inc. Accounts and Borrower and Lender further agree that no advances will be
made against Eligible-Medi-Claim, Inc. Accounts until such time as the existing
contracts between MediClaim, Inc. and its Account Debtors are amended to a form
approved by Foothill and such Account Debtors contracts are included on Schedule
A-1 attached hereto.
Eligible Accounts-Medi-Claim, Inc. for purposes of this definition
shall not include the following:
(a) Accounts that the Account Debtor has failed to pay within one hundred
twenty (120) days of invoice date or Accounts with selling terms of more than
thirty (30) days and all Accounts owed by an Account Debtor that has failed to
pay fifty percent (50%) or more of its Accounts owed to Borrower within one
hundred twenty (120) days of invoice date;
(b) Accounts with respect to which the Account Debtor is an
officer, employee, Affiliate, or agent of Borrower;
(c) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold, or other terms
by reason of which the payment by the Account Debtor may be conditional or
Accounts to which there exist a setoff, defense, counterclaim, the contract
terms for which contain language creating or suggesting that sums to be paid
thereunder are or could be subject to an actual, express, parol or constructive
trust or other impairment to payment of such Accounts;
(d) Accounts with respect to which the Account Debtor is not a resident of
the United States, and which are not either (i) covered by credit insurance in
form and amount, and by an insurer, satisfactory to Foothill, or (ii) supported
by one or more letters of credit that are assignable by their terms and have
been delivered to Foothill in an amount, of a tenor, and issued by a financial
institution, acceptable to Foothill;
(e) Accounts with respect to which the Account Debtor is the
United States or any department, agency, or instrumentality of the
United States;
(f) Accounts with respect to which Borrower is or may become liable to the
Account Debtor for goods sold or services rendered by the Account Debtor to
Borrower;
(g) Accounts with respect to an Account Debtor of Medi-Claim,
Inc. whose total obligations owing to Medi-Claim, Inc. exceed ten
percent (10%) of all Eligible Accounts-Medi-Claim, Inc. to the
extent that the obligations owing by such Account Debtors exceed
ten percent (10%) of all Eligible Accounts-Medi-Claim, Inc.;
provided however that Accounts from the two largest Account Debtors
of Medi-Claim, Inc. (acceptable to or pre-approved by Foothill) in
excess of ten percent (10%) of all Eligible Accounts-Medi-Claim,
Inc. may each be eligible for inclusion up to fifteen percent (15%)
of all Eligible Accounts-Medi-Claim, Inc.;
(h) Accounts with respect to which the Account Debtor disputes liability or
makes any claim with respect thereto, or is subject to any Insolvency
Proceeding, or becomes insolvent, or goes out of business;
(i) Accounts the collection of which Foothill, in its reasonable credit
judgment, believes to be doubtful by reason of the Account Debtor's financial
condition;
(j) Accounts that are payable in other than United States
Dollars;
(k) Accounts that represent progress payments or other advance ▇▇▇▇▇▇▇▇
that are due prior to the completion of performance by Borrower of the subject
contract for goods or services or Accounts which represent accrued sales;
(l) Accounts which are Rebate Receivables unless specifically approved by
Foothill for inclusion as Eligible Account-Medi-Claim, Inc. in which event such
specifically approved Rebate Receivables shall nonetheless be included only to
the extent allowed by Foothill;
(m) Accounts which represent sums due from consumers or
represent the co-pay or first dollar pay amounts from consumers;
and
(n) Accounts which Foothill deems in its reasonable credit judgement not to
be Eligible Accounts (including but not limited to all Accounts due from APS).
Schedule A-1 may be amended by the addition or deletion of Account Debtors and
by the addition and deletion of written and signed (by all parties thereto)
contracts which have not by their stated terms expired and which are fully
enforceable by Foothill as secured
party and assignee of Medi-Claim, Inc. pursuant to the provisions of this
Agreement between Borrower and Account Debtors upon review and acceptance by
Foothill but Foothill reserves the right at all times to exercise its reasonable
discretion to determine whether any particular Account Debtor or contract form
shall qualify to be an Eligible Account-Medi-Claim, Inc. Borrower understands
and agrees that changes in laws applicable to pharmaceutical and health care
reimbursement may be the basis for Foothill's summary determination that certain
otherwise or previously determined Eligible Accounts-Medi-Claim, Inc. will not
after a date certain continue to be Eligible Accounts-Medi-Claim, Inc.
"Eligible Accounts-Mednet, MPC Corporation, Inc., Medi-Mail, Inc., Family
Pharmaceuticals of America, Inc. and Medi-Phar, Inc." calculated on an
individual basis for each of Mednet, MPC Corporation, Medi-Mail, Inc., Family
Pharmaceuticals of America, Inc. and Medi-Phar, Inc., means those Accounts from
which payments are to be directed and made to a Lockbox Bank from Account
Debtors; such Account being created by Mednet, MPC Corporation, Medi-Mail, Inc.,
Family Pharmaceuticals of America, Inc. or Medi-Phar, Inc. in the ordinary
course of its business and arising out of Mednet, MPC Corporation's, Medi-Mail,
Inc.'s, Family Pharmaceuticals of America, Inc.'s or Medi-Phar, Inc.'s sale of
pharmaceutical medications, drugs or similar goods or the rendition of services
in connection with the sale and/or provision of pharmaceutical medications,
drugs or similar goods, that strictly comply with all of Mednet, MPC
Corporation's, Medi-Mail, Inc.'s, Family Pharmaceuticals of America, Inc.'s or
Medi-Phar, Inc.'s representations and warranties to Foothill; that are, and at
all times shall continue to be, acceptable to Foothill in all respects;
provided, however, that standards of eligibility may be fixed and revised from
time to time by Foothill in Foothill's reasonable credit judgment.
Eligible Accounts-Mednet, MPC Corporation, Inc., Medi-Mail, Inc.,
Family Pharmaceuticals of America, Inc. and Medi-Phar, Inc. for
purposes of this definition shall not include the following:
(a) Accounts that the Account Debtor has failed to pay within one hundred
twenty (120) days of invoice date or Accounts with selling terms of more than
thirty (30) days and all Accounts owed by an Account Debtor that has failed to
pay fifty percent (50%) or more of its Accounts owed to Borrower within one
hundred twenty (120) days of invoice date;
(b) Accounts with respect to which the Account Debtor is an
officer, employee, Affiliate, or agent of Borrower;
(c) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold, or other terms
by reason of which the payment by the Account Debtor may be conditional or
Accounts to which there exist a setoff, defense, counterclaim or Accounts which
create or suggest that sums to be paid thereunder are or could be subject to an
actual, express, parol or constructive trust or other impairment to payment of
such Accounts;
(d) Accounts with respect to which the Account Debtor is not a resident of
the United States, and which are not either (i) covered by credit insurance in
form and amount, and by an insurer, satisfactory to Foothill, or (ii) supported
by one or more letters of credit that are assignable by their terms and have
been delivered to Foothill in an amount, of a tenor, and issued by a financial
institution, acceptable to Foothill;
(e) Accounts with respect to which the Account Debtor is the
United States or any department, agency, or instrumentality of the
United States;
(f) Accounts with respect to which Borrower is or may become liable to the
Account Debtor for goods sold or services rendered by the Account Debtor to
Borrower;
(g) Accounts with respect to an Account Debtor of Mednet, MPC
Corporation, Medi-Mail, Inc., Family Pharmaceuticals of America,
Inc. and Medi-Phar, Inc. whose total obligations owing to Mednet,
MPC Corporation, Medi-Mail, Inc., Family Pharmaceuticals of
America, Inc. and Medi-Phar, Inc. exceed ten percent (10%) of all
Eligible Accounts-Mednet, MPC Corporation, Medi-Mail, Inc., Family
Pharmaceuticals of America, Inc. and Medi-Phar, Inc., Inc. to the
extent that the obligations owing by such Account Debtors exceed
ten percent (10%) of all Eligible Accounts-Mednet, MPC Corporation,
Medi-Mail, Inc., Family Pharmaceuticals of America, Inc. and Medi-
Phar, Inc.; provided however that Accounts from the two largest
Account Debtors of Mednet, MPC Corporation, Medi-Mail, Inc., Family
Pharmaceuticals of America, Inc. and Medi-Phar, Inc. (as a group
and otherwise acceptable to or pre-approved by Foothill) in excess
of ten percent (10%) of all Eligible Accounts-Mednet, MPC
Corporation, Medi-Mail, Inc., Family Pharmaceuticals of America,
Inc. and Medi-Phar, Inc. may be eligible for inclusion up to
fifteen percent (15%) of all Eligible Accounts-Mednet, MPC
Corporation, Medi-Mail, Inc., Family Pharmaceuticals of America,
Inc. and Medi-Phar, Inc.;
(h) Accounts with respect to which the Account Debtor disputes liability or
makes any claim with respect thereto, or is subject to any Insolvency
Proceeding, or becomes insolvent, or goes out of business;
(i) Accounts the collection of which Foothill, in its reasonable credit
judgment, believes to be doubtful by reason of the Account Debtor's financial
condition;
(j) Accounts that are payable in other than United States
Dollars;
(k) Accounts that represent progress payments or other advance ▇▇▇▇▇▇▇▇
that are due prior to the completion of performance by Borrower of the subject
contract for goods or services or Accounts which represent accrued sales;
(l) Accounts which are Rebate Receivables unless specifically
approved by Foothill for inclusion as Eligible Account-Mednet, MPC
Corporation, Medi-Mail, Inc., Family Pharmaceuticals of America,
Inc. and Medi-Phar, Inc. in which event such specifically approved
Rebate Receivables shall nonetheless be included only to the extent
allowed by Foothill and shall be net of any prepayment by the
Account Debtor and net of any amounts payable by any Borrower
entity to any other party;
(m) Accounts which represent sums due from Account Debtors of Medi-Phar,
Inc. until such time as all existing security interests and liens on such
Accounts are released of record with all applicable filing authorities in
California;
(n) Accounts due to Medi-Mail, Inc. which in the reasonable credit
judgement of Foothill may not be collectible in whole or in part due to the
Borrower or any one or more of them not having the required license, permit or
registration from jurisdictions requiring such for the shipment of
pharmaceuticals by mail or other methods from such jurisdiction or from
jurisdictions requiring a license, permit or registration for the shipment of
pharmaceuticals by mail or other methods into such jurisdiction;
(o) Accounts which represent sums due from consumers or
represent the co-pay or first dollar pay amounts from consumers;
and
(p) Accounts which Foothill deems in its reasonable credit judgement not to
be Eligible Accounts (including but not limited to all Accounts due from APS).
Foothill reserves the right at all times to exercise its reasonable discretion
to determine whether any particular Account Debtor shall qualify to be an
Eligible Account. Borrower understands and agrees that changes in laws
applicable to pharmaceutical and health care reimbursement may be the basis for
Foothill's summary determination that certain otherwise or previously determined
Eligible AccountsEligible Accounts-Mednet, MPC Corporation, Inc., Medi-Mail,
Inc., Family Pharmaceuticals of America, Inc. and Medi-Phar, Inc. will not after
a date certain continue to be Eligible Accounts-Eligible Accounts-Mednet, MPC
Corporation, Inc., Medi-Mail, Inc., Family Pharmaceuticals of America, Inc. and
Medi-Phar, Inc.
"Eligible Inventory" means Inventory consisting of good and marketable
first quality medications, prescription drugs and pharmacy items, as to which
there shall be no legal or contractual limitations restricting, proscribing or
otherwise prohibiting, in any way, the ability of the Borrower to freely sell,
transfer or otherwise dispose of same (other than licensing laws as to which
Borrower is in full compliance), which have effective use and shelf life dates
which have not expired as of the date of determination, held for sale in the
ordinary course of Borrower's business, located at Borrower's premises
identified on Schedule E-1 and with respect to such premises Foothill shall have
received a landlord waiver and license agreement or an Agreement of Lessor to
Borrower's Assignment of Lease in form satisfactory to Foothill, and which are
acceptable to Foothill in all respects (provided, however, that standards of
eligibility may be fixed and revised from time to time by Foothill in Foothill's
reasonable credit judgment), and that strictly comply with all of Borrower's
representations and warranties to Foothill. Eligible Inventory shall not include
slow moving or obsolete items, items subject to recall by manufacturers,
distributors or any federal or state regulatory agency or unit, restrictive or
custom items, packaging and shipping materials, supplies used or consumed in
Borrower's business, Inventory at any location other than those set forth on
Schedule E-1 or if with respect to such premises Foothill shall not have
received a landlord waiver and license agreement or an Agreement of Lessor to
Borrower's Assignment of Lease in form
satisfactory to Foothill, Inventory subject to a security interest or lien in
favor of any third Person, ▇▇▇▇ and hold items, Inventory that is not subject to
Foothill's perfected security interest, returned or defective goods, "seconds,"
or Inventory acquired on consignment. Inventory shall not be Eligible Inventory
if Borrower shall not have a current license to sell at retail such item, if a
license is necessary, or Borrower shall not have obtained the required licenses
or made the required registrations with applicable governmental authorities in
connection with the operation of its business within a State or in connection
with the operation of a mail order pharmacy in the State of such pharmacy's
location and in each state into which pharmaceutical items are sold or
delivered. Eligible Inventory shall be valued at the lower of Borrower's cost or
market value.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings, fixtures,
vehicles (including motor vehicles and trailers), tools, parts, dies, jigs,
goods (other than consumer goods, farm products, or Inventory), wherever
located, and any interest of Borrower in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any predecessor, successor, or superseding laws of
the United States of America, together with all regulations promulgated
thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
which, within the meaning of Section 414 of the IRC, is: (i) under common
control with Borrower; (ii) treated, together with Borrower, as a single
employer; (iii) treated as a member of an affiliated service group of which
Borrower is also treated as a member; or (iv) is otherwise aggregated with the
Borrower for purposes of the employee benefits requirements listed in IRC
Section 414(m)(4).
"ERISA Event" means any one or more of the following: (i) a Reportable
Event with respect to a Qualified Plan or a Multiemployer Plan; (ii) a
Prohibited Transaction with respect to any Plan; (iii) a complete or partial
withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan; (iv)
the complete or partial withdrawal of Borrower or an ERISA Affiliate from a
Qualified Plan during a plan year in which it was, or was treated
as, a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (v) a
failure to make full payment when due of all amounts which, under the provisions
of any Plan or applicable law, Borrower or any ERISA Affiliate is required to
make; (vi) the filing of a notice of intent to terminate, or the treatment of a
plan amendment as a termination, under Sections 4041 or 4041A of ERISA; (vii) an
event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Qualified Plan or Multiemployer Plan; (viii) the
imposition of any liability under Title IV of ERISA, other than PBGC premiums
due but not delinquent under Section 4007 of ERISA, upon Borrower or any ERISA
Affiliate; and (ix) a violation of the applicable requirements of Sections 404
or 405 of ERISA, or the exclusive benefit rule under Section 403(c) of ERISA, by
any fiduciary or disqualified person with respect to any Plan for which Borrower
or any ERISA Affiliate may be directly or indirectly liable.
"Event of Default" has the meaning set forth in Section 8.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to this
Agreement.
"Foothill Expenses" means all: costs or expenses (including taxes,
photocopying, notarization, telecommunication and insurance premiums) required
to be paid by Borrower under any of the Loan Documents that are paid or advanced
by Foothill; documentation, filing, recording, publication, appraisal (including
periodic Collateral appraisals), real estate survey, environmental audit, and
search fees assessed, paid, or incurred by Foothill in connection with
Foothill's transactions with Borrower; costs and expenses incurred by Foothill
in the disbursement of funds to Borrower (by wire transfer or otherwise);
charges paid or incurred by Foothill resulting from the dishonor of checks;
costs and expenses paid or incurred by Foothill to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated; costs and expenses paid or
incurred by Foothill in examining Borrower's Books; costs and expenses of third
party claims or any other suit paid or incurred by Foothill in enforcing or
defending the Loan Documents; and Foothill's reasonable
attorneys fees and expenses incurred in advising, structuring, drafting,
reviewing, administering, amending, terminating, enforcing (including attorneys
fees and expenses incurred in connection with a "workout," a "restructuring," or
an Insolvency Proceeding concerning Borrower), defending, or concerning the Loan
Documents, irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and future general
intangibles and other personal property (including contract rights, rights
arising under common law, statutes, or regulations, choses or things in action,
goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringements, claims, computer programs,
computer discs, computer tapes, literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims), other than
goods, Accounts, and Negotiable Collateral.
"Hazardous Materials" means all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable laws or regulations as "hazardous substances," "hazardous materials,"
"hazardous wastes," "toxic substances," or any other formulation intended to
define, list, or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity,
or "EP toxicity"; (b) oil, petroleum, or petroleum derived substances, natural
gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and
other wastes associated with the exploration, development, or production of
crude oil, natural gas, or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty (50) parts per million.
"Indebtedness" means: (a) all obligations of Borrower for borrowed money;
(b) all obligations of Borrower evidenced by bonds, debentures, notes, or other
similar instruments (other than Preferred Class A and Class B Stock) and all
reimbursement or other
obligations of Borrower in respect of letters of credit, letter of credit
guaranties, bankers acceptances, interest rate swaps, controlled disbursement
accounts, or other financial products; (c) all obligations under capital leases;
(d) all obligations or liabilities of others secured by a lien or security
interest on any property or asset of Borrower, irrespective of whether such
obligation or liability is assumed; and (e) any obligation of Borrower
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other bankruptcy
or insolvency law, including assignments for the benefit of creditors, formal or
informal moratoria, compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Inventory" means all present and future inventory in which Borrower has
any interest, including medications, prescription drugs and pharmacy items held
for sale and all of Borrower's present and future packing and shipping
materials, wherever located, and any documents of title representing any of the
above.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
"Loan Documents" means this Agreement, the Lockbox Agreements, any other
note or notes executed by Borrower and payable to Foothill, and any other
agreement entered into in connection with this Agreement.
"Lockbox Account" shall mean the depositary account established pursuant to
the respective Lockbox Agreement.
"Lockbox Agreements" means those certain Lockbox Operating Procedural
Agreements and those certain Depository Account Agreements, in form and
substance satisfactory to Foothill, each of which is among Borrower, Foothill,
and one of the Lockbox Banks.
"Lockbox Banks" means as to Medi-Mail, Inc. in Nevada-First
Interstate Bank of Nevada; as to Medi-Mail, Inc. in Chicago-First
Chicago Bank and Trust Company; as to Medi-Mail, Inc. in South
Carolina-NationsBank; as to Medi-Claim, Inc.- Mellon Bank and Trust
Company; as to Medi-Phar, Inc. in Nevada-First-Interstate Bank of
Nevada; as to Medi-Phar, Inc. in California-First Interstate Bank.
"Maximum Amount" has the meaning set forth in Section 2.1(c).
"Multiemployer Plan" means a multiemployer plan as defined in Sections
3(37) or 4001(a)(3) of ERISA or Section 414 of the IRC in which employees of
Borrower or an ERISA Affiliate participate or to which Borrower or any ERISA
Affiliate contribute or are required to contribute.
"Negotiable Collateral" means all of Borrower's present and future letters
of credit, notes, drafts, instruments, certificated and uncertificated
securities (including the shares of stock of subsidiaries of Borrower),
documents, personal property leases (wherein Borrower is the lessor), chattel
paper, and Borrower's Books relating to any of the foregoing.
"Obligations" means all loans, advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), contingent reimbursement obligations owing to Foothill
under any outstanding L/Cs or L/C Guarantees, premiums (including Early
Termination Premiums), liabilities (including all amounts charged to Borrower's
loan account pursuant to any agreement authorizing Foothill to charge Borrower's
loan account), obligations, fees, lease payments, guaranties, covenants, and
duties owing by Borrower to Foothill of any kind and description (whether
pursuant to or evidenced by the Loan Documents, by any note or other instrument,
or pursuant to any other agreement between Foothill and Borrower, and
irrespective of whether for the payment of money), whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including any debt, liability, or obligation owing from Borrower to others
that Foothill may have obtained by assignment or otherwise, and further
including all interest not paid when due and all Foothill Expenses that Borrower
is required to pay or reimburse by the Loan Documents, by law, or otherwise.
"Old Lender" shall mean McKesson Corporation, Bergen ▇▇▇▇▇▇▇▇
Drug Company and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., W.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇.
"Overadvance" has the meaning set forth in Section 2.4.
"Pay-Off Letter" means a letter or letters, in form and substance
reasonably satisfactory to Foothill, from Old Lender respecting the amount
necessary to repay in full all of the obligations of Borrower owing to Old
Lender and obtain a termination or release of all of the security interests or
liens existing in favor of Old Lender in and to the properties or assets of
Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation as defined in Title
IV of ERISA, or any successor thereto.
"Permitted Liens" means: (a) liens and security interests held by Foothill;
(b) liens for unpaid taxes that are not yet due and payable; (c) liens and
security interests set forth on Schedule P-1 attached hereto; (d) purchase money
security interests and liens of lessors under capital leases to the extent that
the acquisition or lease of the underlying asset was permitted under Section
7.10, and so long as the security interest or lien only secures the purchase
price of the asset; (e) easements, rights of way, reservations, covenants,
conditions, restrictions, zoning variances, and other similar encumbrances that
do not materially interfere with the use or value of the property subject
thereto; (f) obligations and duties as lessee under any lease existing on the
date of this Agreement; (g) mechanics', materialmen's, warehousemen's, or
similar liens that arise by operation of law; and (h) exceptions listed in the
title insurance or commitment therefor to be delivered by Borrower hereunder.
"Permitted Protest" means the right of Borrower to protest any lien, tax,
rental payment, or other charge, other than any such lien or charge that secures
the Obligations, provided (i) a reserve with respect to such obligation is
established on the books of Borrower in an amount that is reasonably
satisfactory to Foothill, (ii) any such protest is instituted and diligently
prosecuted by Borrower in good faith, and (iii) Foothill is satisfied that,
while any such protest is pending, there will be no impairment of the
enforceability, validity, or priority of any of the liens or security interests
of Foothill in and to the property or assets of Borrower.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint ventures, trusts, land trusts,
business trusts, or other organizations, irrespective
of whether they are legal entities, and governments and agencies
and political subdivisions thereof.
"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
which Borrower or any ERISA Affiliate sponsors or maintains or to which Borrower
or any ERISA Affiliate makes, is making, or is obligated to make contributions,
including any Multiemployer Plan or Qualified Plan.
"Prohibited Transaction" means any transaction described in Section 406 of
ERISA which is not exempt by reason of Section 408 of ERISA, and any transaction
described in Section 4975(c) of the IRC which is not exempt by reason of Section
4975(c) of the IRC.
"Qualified Plan" means a pension plan (as defined in Section 3(2) of ERISA)
intended to be tax-qualified under Section 401(a) of the IRC which Borrower or
any ERISA Affiliate sponsors, maintains, or to which any such person makes, is
making, or is obligated to make, contributions, or, in the case of a
multiple-employer plan (as described in Section 4064(a) of ERISA), has made
contributions at any time during the immediately preceding period covering at
least five (5) plan years, but excluding any Multiemployer Plan.
"Rebate Receivable" means an Account arising under a written agreement
entitled "Pharmaceutical Rebate Services Agreement" or any other agreement
whereby a receivable is anticipated from a pharmaceutical manufacturer or
distributor for a rebate resulting from volume purchases or under any
circumstance where a deduction or refund or remuneration, in cash or in kind,
from a stipulated payment, charge or rate, not taken out in advance of payment,
but handed back after payment of the stipulated payment which is obtained by
Borrower and such refund of remuneration arises from the purchase or sale of
drugs or other pharmaceutical items.
"Reference Rate" means the highest of the variable rates of interest, per
annum, most recently announced by (a) Bank of America, N.T. & S.A., (b) Mellon
Bank, N.A., and (c) Citibank, N.A., or any successor to any of the foregoing
institutions, as its "prime rate" or "reference rate," as the case may be, as
established from time to time, irrespective of whether such announced rate is
the best rate available from such financial institution.
"Renewal Date" has the meaning set forth in Section 3.3.
"Reportable Event" means any event described in Section 4043
(other than Subsections (b)(7) and (b)(9)) of ERISA.
"Secondary Dilution Reserve" means, as of the date of any determination of
the individual borrowing base calculations for each of the individual Borrower's
borrowing bases, an additional amount in excess of the Dilution Reserve,
sufficient to reduce Foothill's advance rate against Eligible
Accounts-Medi-Claim, Inc. and Eligible Accounts-Mednet, MPC Corporation, Inc.,
Medi-Mail, Inc., Family Pharmaceuticals of America, Inc. and Medi-Phar, Inc. by
one percentage point for each percentage point by which the amount (expressed as
a percentage and based upon the experience of the immediately prior three (3)
months) of Borrower's Accounts that are subject to bad debt write-downs,
discounts, advertising, returns, promotions, credits, allowances,
contra-accounts and other offsets which reduce the value of the respective
Accounts or other dilution is in excess of one percent (1%).
"Solvent" means, with respect to any Person on a particular date, that on
such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.
"Tangible Net Worth" means, as of the date any determination
thereof is to be made, the difference of: (a) Borrower's total
stockholder's equity; minus (b) the sum of: (i) all intangible
assets of Borrower; (ii) all of Borrower's prepaid expenses; and
(iii) all amounts due to Borrower from Affiliates, calculated on a
consolidated basis.
"Unfunded Benefit Liability" means the excess of a Plan's benefit
liabilities (as defined in Section 4001(a)(16) of ERISA) over the current value
of such Plan's assets, determined in accordance with the assumptions used by the
Plan's actuaries for funding the Plan pursuant to Section 412 of the IRC for the
applicable plan year.
"Voidable Transfer" has the meaning set forth in Section 15.8.
1.2 Accounting Terms. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP. When used herein, the term "financial
statements" shall include the notes and schedules thereto. Whenever the term
"Borrower" is used in respect of a financial covenant or a related definition,
it shall be understood to mean Borrower on a consolidated basis unless the
context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the Code shall be
construed and defined as set forth in the Code unless otherwise defined herein.
1.4 Construction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Section, subsection, clause,
schedule, and exhibit references are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the Loan Documents to this
Agreement or any of the Loan Documents shall include all alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, and supplements, thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached to this
Agreement shall be deemed incorporated herein by reference.
1.6 Joint and Several Borrowing. Each of Mednet, MPC Corporation,
Medi-Mail, Inc., Family Pharmaceuticals of America, Inc., MediClaim, Inc. and
Medi-Phar, Inc. agree that for borrowing purposes a separate borrowing base
shall be calculated for each entity in accordance with Section 2.1 of this
Agreement and that no entity shall be entitled to receive a greater advance than
the borrowing base calculated for each such entity in accordance with the
provisions of Section 2.1 of this Agreement. All advances hereunder shall be
made to Mednet, MPC Corporation as the parent corporation for itself and as
agent for each of the other individual Borrower entities and Mednet, MPC
Corporation and each of the other individual entities agrees that Mednet, MPC
Corporation shall be responsible for the allocation and distribution to each of
the individual Borrower entities such amounts of each advance as are necessary
to meet the operating and administrative needs of each company. Each of
Medi-Mail, Inc., Family Pharmaceuticals of America, Inc., Medi-Claim, Inc. and
MediPhar, Inc. constitute and appoint Mednet, MPC Corporation as their
respective agent for borrowing purposes to receive all advances hereunder and
that they as an integrated family of companies will allocate and distribute such
amounts of each Advance as shall be necessary such that Foothill need only deal
with and advance to Mednet, MPC Corporation.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolving Advances.
(a) Subject to the terms and conditions of this Agreement, Foothill agrees
to make revolving advances to Borrower in an amount at any one time outstanding
not to exceed the aggregate sum of all of the individual borrowing bases for
each of the individual entities constituting Borrower (the sum of the individual
borrowing bases are hereinafter referred to as "Borrowing Base") less the
undrawn or unreimbursed amount of L/Cs and L/C Guarantees outstanding hereunder.
For purposes of this Agreement, the individual borrowing bases, as of any date
of determination, shall mean the sum of:
(i) an amount equal to the lesser of:
(a) eighty-five percent (85%) of the amount of Eligible
Accounts-Medi-Claim, Inc. less the Dilution Reserve and less the
Secondary Dilution Reserve, if any, (Borrower acknowledges and
agrees that as of the Closing Date no advances will be made against
Eligible Accounts-Medi-Claim, Inc. as there are no Eligible
Accounts-Medi-Claim, Inc. on the Closing Date; such advances to be made only
after Foothill has reviewed and approved for inclusion on Schedule A-1 hereto
all written contracts and contract amendment letters submitted by Borrower) plus
for each of the other entities comprising Borrower, calculated separately,
eighty-five percent (85%) of the amount of Eligible Accounts-Mednet, MPC
Corporation, Inc., Medi-Mail, Inc., Family Pharmaceuticals of America, Inc. and
Medi-Phar, Inc. less the Dilution Reserve (applied to each such entity
calculation) and less the Secondary Dilution Reserve (applied to each such
entity calculation), if any. With respect to the calculations in this subsection
(i), Accounts arising from contracts entitled "Chain Pharmacy Network Agreement"
shall be included only to the extent the receivables are otherwise Eligible
Receivables and shall be net of any prepayment by the Account Debtor and net of
any trust funds or prepayments by such Account Debtor or Accounts arising under
contracts entitled "Sponsor Agreement" but with respect to such Sponsor
Agreement receivables, the receivables which shall be eligible shall be net of
any prepaid amounts by such Account Debtors; or
(b) an amount equal to Borrower's collections with respect to
Accounts for the immediately preceding thirty (30) day period; plus
(ii) for an initial period of ninety (90) days after the Closing Date, provided
that monthly physical inventories are performed and the results thereof are
satisfactory to Foothill, in its sole discretion, and further provided the
landlords, owners and sublessors of the locations at which the Inventory
consisting of Eligible Inventory is located have provided to Foothill an
appropriate landlord waiver and consent or Agreement of Landlord to Borrowers
Assignment of Lease, an amount equal to the lowest of: (x) sixty percent (60%)
of the amount of Eligible Inventory, (y) 50% of the amount of credit
availability created by Section 2.1(a)(i) above or (z) One Million Two Hundred
Thousand Dollars ($1,200,000). Borrower acknowledges and agrees that ninety (90)
days after the Closing Date no further advances will be made against Inventory
unless Borrower has implemented a perpetual inventory reporting and tracking
system (a perpetual inventory reporting and tracking system is one that is
consistent with industry standards and proves after testing, that variances, in
count or cost of all covered inventory items, are less than 3% from the actual
cost or count of such covered inventory after physical count and audit)
acceptable to Foothill in its sole discretion and a test of such perpetual
inventory reporting and tracking system by Foothill with the results of such
test being satisfactory to
Foothill in its sole discretion. After Foothill has been satisfied with the
implementation and performance of the perpetual inventory reporting and tracking
system monthly physical inventories need not continue to be performed and
advances against Eligible Inventory may be made by Foothill, in its sole
discretion, an amount equal to the lowest of: (x) sixty percent (60%) of the
amount of Eligible Inventory, (y) 50% of the amount of credit availability
created by Section 2.1(a)(i) above or (z) Six Million Dollars ($6,000,000).
Foothill agrees that if Borrower is able to implement the perpetual inventory
reporting and tracking system referred to above which is acceptable to Foothill
in its sole discretion and the test of such system is satisfactory to Foothill
in its sole discretion prior to ninety (90) days after the Closing Date, then
the One Million Two Hundred Thousand ($1,200,000) Dollar limitation set forth in
Section 2.1(a)(ii)(z) above shall be eliminated and a limitation of Six Million
($6,000,000) Dollars shall be inserted in lieu therefor.
(b) Anything to the contrary in Section 2.1(a) above notwithstanding,
Foothill may reduce its advance rates based upon Eligible Accounts or Eligible
Inventory without declaring an Event of Default if it determines, in its
reasonable discretion, that there is a material impairment of the prospect of
repayment of all or any portion of the Obligations or a material impairment of
the value or priority of Foothill's security interests in the Collateral.
(c) Foothill shall have no obligation to make advances hereunder to
the extent they would cause the aggregate outstanding Obligations at any time to
exceed Twenty Million Dollars ($20,000,000) ("Maximum Amount").
(d) Foothill is authorized to make advances under this Agreement based
upon telephonic or other instructions received from anyone purporting to be an
Authorized Officer of Borrower, or without instructions if pursuant to Section
2.5(d). Borrower agrees to establish and maintain a single designated deposit
account for the purpose of receiving the proceeds of the advances requested by
Borrower and made by Foothill hereunder. Unless otherwise agreed by Foothill and
Borrower, any advance requested by Borrower and made by Foothill hereunder shall
be made to such designated deposit account. Amounts borrowed pursuant to this
Section 2.1 may be repaid and, subject to the terms and conditions of this
Agreement, reborrowed at any time during the term of this Agreement.
2.2 Letters of Credit and Letter of Credit Guarantees.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to issue commercial or standby letters of credit for the account
of Borrower (each, an "L/C") or to issue standby letters of credit or guarantees
of payment (each such letter of credit or guaranty, an "L/C Guaranty") with
respect to commercial or standby letters of credit issued by another Person for
the account of Borrower in an aggregate face amount not to exceed the lesser of:
(i) the Borrowing Base less the amount of advances outstanding pursuant to
Section 2.1, or (ii) Three Million Dollars ($3,000,000). Borrower expressly
understands and agrees that Foothill shall have no obligation to arrange for the
issuance by other financial institutions of letters of credit that are to be the
subject of L/C Guarantees. Borrower and Foothill acknowledge and agree that
certain of the letters of credit that are to be the subject of L/C Guarantees
may be outstanding on the Closing Date. Each L/C and each letter of credit that
is the subject of an L/C Guaranty shall have an expiry date no later than sixty
(60) days prior to the date on which this Agreement is scheduled to terminate
under Section 3.3 (without regard to any potential renewal term) and all such
L/Cs and letters of credit (and the applicable L/C Guarantees) shall be in form
and substance acceptable to Foothill in its sole discretion. Foothill shall not
have any obligation to issue L/Cs or L/C Guarantees to the extent that the face
amount of all outstanding L/Cs and L/C Guarantees, plus the amount of advances
outstanding pursuant to Section 2.1, would exceed Twenty Million Dollars
($20,000,000). The L/Cs and the L/C Guarantees issued under this Section 2.2
shall be used by Borrower, consistent with this Agreement, for its general
working capital purposes or to support its obligations with respect to workers'
compensation premiums or other similar obligations. If Foothill is obligated to
advance funds under an L/C or L/C Guaranty, the amount so advanced immediately
shall be deemed to be an advance made by Foothill to Borrower pursuant to
Section 2.1 and, thereafter, shall bear interest at the rates then applicable
under Section 2.5.
(b) Borrower hereby agrees to indemnify, save, defend, and hold
Foothill harmless from any loss, cost, expense, or liability, including payments
made by Foothill, expenses, and reasonable attorneys fees incurred by Foothill
arising out of or in connection with any L/Cs or L/C Guarantees. Borrower agrees
to be bound by the issuing bank's regulations and interpretations of any letters
of credit guarantied by Foothill and opened to or for Borrower's account or by
Foothill's interpretations of any L/C
issued by Foothill to or for Borrower's account, even though this interpretation
may be different from Borrower's own, and Borrower understands and agrees that
Foothill shall not be liable for any error, negligence, or mistakes, whether of
omission or commission, in following Borrower's instructions or those contained
in the L/Cs or any modifications, amendments, or supplements thereto. Borrower
understands that the L/C Guarantees may require Foothill to indemnify the
issuing bank for certain costs or liabilities arising out of claims by Borrower
against such issuing bank. Borrower hereby agrees to indemnify, save, defend,
and hold Foothill harmless with respect to any loss, cost, expense (including
attorneys fees), or liability incurred by Foothill under any L/C Guaranty as a
result of Foothill's indemnification of any such issuing bank.
(c) Borrower hereby authorizes and directs any bank that issues a
letter of credit guaranteed by Foothill to deliver to Foothill all instruments,
documents, and other writings and property received by the issuing bank pursuant
to such letter of credit, and to accept and rely upon Foothill's instructions
and agreements with respect to all matters arising in connection with such
letter of credit and the related application. Borrower may or may not be the
"applicant" or "account party" with respect to such letter of credit.
(d) Any and all service charges, commissions, fees, and costs incurred
by Foothill relating to the letters of credit guaranteed by Foothill shall be
considered Foothill Expenses for purposes of this Agreement and immediately
shall be reimbursable by Borrower to Foothill. On the first day of each month,
Borrower will pay Foothill a fee equal to two and one-half percent (2.5%) per
annum times the average Daily Balance of the L/Cs and L/C Guarantees that were
outstanding during the immediately preceding month. Service charges,
commissions, fees, and costs may be charged to Borrower's loan account at the
time the service is rendered or the cost is incurred.
(e) Immediately upon the termination of this Agreement, Borrower
agrees to either: (i) provide cash collateral to be held by Foothill in an
amount equal to the maximum amount of Foothill's obligations under L/Cs plus the
maximum amount of Foothill's obligations to any Person under outstanding L/C
Guarantees, or (ii) cause to be delivered to Foothill releases of all of
Foothill's obligations under its outstanding L/Cs and L/C Guarantees. At
Foothill's discretion, any proceeds of Collateral received by
Foothill after the occurrence and during the continuation of an Event of Default
may be held as the cash collateral required by this Section 2.2(e).
2.3 Intentionally Deleted.
2.4 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Foothill pursuant to Sections 2.1 and 2.2 is
greater than either the dollar or percentage limitations set forth in Sections
2.1 or 2.2 (an "Overadvance"), Borrower immediately shall pay to Foothill, in
cash, the amount of such excess to be used by Foothill first, to repay
non-contingent Obligations and, thereafter, to be held by Foothill as cash
collateral to secure Borrower's obligation to repay Foothill for all amounts
paid pursuant to L/Cs or L/C Guarantees.
2.5 Interest: Rates, Payments, and Calculations.
(a) Interest Rate. All Obligations, except for undrawn L/Cs and L/C
Guarantees shall bear interest, on the average Daily Balance, at a per annum
rate of one and one-half (1.5) percentage points above the Reference Rate.
(b) Default Rate. (i) All Obligations, except for undrawn L/Cs and L/C
Guarantees shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a per annum rate equal to five (5.0)
percentage points above the Reference Rate. (ii) From and after the occurrence
and during the continuance of an Event of Default, the fee provided in Section
2.2(d) shall be increased to a fee equal to seven and one-half percent (7.5%)
per annum times the average Daily Balance of the undrawn L/Cs and L/C Guarantees
that were outstanding during the immediately preceding month.
(c) Minimum Interest. In no event shall the rate of
interest chargeable hereunder be less than eight percent (8%) per
annum.
(d) Payments. Interest hereunder shall be due and payable, in arrears,
on the first day of each month during the term hereof. Borrower hereby
authorizes Foothill, at its option, without prior notice to Borrower, to charge
such interest, all Foothill Expenses (as and when incurred), and all
installments or other payments due under any other note or other Loan Document
to
Borrower's loan account, which amounts thereafter shall accrue interest at the
rate then applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(e) Computation. The Reference Rate as of the date of this Agreement
is eight and one-half percent (8.50%) per annum. In the event the Reference Rate
is changed from time to time hereafter, the applicable rate of interest
hereunder automatically and immediately shall be increased or decreased by an
amount equal to such change in the Reference Rate. All interest and fees
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall
the interest rate or rates payable under this Agreement, plus any other amounts
paid in connection herewith, exceed the highest rate permissible under any law
that a court of competent jurisdiction shall, in a final determination, deem
applicable. Borrower and Foothill, in executing this Agreement, intend legally
to agree upon the rate or rates of interest and manner of payment stated within
it; provided, however, that, anything contained herein to the contrary
notwithstanding, if said rate or rates of interest or manner of payment exceeds
the maximum allowable under applicable law, then, ipso facto as of the date of
this Agreement, Borrower is and shall be liable only for the payment of such
maximum as allowed by law, and payment received from Borrower in excess of such
legal maximum, whenever received, shall be applied to reduce the principal
balance of the Obligations to the extent of such excess.
2.6 Crediting Payments; Application of Collections. The receipt of any wire
transfer of funds, check, or other item of payment by Foothill (whether from
transfers to Foothill by the Lockbox Banks pursuant to the Lockbox Agreements or
otherwise) immediately shall be applied to provisionally reduce the Obligations,
but shall not be considered a payment on account unless such wire transfer is of
immediately available federal funds and is made to the appropriate deposit
account of Foothill or unless and until such check or other item of payment is
honored when presented for payment. From and after the Closing Date, Foothill
shall be entitled to charge Borrower for four (4) Business Days of `clearance'
at the rate set forth in Section 2.5(a) or Section 2.5(b)(i), as applicable, on
all collections, checks, wire
transfers, or other items of payment that are received by Foothill (regardless
of whether forwarded by the Lockbox Banks to Foothill, whether provisionally
applied to reduce the Obligations, or otherwise). This across-the-board four (4)
Business Day clearance charge on all receipts is acknowledged by the parties to
constitute an integral aspect of the pricing of Foothill's facility to Borrower,
and shall apply irrespective of the characterization of whether receipts are
owned by Borrower or Foothill, and irrespective of the level of Borrower's
Obligations to Foothill. Should any check or item of payment not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment, and interest shall be recalculated accordingly. Anything to the
contrary contained herein notwithstanding, any wire transfer, check, or other
item of payment shall be deemed received by Foothill only if it is received into
Foothill's Operating Account (as such account is identified in the Lockbox
Agreements) on or before 11:00 a.m. Los Angeles time. If any wire transfer,
check, or other item of payment is received into Foothill's Operating Account
(as such account is identified in the Lockbox Agreements) after 11:00 a.m. Los
Angeles time it shall be deemed to have been received by Foothill as of the
opening of business on the immediately following Business Day.
At any time that all Obligations are paid in full and there exists a credit
balance resulting from remittances from Borrower's Account Debtors or the
receipt of funds from Borrower which overpay Obligations, Foothill shall
transmit to Borrower such credit balance.
2.7 Statements of Obligations. Foothill shall render statements to Borrower
of the Obligations, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Foothill Expenses owing,
and such statements shall be conclusively presumed to be correct and accurate
and constitute an account stated between Borrower and Foothill unless, within
thirty (30) days after receipt thereof by Borrower, Borrower shall deliver to
Foothill by registered or certified mail at its address specified in Section 12,
written objection thereto describing the error or errors contained in any such
statements.
2.8 Fees. Borrower shall pay to Foothill the following fees:
(a) Closing Fee. A one time closing fee of Two Hundred
Thousand Dollars ($200,000) which has been earned, in full, and is
due and payable by Borrower to Foothill in installments of Twenty
Thousand Dollars ($20,000) on this date and continuing on the first day of each
calendar month commencing January 1, 1996 and continuing through and including
September 1, 1996;
(b) Unused Line Fee. On the first day of each month
during the term of this Agreement, a fee in an amount equal to one-
half percent (0.5%) per annum times the Average Unused Portion of
the Maximum Amount;
(c) Annual Facility Fee. On the Closing Date and on
each anniversary of the Closing Date, a fee in an amount equal to
One Hundred Thousand Dollars ($100,000) such fee to be fully earned
on each such anniversary;
(d) Financial Examination, Documentation, and Appraisal Fees.
Foothill's customary fee of Six Hundred Dollars ($600) per day per examiner,
plus out-of-pocket expenses for each financial analysis and examination of
Borrower performed by Foothill or its agents; Foothill's customary appraisal fee
of One Thousand Dollars ($1,000) per day per appraiser, plus out-of-pocket
expenses for each appraisal of the Collateral performed by Foothill or its
agents; and, on each anniversary of the Closing Date, Foothill's customary fee
of One Thousand Dollars ($1,000) per year for its loan documentation review; and
(e) Servicing Fee. On the first day of each month
during the term of this Agreement, and thereafter so long as any
Obligations are outstanding, a servicing fee in an amount equal to Three
Thousand Five Hundred Dollars ($3,500) per month.
In addition to the monthly Servicing Fee, Borrower shall on the Closing Date pay
to Lender the sum of Fifteen Thousand Dollars ($15,000) as a prepaid Additional
Servicing Fee. If during the ninety days (90) days following the Closing Date,
Foothill shall after audit be satisfied with the accuracy of Borrower's books
and records and reporting systems in connection with Borrower's Chicago,
Illinois operations, Borrower shall be entitled to a refund on a per diem basis
of such amount of the prepaid Additional Servicing Fee as is calculated from the
date of Foothill's audit report through the ninetieth day after the Closing
Date. If however, Borrower shall not have satisfied Foothill with respect to the
accuracy of Borrower's books and records and reporting systems in connection
with Borrower's Chicago, Illinois operations on or before the ninetieth day
after the Closing Date, then Foothill shall continue to charge and Borrower
shall continue to pay on a monthly basis, without per diem refund, an Additional
Servicing Fee of Five Thousand Dollars ($5,000) per month until such time as
Foothill is satisfied with the accuracy of Borrower's books and records and
reporting systems in connection with Borrower's Chicago, Illinois operations.
Subsequent to the ninetieth day after the Closing Date, so long as Foothill is
not satisfied with the accuracy of Borrower's books and records and reporting
systems in connection with Borrower's Chicago, Illinois operations, Foothill may
determine any of the Collateral from the Chicago, Illinois operations of
Borrower to be ineligible for Advances.
(f) Deposit. Foothill acknowledges receipt of a deposit in the sum of
$75,000 paid pursuant to a Section 13 of a Letter of Intent dated October 14,
1995 which $75,000 deposit shall be applied against Foothill's expenses in
connection with its auditing of Borrower and its businesses, financial, legal
and collateral investigations and determinations in the underwriting, approving,
documenting, closing and funding of the financial accommodations represented by
this Agreement and in connection with costs and expenses incurred by it and its
counsel in the above activities. Borrower understands that the amount of the
above referenced costs and charges may exceed the $75,000 on deposit and that
Borrower is obligated to pay and/or reimburse Foothill for all such expenses
without regard to the amount tendered to Foothill as such deposit.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to Initial Advance, L/C, or L/C Guaranty. The
obligation of Foothill to make the initial advance or to provide the initial L/C
or L/C Guaranty is subject to the fulfillment, to the satisfaction of Foothill
and its counsel, of each of the following conditions on or before the Closing
Date:
(a) the Closing Date shall occur on or before December
31, 1995;
(b) Old Lender shall have executed and delivered the Pay-Off Letter,
together with UCC termination statements and other documentation evidencing the
termination of its liens and security interests in and to the properties and
assets of Borrower or a subordination agreement in form and substance
satisfactory to Foothill in its sole discretion;
(c) All applicable parties and creditors shall have executed and
delivered UCC termination statements and other documentation evidencing the
termination of its liens and security interests in and to the properties and
assets of Borrower or a subordination agreement in form and substance
satisfactory to Foothill in its sole discretion;
(d) Foothill shall have received searches reflecting the
filing of its financing statements;
(e) Foothill shall have received each of the following documents, duly
executed, and each such document shall be in full force and effect and such
other documents and agreements as may be required or deemed necessary by
Foothill, duly executed and in full force and effect:
i. Loan and Security Agreement with
Schedule A-1 - List of Approved Medi-Claim, Inc. Account
Debtors and Approved Written Contracts
Schedule E-1 - Eligible Inventory and Locations Thereof,
Schedule P-1 - Permitted Liens,
Schedule 5.9 - Litigation and
ii. UCC, Tax and Judgment Lien Searches on
(i) Medi-Mail, Inc.
(ii) Family Pharmaceuticals of America, Inc.
(iii) Medi-Claim, Inc.
(iv) Medi-Phar, Inc.
(v) Mednet, MPC Corporation
(vi) GBK, Inc.
(vii) Medical Services Agency, Inc.
(viii)The Home Pharmacy
(ix) ArcVentures, Inc.
(x) Tel-Drug, Inc.
with Secretary of State of
Nevada
California
South Carolina
Pennsylvania
Illinois
South Carolina
Maryland
Local Searches in/with
▇▇▇▇ County, Illinois
Cumberland County, Pennsylvania
Charleston County, South Carolina
iii. Assignment of Trademarks
Medi-Mail, Inc.
1-800-RX Delivery
1-800-RX Discount
RX for the 90's
Medi-Claim
Medi-Phar
Mednet
iv. Lockbox Operating Procedural
Agreements and Depository Account Agreements
as to Medi-Mail, Inc. in Nevada-First Interstate Bank of
Nevada;
as to Medi-Mail, Inc. in Chicago-First Chicago Bank and
Trust Company;
as to Medi-Mail, Inc. in South Carolina-NationsBank;
as to Medi-Claim, Inc.- Mellon Bank and Trust Company;
as to Medi-Phar, Inc. in Nevada-First-Interstate Bank of
Nevada; and
as to Medi-Phar, Inc. in California-First Interstate Bank
v. UCC Financing Statements With Respect
to
(i) Medi-Mail, Inc.
(ii) Family Pharmaceuticals of America, Inc.
(iii) Medi-Claim, Inc.
(iv) Medi-Phar, Inc.
(v) Mednet, MPC Corporation
with the Secretary of State of
Nevada
California
South Carolina
Pennsylvania
Illinois
and with Local Filing Authorities in
▇▇▇▇ County, Illinois
Prothonotary of Cumberland County, Pennsylvania
County Clerk of Charleston County, South Carolina
vi. Conditional Assignment of Leases for
Chief Executive Offices of
Medi-Mail, Inc.
Family Pharmaceuticals of America, Inc.
Medi-Claim, Inc.
Medi-Phar, Inc.
Mednet, MPC Corporation
vii. Copies of Leases
viii.Agreements of Lessor to Conditional Assignment of Leases or
Landlord's Licenses and Waiver Agreements (This condition shall be a
condition precedent to advances against Inventory; provided however
that Borrower agrees within 30 days of the date of this Agreement to
utilize its best efforts to obtain the Lessor's Agreement from
Borrower's Landlord at the location of its Chief Executive Office in
Las Vegas, Nevada)
ix. Certified Copies of Certificate of
Incorporation
(i) Medi-Mail, Inc.
(ii) Family Pharmaceuticals of America, Inc.
(iii) Medi-Claim, Inc.
(iv) Medi-Phar, Inc.
(v) Mednet, MPC Corporation
x. Officer Certified Copy of Bylaws
(i) Medi-Mail, Inc.
(ii) Family Pharmaceuticals of America, Inc.
(iii) Medi-Claim, Inc.
(iv) Medi-Phar, Inc.
(v) Mednet, MPC Corporation
xi. Certificate of Authority To Do Business
and/or Good Standing Certificates in Nevada, South
Carolina, Illinois, California and Pennsylvania for
(i) Medi-Mail, Inc.
(ii) Family Pharmaceuticals of America, Inc.
(iii) Medi-Claim, Inc.
(iv) Medi-Phar, Inc.
(v) Mednet, MPC Corporation
xii. Secretary Certificates of Directors
Resolutions
and Certificate of Incumbency
(i) Medi-Mail, Inc.
(ii) Family Pharmaceuticals of America, Inc.
(iii) Medi-Claim, Inc.
(iv) Medi-Phar, Inc.
(v) Mednet, MPC Corporation
xiii.For advances on Home Pharmacy Accounts Completion of
Audit by Foothill and for advances on Medi-Phar, Inc.
Accounts and Inventory, the elimination of existing UCC
liens on Medi-Phar, Inc. California accounts receivable
and Inventory
xiv.Verification that all contracts giving rise to Accounts are acceptable
to Foothill and either written in name of Borrower or assigned to
Borrower with applicable consents of other parties to contracts
xv. Most recent Management Letter from Accountants to be
reviewed and approved by Foothill
xvi. Financial projections for the next 12 months to be
provided to Foothill and approved by Foothill
xvii.Borrower must have performed and Foothill must have observed physical
inventories of all Inventory at all of Borrower's locations where
Inventory to be advanced against is located and the results of such
physical inventory must be satisfactory to Foothill
(f) Foothill shall have received certificates of corporate status with
respect to Borrower, each dated within fifteen (15) days of the Closing Date,
such certificates to be issued by the Secretary of State of the states in which
its failure to be duly qualified or licensed would have a material adverse
effect on the financial condition or properties and assets of Borrower, which
certificates shall indicate that Borrower is in good standing;
(g) Foothill shall have received the certified copies of the policies
of insurance, together with the endorsements thereto, as are required by Section
6.12 hereof, the form and substance of which shall be satisfactory to Foothill
and its counsel;
(h) Foothill shall have received duly executed certificates of title
with respect to that portion of the Collateral that is subject to certificates
of title;
(i) Foothill shall have received landlord waivers and, if requested by
Foothill, mortgagee waivers from the lessors and mortgagees of the locations
where the Inventory or Equipment is located prior to including Inventory in the
Borrowing Base;
(j) Foothill shall have received an opinion of
Borrower's counsel in form and substance satisfactory to Foothill
in its sole discretion;
(k) Foothill shall have received satisfactory evidence that all
returns required to be filed by Borrower have been timely filed and all taxes
upon Borrower or its properties, assets, income and franchises (including real
property taxes and payroll taxes) have been paid prior to delinquency, except
such taxes that are the subject of a Permitted Protest;
(l) Borrower shall be in compliance with all laws, rules and
regulations concerning the operation of its respective businesses and have
obtained and furnished to Foothill all licenses and permits, together with
collateral assignments of such of the licenses and permits as Foothill may
require; and
(m) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered or
executed or recorded and shall be in form and substance satisfactory to Foothill
and its counsel.
3.2 Conditions Precedent to All Advances, L/Cs, or L/C Guarantees. The
following shall be conditions precedent to all advances, L/Cs, or L/C Guarantees
hereunder:
(a) the representations and warranties contained in this Agreement and
the other Loan Documents shall be true and correct in all respects on and as of
the date of such advance, L/C, or L/C Guaranty, as though made on and as of such
date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Event of Default or event which with the giving of notice or
passage of time would constitute an Event of Default shall have occurred and be
continuing on the date of such advance, L/C, or L/C Guaranty, nor shall either
result from the making thereof;
(c) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the making of such advance or the
issuance of such L/C or L/C Guaranty shall have been issued and remain in force
by any governmental authority against Borrower, Foothill, or any of their
Affiliates;
(d) Borrower will have entered into a written contract with the firm
of ▇▇▇▇▇▇▇▇ & Associates to perform the functions, through one of its employees
or associates, of a full time Chief Financial Officer of Borrower on an interim
basis, and such individual must be functioning as such interim full time Chief
Financial Officer in Borrower's day to day operations until a permanent Chief
Financial Officer, acceptable to Foothill in its reasonable discretion, is
employed and such designated individual functions as such full time permanent
Chief Financial Officer in Borrower's day to day operations; and
(e) For Advances subsequent to March 31, 1996, McGladrey & ▇▇▇▇▇▇, LLP
shall have performed a review, in form, scope and substance satisfactory to
Foothill, of Borrower's accounting systems, procedures and processes and the
suggestions and corrective measures set forth in the written report to Borrower
of such review shall have been or be implemented (within a time period deemed
acceptable and reasonable by Foothill) by Borrower.
.
3.3 Term; Automatic Renewal. This Agreement shall become
effective upon the execution and delivery hereof by Borrower and
Foothill and shall continue in full force and effect for a term ending on the
date (the "Renewal Date") that is five (5) years from the Closing Date and
automatically shall be renewed for successive two (2) year periods thereafter,
unless sooner terminated pursuant to the terms hereof. Either party may
terminate this Agreement effective on the Renewal Date or on any two (2) year
anniversary of the Renewal Date by giving the other party at least ninety (90)
days prior written notice by registered or certified mail, return receipt
requested. The foregoing notwithstanding, Foothill shall have the right to
terminate its obligations under this Agreement immediately and without notice
upon the occurrence and during the continuation of an Event of Default.
3.4 Effect of Termination. On the date of termination, all Obligations
(including contingent reimbursement obligations under any outstanding L/Cs or
L/C Guarantees) immediately shall become due and payable without notice or
demand. No termination of this Agreement, however, shall relieve or discharge
Borrower of Borrower's duties, Obligations, or covenants hereunder, and
Foothill's continuing security interests in the Collateral shall remain in
effect until all Obligations have been fully and finally discharged and
Foothill's obligation to provide advances hereunder is terminated. If Borrower
has sent a notice of termination pursuant to the provisions of Section 3.3, but
fails to pay all Obligations on the date set forth in said notice, then Foothill
may, but shall not be required to, renew this Agreement for an additional term
of two (2) years.
3.5 Early Termination by Borrower. The provisions of Section 3.3 that allow
termination of this Agreement by Borrower only on the Renewal Date and certain
anniversaries thereof notwithstanding, Borrower has the option, at any time upon
ninety (90) days prior written notice to Foothill, to terminate this Agreement
by paying to Foothill, in cash, the Obligations (including an amount equal to
the full amount of the L/Cs or L/C Guarantees), together with a premium (the
"Early Termination Premium") equal to the greater of: (a) the total interest and
L/C and L/C Guaranty fees for the immediately preceding six (6) months or (b)
Six Hundred Thousand Dollars ($600,000) if termination occurs within the first
twenty four months (24) after the date of this Agreement or Four Hundred
Thousand Dollars ($400,000) if termination occurs during the twenty fifth (25th)
through the forty-eighth months (48th) after the date of this Agreement or Two
Hundred Thousand Dollars ($200,000) if termination occurs during the forty-ninth
(49th) through the sixtieth months (60th) after the date of this Agreement.
Notwithstanding anything contained in this Section to the contrary, in the
event that Foothill declares an Event of Default as a result of a violation of
Section 8.2 predicated upon a violation or non-compliance with Section 7.9 and
the violation or non-compliance with Section 7.9 is a result of a Change of
Control not involving any officer or director of Borrower or any Affiliate of
any officer or director of Borrower, Borrower shall have a period of forty-five
(45) days from the date of written notice from Foothill of declaration of such
Event of Default to repay all Obligations with the application of an Early
Termination Premium but at the rate of fifty percent (50%) of the amount of such
Early Termination Premium which otherwise would be due as of the date of the
notice of such Event of Default.
Notwithstanding anything contained in this Section to the contrary,
Borrower shall during the six (6) months following the Closing Date retain
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ of ▇▇▇▇▇▇▇▇ & Associates for such period of time as is
necessary to supervise and to undertake the performance of the responsibility of
obtaining written amendments to each of the contracts giving rise to a potential
Eligible Medi-Claim Account for both the sponsor agreements and for the pharmacy
agreements and shall cause ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ on a monthly basis to report to
Foothill as to the progress being made. If after the sixth (6th) month following
the Closing Date Foothill shall not be satisfied with the efforts of Borrower or
Borrower through the efforts of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall not have achieved the
amendments to all such contracts, during the seventh, eight and ninth months
after the Closing Date, Borrower may after payment to Foothill of all
installments of the Closing Fee set forth in Section 2.8 (a) prepay on or before
the last day of the ninth month after the Closing Date the Obligations without
premium or penalty.
3.6 Termination Upon Event of Default. If Foothill terminates this
Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be the
amount of damages sustained by Foothill as the result of the early termination
and Borrower agrees that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.6 shall
be deemed included in the Obligations. The Early Termination Premium
shall not be charged or collected in the event that Foothill exercises its
remedies set forth in Section 9 of this Agreement and conducts a commercially
reasonable public or private sale of the Collateral to obtain payment of the
Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby grants to Foothill a
continuing security interest in all currently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Foothill's security interests in
the Collateral shall attach to all Collateral without further act on the part of
Foothill or Borrower. Anything contained in this Agreement or any other Loan
Document to the contrary notwithstanding, except for the sale of Inventory to
buyers in the ordinary course of business, Borrower has no authority, express or
implied, to dispose of any item or portion of the Collateral.
4.2 Negotiable Collateral. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Borrower shall,
immediately upon the request of Foothill, endorse and assign such Negotiable
Collateral to Foothill and deliver physical possession of such Negotiable
Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles, Negotiable Collateral. On
or before the Closing Date, Foothill, Borrower, and the Lockbox Banks shall
enter into the Lockbox Agreements, in form and substance satisfactory to
Foothill in its sole discretion, pursuant to which all of Borrower's cash
receipts, checks, and other items of payment (including, insurance proceeds,
proceeds of cash sales, rental proceeds, and tax refunds) will be forwarded to
Foothill on a daily basis. At any time following an Event of Default or at any
time that Foothill in the exercise of its reasonable credit judgement deems
itself insecure or believes that the prospect for repayment of the Obligations
is impaired or unlikely, Foothill or Foothill's designee may: (a) notify
customers or Account Debtors of Borrower that the Accounts, General Intangibles,
or Negotiable Collateral have been assigned to Foothill or that Foothill has a
security interest therein; and (b) collect the Accounts, General Intangibles,
and Negotiable Collateral directly and charge the collection costs and expenses
to Borrower's loan account. Borrower agrees that it will hold in
trust for Foothill, as Foothill's trustee, any cash receipts, checks, and other
items of payment (including, insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) that it receives and immediately will deliver said
cash receipts, checks, and other items of payment to Foothill in their original
form as received by Borrower. Borrower may request remittance to it of any
credit balance reflected on its account at any time when all Obligations have
been paid in full.
4.4 Delivery of Additional Documentation Required. At any time upon the
request of Foothill, Borrower shall execute and deliver to Foothill all
financing statements, continuation financing statements, fixture filings,
security agreements, chattel mortgages, pledges, assignments, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that
Foothill may reasonably request, in form satisfactory to Foothill, to perfect
and continue perfected Foothill's security interests in the Collateral and in
order to fully consummate all of the transactions contemplated hereby and under
the other the Loan Documents.
4.5 Power of Attorney. Borrower hereby irrevocably makes, constitutes, and
appoints Foothill (and any of Foothill's officers, employees, or agents
designated by Foothill) as Borrower's true and lawful attorney, with power to:
(a) if Borrower refuses to, or fails timely to execute and deliver any of the
documents described in Section 4.4, sign the name of Borrower on any of the
documents described in Section 4.4; (b) at any time that an Event of Default has
occurred and is continuing or Foothill deems itself insecure (in accordance with
Section 1208 of the Code), sign Borrower's name on any invoice or ▇▇▇▇ of lading
relating to any Account, drafts against Account Debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to Account
Debtors; (c) send requests for verification of Accounts; (d) endorse Borrower's
name on any checks, notices, acceptances, money orders, drafts, or other item of
payment or security that may come into Foothill's possession; (e) at any time
that an Event of Default has occurred and is continuing or Foothill deems itself
insecure (in accordance with Section 1208 of the Code), notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Foothill, to receive and open all mail addressed to Borrower, and
to retain all mail relating to the Collateral and forward all other mail to
Borrower; (f) at any time that an Event of Default has occurred and is
continuing or Foothill deems itself
insecure (in accordance with Section 1208 of the Code), make, settle, and adjust
all claims under Borrower's policies of insurance and make all determinations
and decisions with respect to such policies of insurance; and (g) at any time
that an Event of Default has occurred and is continuing or Foothill deems itself
insecure (in accordance with Section 1208 of the Code), settle and adjust
disputes and claims respecting the Accounts directly with Account Debtors, for
amounts and upon terms which Foothill determines to be reasonable, and Foothill
may cause to be executed and delivered any documents and releases which Foothill
determines to be necessary. The appointment of Foothill as Borrower's attorney,
and each and every one of Foothill's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully and
finally repaid and performed and Foothill's obligation to extend credit
hereunder is terminated.
4.6 Right to Inspect. Foothill (through any of its officers, employees, or
agents) shall have the right, from time to time hereafter to inspect Borrower's
Books and to check, test, and appraise the Collateral in order to verify
Borrower's financial condition or the amount, quality, value, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Foothill as follows:
5.1 No Prior Encumbrances. Borrower has good and
indefeasible title to the Collateral free and clear of liens,
claims, security interests, or encumbrances, except for Permitted
Liens.
5.2 Eligible Accounts. The Eligible Accounts-Medi-Claim, Inc. set forth on
Schedule A-1 represent an agreed upon listing of Accounts represented by written
contracts reviewed and approved by Foothill and none of the Contracts listed on
Schedule A-1 have been revised or modified or will be revised or modified from
the dates listed on Schedule A-1 without the prior written consent of Foothill.
The Eligible Accounts-Medi-Claim, Inc. pursuant to the contracts set forth on
Schedule A-1, are at the time of the creation thereof and as of each date on
which Borrower includes them in a Borrowing Base calculation or certification,
bona fide existing obligations created by the sale and delivery of Inventory or
the rendition of
services to Account Debtors in the ordinary course of Borrower's business, and
to the knowledge of Borrower are unconditionally owed to Borrower without
defenses, disputes, offsets, counterclaims, or rights of return or cancellation.
The property or service giving rise to such Eligible Accounts has been delivered
to the Account Debtor, or to the Account Debtor's agent for immediate shipment
to and unconditional acceptance by the Account Debtor. At the time of the
creation of an Eligible Account-Medi-Claim, Inc. and as of each date on which
Borrower includes an Eligible Account-Medi-Claim, Inc. in a Borrowing Base
calculation or certification, Borrower has not received notice of actual or
imminent bankruptcy, insolvency, or material impairment of the financial
condition of any applicable Account Debtor regarding such Eligible
Account-Medi-Claim, Inc.
The Eligible Accounts-Mednet, MPC Corporation, Inc., Medi-Mail, Inc., Family
Pharmaceuticals of America, Inc. and Medi-Phar, Inc. are at the time of the
creation thereof and as of each date on which Borrower includes them in a
Borrowing Base calculation or certification, bona fide existing obligations
created by the sale and delivery of Inventory or the rendition of services to
Account Debtors in the ordinary course of Borrower's business, and to the
knowledge of Borrower are unconditionally owed to Borrower without defenses,
disputes, offsets, counterclaims, or rights of return or cancellation. The
property or service giving rise to such Eligible Accounts has been delivered to
the Account Debtor, or to the Account Debtor's agent for immediate shipment to
and unconditional acceptance by the Account Debtor. At the time of the creation
of an Eligible Account-Mednet, MPC Corporation, Inc., Medi-Mail, Inc., Family
Pharmaceuticals of America, Inc. and Medi-Phar, Inc. and as of each date on
which Borrower includes an Eligible Account-Mednet, MPC Corporation, Inc.,
Medi-Mail, Inc., Family Pharmaceuticals of America, Inc. and Medi-Phar, Inc. in
a Borrowing Base calculation or certification, Borrower has not received notice
of actual or imminent bankruptcy, insolvency, or material impairment of the
financial condition of any applicable Account Debtor regarding such Eligible
Account-Mednet, MPC Corporation, Inc., Medi-Mail, Inc., Family Pharmaceuticals
of America, Inc. and Medi-Phar, Inc.
5.3 Eligible Inventory. All Eligible Inventory is now and at
all times hereafter shall be of good and merchantable quality and
to Borrower's knowledge free from defects.
5.4 Location of Inventory and Equipment. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar
party (without Foothill's prior written consent) and are located only at the
locations identified on Schedule E-1 or otherwise permitted by Section 6.15.
5.5 Inventory Records. Borrower now keeps, and hereafter at all times shall
keep, correct and accurate records itemizing and describing the kind, type,
quality, and quantity of the Inventory, and Borrower's cost therefor.
5.6 Location of Chief Executive Office; FEIN. The chief
executive office of Borrower is located at the address indicated in
the preamble to this Agreement and Borrower's FEIN is ▇▇-▇▇▇-▇▇▇▇
for Medi-Mail, Inc., ▇▇-▇▇▇-▇▇▇▇ for Family Pharmaceuticals of
America, Inc., ▇▇-▇▇▇-▇▇▇▇ for Medi-Claim, Inc. and ▇▇-▇▇▇-▇▇▇▇ for
Medi-Phar, Inc. and ▇▇-▇▇▇-▇▇▇▇ for Mednet, MPC Corporation.
5.7 Due Organization and Qualification; No Subsidiaries. Borrower is duly
organized and existing and in good standing under the laws of the state of its
incorporation and qualified and licensed to do business in, and in good standing
in, any state where the failure to be so licensed or qualified could reasonably
be expected to have a material adverse effect on the business, operations,
condition (financial or otherwise), finances, or prospects of Borrower or on the
value of the Collateral to Foothill. Borrower, other than Mednet, MPC
Corporation has no subsidiaries.
5.8 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's corporate powers, have
been duly authorized, and are not in conflict with nor constitute a breach of
any provision contained in Borrower's Articles or Certificate of Incorporation,
or By-laws, nor will they constitute an event of default under any material
agreement to which Borrower is a party or by which its properties or assets may
be bound.
5.9 Litigation. There are no actions or proceedings pending by or against
Borrower before any court or administrative agency and Borrower does not have
knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower, except for: (a) ongoing collection matters in which Borrower
is the plaintiff; (b) matters disclosed on Schedule 5.9; and (c) and matters
arising after the date hereof that, if decided adversely to Borrower, would not
materially impair the prospect of repayment of
the Obligations or materially impair the value or priority of
Foothill's security interests in the Collateral.
5.10 No Material Adverse Change in Financial Condition. All financial
statements relating to Borrower that have been delivered by Borrower to Foothill
have been prepared in accordance with GAAP and fairly present Borrower's
financial condition as of the date thereof and Borrower's results of operations
for the period then ended. There has not been a material adverse change in the
financial condition of Borrower since the date of the latest financial
statements submitted to Foothill on or before the Closing Date.
5.11 Solvency. Borrower is Solvent. No transfer of property is being made
by Borrower and no obligation is being incurred by Borrower in connection with
the transactions contemplated by this Agreement or the other Loan Documents with
the intent to hinder, delay, or defraud either present or future creditors of
Borrower.
5.12 Employee Benefits. Borrower neither has nor maintains any Plan but
nothing contained in this Agreement shall be construed to prohibit Borrower from
adopting a Plan provided that Borrower shall provide Foothill with a copy of
such Plan at least thirty (30) days prior to adoption thereof.
5.13 Environmental Condition. None of Borrower's properties or assets has
ever been used by Borrower or, to the best of Borrower's knowledge, by previous
owners or operators in the disposal of, or to produce, store, handle, treat,
release, or transport, any Hazardous Materials. None of Borrower's properties or
assets has ever been designated or identified in any manner pursuant to any
environmental protection statute as a Hazardous Materials disposal site, or a
candidate for closure pursuant to any environmental protection statute. No lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned or operated by Borrower. Borrower has
not received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal or state governmental agency concerning
any action or omission by Borrower resulting in the releasing or disposing of
Hazardous Materials into the environment.
5.14 Reliance by Foothill; Cumulative. Each warranty and
representation contained in this Agreement automatically shall be
deemed repeated with each advance or issuance of an L/C or L/C Guaranty and
shall be conclusively presumed to have been relied on by Foothill regardless of
any investigation made or information possessed by Foothill. The warranties and
representations set forth herein shall be cumulative and in addition to any and
all other warranties and representations that Borrower now or hereafter shall
give, or cause to be given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, and
unless Foothill shall otherwise consent in writing, Borrower shall do all of the
following:
6.1 Accounting System. Borrower shall maintain a standard and modern system
of accounting in accordance with GAAP with ledger and account cards or computer
tapes, discs, printouts, and records pertaining to the Collateral which contain
information as from time to time may be requested by Foothill. Borrower also
shall keep proper books of account showing all sales, claims, and allowances on
its Inventory.
6.2 Collateral Reports. Borrower shall deliver to Foothill, no later than
the tenth (10th) day of each month during the term of this Agreement, a detailed
aging, by total, of the Accounts, a reconciliation statement, and a summary
aging, by vendor, of all accounts payable and any book overdraft. Where
applicable original sales invoices evidencing daily sales shall be mailed by
Borrower to each Account Debtor with, at Foothill's request, a copy to Foothill,
and, at Foothill's direction, the invoices shall indicate on their face that the
Account has been assigned to Foothill and that all payments are to be made
directly to Foothill. Borrower shall deliver to Foothill, as Foothill may from
time to time require, collection reports, sales journals, invoices, original
delivery receipts, customer's purchase orders, shipping instructions, bills of
lading, and other documentation respecting shipment arrangements. Absent such a
request by Foothill, copies of all such documentation shall be held by Borrower
as custodian for Foothill.
Borrower shall on or before the Closing Date provide Foothill with a copy of
each written contract now in existence or hereafter created which give rise to
an Eligible Account. Borrower agrees to make no changes, revisions or
modifications to any written contract
giving rise to an Eligible Account without the prior written consent of
Foothill. With respect to any change, revision or modification agreed to by
Foothill, Borrower shall on or before the tenth (10th) day of each calendar
month provide Foothill with a copy of all amendments, revisions and
modifications to each written contract which gives rise to an Account showing
the acceptance of such amendment, revision or modification and execution by all
parties to such contract and Borrower shall provide a copy of any newly entered
into written contract giving rise to an Account. With respect to any new written
contract giving rise to an Account, Borrower understands that neither such
written contract nor the Account arising therefrom shall qualify as an Eligible
Account until affirmative approval and acceptance by Foothill of the terms
thereof.
In addition, from time to time, Borrower shall deliver to Foothill such other
and additional information or documentation as Foothill may request including
but not limited to reports on a weekly basis as to the market value of the
pharmaceutical items comprising Eligible Inventory.
6.3 Schedules of Accounts. With such regularity as Foothill shall require,
Borrower shall provide Foothill with schedules describing all Accounts.
Foothill's failure to request such schedules or Borrower's failure to execute
and deliver such schedules shall not affect or limit Foothill's security
interests or other rights in and to the Accounts.
6.4 Financial Statements, Reports, Certificates. Each of the individual
entities comprising Borrower agrees to deliver to Foothill: (a) as soon as
available, but in any event within thirty (30) days after the end of each month
during each of Borrower's fiscal years, a company prepared balance sheet, income
statement, and cash flow statement covering Borrower's operations during such
period; and (b) as soon as available, but in any event within ninety (90) days
after the end of each of Borrower's fiscal years, consolidated and consolidating
financial statements of Borrower for each such fiscal year, audited by McGladrey
& ▇▇▇▇▇▇, LLP or other independent certified public accountants reasonably
acceptable to Foothill and certified, without any qualifications, by such
accountants to have been prepared in accordance with GAAP, together with a
certificate of such accountants addressed to Foothill stating that such
accountants do not have knowledge of the existence of any event or condition
constituting an Event of Default, or that would, with the passage of time or the
giving of
notice, constitute an Event of Default. Such audited financial statements shall
include a balance sheet, profit and loss statement, and cash flow statement,
and, if prepared, the Accountants' Letter to Management.
Together with the above, Borrower shall cause Borrower to deliver to
Foothill Mednet, MPC Corporation's Form 10-Q Quarterly Reports, Form 10-K Annual
Reports, and Form 8-K Current Reports, and any other filings made by Mednet, MPC
Corporation with the Securities and Exchange Commission, if any, as soon as the
same are filed, or any other information that is provided by Mednet, MPC
Corporation to its shareholders, and any other report reasonably requested by
Foothill relating to the Collateral or the financial condition of Borrower.
Each month, together with the financial statements provided pursuant to
Section 6.4(a), Borrower shall deliver to Foothill a certificate signed by the
chief financial officer of Borrower and each of the entities comprising Borrower
to the effect that: (i) all reports, statements, or computer prepared
information of any kind or nature delivered or caused to be delivered to
Foothill hereunder have been prepared in accordance with GAAP (except for year
end adjustments) and fairly present the financial condition of Borrower; (ii)
Borrower is in timely compliance with all of its covenants and agreements
hereunder; (iii) the representations and warranties of Borrower contained in
this Agreement and the other Loan Documents are true and correct in all material
respects on and as of the date of such certificate, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date); and (iv) on the date of delivery of such certificate
to Foothill there does not exist any condition or event that constitutes an
Event of Default (or, in each case, to the extent of any non-compliance,
describing such non-compliance as to which he or she may have knowledge and what
action Borrower has taken, is taking, or proposes to take with respect thereto).
Borrower shall have issued written instructions to McGladrey & ▇▇▇▇▇▇, LLP
or its then current firm of independent certified public accountants authorizing
them to communicate with Foothill and to release to Foothill whatever financial
information concerning Borrower that Foothill may request. Borrower hereby
irrevocably authorizes and directs all auditors, accountants, or other third
parties to deliver to Foothill, at Borrower's expense, copies of Borrower's
financial statements, papers related thereto,
and other accounting records of any nature in their possession, and to disclose
to Foothill any information, other than that which is claimed to be privileged
under the "attorney-client" privilege, they may have regarding Borrower's
business affairs and financial conditions.
6.5 Tax Returns. Borrower agrees to deliver to Foothill copies of each of
Borrower's future federal income tax returns, and any amendments thereto, within
thirty (30) days of the filing thereof with the Internal Revenue Service.
6.6 Intentionally Deleted.
6.7 Designation of Inventory. Borrower shall now and from time to time
hereafter, but not less frequently than weekly, execute and deliver to Foothill
a designation of Inventory specifying Borrower's cost and the wholesale market
value thereof and further specifying such other information as Foothill may
reasonably request.
6.8 Returns. Returns and allowances, if any, as between Borrower and its
Account Debtors shall be on the same basis and in accordance with the usual
customary practices of Borrower, as they exist at the time of the execution and
delivery of this Agreement. If, at a time when no Event of Default has occurred
and is continuing, any Account Debtor returns any Inventory to Borrower,
Borrower promptly shall determine the reason for such return and, if Borrower
accepts such return, adjust its books and generate a return report (with a copy
to be sent to Foothill) with respect to such Account Debtor. If, at a time when
an Event of Default has occurred and is continuing, any Account Debtor returns
any Inventory to Borrower, Borrower promptly shall determine the reason for such
return and, if Foothill consents (which consent shall not be unreasonably
withheld), issue a credit memorandum (with a copy to be sent to Foothill) in the
appropriate amount to such Account Debtor. On a daily basis, Borrower shall
notify Foothill of all returns and recoveries and of all disputes and claims.
6.9 Title to Equipment. Upon Foothill's request, Borrower immediately shall
deliver to Foothill, properly endorsed, any and all evidences of ownership of,
certificates of title, or applications for title to any items of Equipment.
6.10 Maintenance of Equipment. Borrower shall keep and
maintain the Equipment in good operating condition and repair
(ordinary wear and tear excepted), and make all necessary replacements thereto
so that the value and operating efficiency thereof shall at all times be
maintained and preserved. Borrower shall not permit any item of Equipment to
become a fixture to real estate or an accession to other property, and the
Equipment is now and shall at all times remain personal property.
6.11 Taxes. All assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or any of its property have been paid, and shall hereafter be paid in full,
before delinquency or before the expiration of any extension period. Borrower
shall make due and timely payment or deposit of all federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Foothill, on demand, appropriate certificates attesting to the
payment thereof or deposit with respect thereto. Borrower will make timely
payment or deposit of all tax payments and withholding taxes required of it by
applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Foothill with proof satisfactory to Foothill indicating that Borrower
has made such payments or deposits.
6.12 Insurance.
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as are ordinarily insured against by
other owners in similar businesses. Borrower also shall maintain business
interruption, public liability, product liability, and property damage insurance
relating to Borrower's ownership and use of the Collateral as well as insurance
against larceny, embezzlement, and criminal misappropriation.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be reasonably satisfactory to Foothill.
All such policies of insurance (except those of public liability and property
damage) shall contain a 438BFU lender's loss payable endorsement, or an
equivalent endorsement in a form satisfactory to Foothill, showing Foothill as
sole loss payee thereof, and shall contain a waiver of warranties, and shall
specify that the insurer must give at least ten (10) days prior written notice
to Foothill before canceling its policy for any reason. Borrower shall deliver
to Foothill certified copies of
such policies of insurance and evidence of the payment of all premiums therefor.
All proceeds payable under any such policy shall be payable to Foothill to be
applied on account of the Obligations.
6.13 Financial Covenants. Borrower shall maintain:
(a) Current Ratio. At all times, a ratio of
Consolidated Current Assets divided by Consolidated Current
Liabilities of at least one to one (1.0 to 1.0);
(b) Tangible Net Worth. At Borrower's fiscal year end 1995 a Tangible
Net Worth of at least Five Hundred Thousand Dollars ($500,000) ("Base Tangible
Net Worth") and at the end of each fiscal quarter thereafter a Tangible Net
Worth equal to the Base Tangible Net Worth plus the sum of Five Hundred Thousand
Dollars ($500,000) times the number of quarters since Borrower's fiscal year end
1995 (ie. at Borrower's fiscal year end 1996 Borrower's Tangible Net Worth shall
be the Base Tangible Net Worth of $500,000 plus the sum of $500,000 times 4
representing the quarters elapsed since Borrower's fiscal year end 1995); and
(c) Earnings Before Interest, Taxes, Depreciation and Amortization.
Tested on a fiscal quarter end basis, commencing as of the end of Borrower's
first fiscal quarter 1996, net earnings from operations before interest, taxes,
depreciation and amortization on a cumulative basis for such periods shall be at
least the following:
Fiscal Quarter Yearly Cumulative Earnings Before
Interest, Taxes, Depreciation and
Amortization
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇ $ 500,000
2nd Fiscal Quarter-1996 $1,000,000
3rd Fiscal Quarter-1996 $1,500,000
4th Fiscal Quarter-1996 $2,000,000
1st Fiscal Quarter-1997 $1,000,000
2nd Fiscal Quarter-1997 $2,000,000
3rd Fiscal Quarter-1997 $3,000,000
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇ $4,000,000
6.14 No Setoffs or Counterclaims. All payments hereunder and under the
other Loan Documents made by or on behalf of Borrower shall be made without
setoff or counterclaim and free and clear of, and without deduction or
withholding for or on account of, any federal, state, or local taxes.
6.15 Location of Inventory and Equipment. Borrower shall keep the Inventory
and Equipment only at the locations identified on Schedule E-1; provided,
however, that Borrower may amend Schedule E-1 so long as such amendment occurs
by written notice to Foothill not less than thirty (30) days prior to the date
on which the Inventory or Equipment is moved to such new location, so long as
such new location is within the continental United States, and so long as, at
the time of such written notification, Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected
Foothill's security interests in such assets and also provides to Foothill a
landlord's waiver in form and substance satisfactory to Foothill.
6.16 Compliance with Laws. Borrower shall comply in all material respects
with the requirements of all applicable laws, rules, regulations, and orders of
any governmental authority, including the Fair Labor Standards Act and the
Americans With Disabilities Act, other than laws, rules, regulations, and orders
the non-compliance with which, individually or in the aggregate, would not have
and could not reasonably be expected to have a material adverse effect on the
business, operations, condition (financial or otherwise), finances, or prospects
of Borrower or on the value of the Collateral to Foothill.
Foothill acknowledges that Borrower has not registered or become
licensed in the following jurisdictions: Alabama, Alaska, Arkansas, Delaware,
Florida, Kansas, Kentucky, Maine, Minnesota, Mississippi, Missouri, Montana, New
Mexico, North Dakota, Oklahoma, Rhode Island, South Carolina, Tennessee, Texas,
Utah, Virginia or Wisconsin. Notwithstanding the above acknowledgement, Borrower
is currently of the opinion that it is in compliance with and continue to be in
compliance in all respects with all requirements of all laws, rules, regulations
and orders of any Federal, State, Regional or Local governmental authority
requiring licensing or registration to do business generally, to conduct the
operations of a pharmacy, to sell and distribute pharmaceuticals in interstate
commerce or to administer or process claims for payment or reimbursement for the
provision of medical or health related services or goods.
6.17 Employee Benefits.
(a) Borrower shall deliver to Foothill a written statement by the chief
financial officer of Borrower specifying the nature of any of the following
events and the actions which Borrower proposes to take with respect thereto
promptly, and in any event within ten (10) days of becoming aware of any of
them, and when known, any action taken or threatened by the Internal Revenue
Service, PBGC, Department of Labor, or other party with respect thereto: (i) an
ERISA Event with respect to any Plan; (ii) the incurrence of an obligation to
pay a premium to the PBGC under Section 4006(a)(3)(E) of ERISA with respect to
any Plan; and (iii) any lien on the assets of Borrower arising in connection
with any Plan.
(b) Borrower shall also promptly furnish to Foothill copies prepared or
received by Borrower or an ERISA Affiliate of: (i) at the request of Foothill,
each annual report (Internal Revenue Service Form 5500 series) and all
accompanying schedules, actuarial reports, financial information concerning the
financial status of any Plan, and schedules showing the amounts contributed to
any Plan by or on behalf of Borrower or its ERISA Affiliates for the most recent
three (3) plan years; (ii) all notices of intent to terminate or to have a
trustee appointed to administer any Plan; (iii) all written demands by the PBGC
under Subtitle D of Title IV of ERISA; (iv) all notices required to be sent to
employees or to the PBGC under Section 302 of ERISA or Section 412 of the IRC;
(v) all written notices received with respect to a Multiemployer Plan concerning
(x) the imposition or amount of withdrawal liability pursuant to Section 4202 of
ERISA, (y) a termination described in Section 4041A of ERISA, or (z) a
reorganization or
insolvency described in Subtitle E of Title IV of ERISA; (vi) the adoption of
any new Plan that is subject to Title IV of ERISA or Section 412 of the IRC by
Borrower or any ERISA Affiliate; (vii) the adoption of any amendment to any Plan
that is subject to Title IV of ERISA or Section 412 of the IRC, if such
amendment results in a material increase in benefits or Unfunded Benefit
Liability; or (viii) the commencement of contributions by Borrower or any ERISA
Affiliate to any Plan that is subject to Title IV of ERISA or Section 412 of the
IRC.
6.18 Leases. Borrower shall pay when due all rents and other amounts
payable under any leases to which Borrower is a party or by which Borrower's
properties and assets are bound, unless such payments are the subject of a
Permitted Protest. To the extent that Borrower fails timely to make payment of
such rents and other amounts payable when due under its leases, Foothill shall
be entitled, in its discretion, and without the necessity of declaring an Event
of Default, to reserve an amount equal to such unpaid amounts from the loan
availability created under Section 2.1 hereof.
6.19 Legal Change. Borrower shall immediately advise Foothill of any legal
change, whether statutory, administrative, judicial or otherwise, that would, in
any way, limit or restrict the ability of Borrower to sell, transfer or
otherwise dispose of its Eligible Inventory or which would limit the ability of
Foothill to exercise its rights against the Eligible Inventory hereunder or as a
secured creditor under the Code and Foothill may, in its sole discretion, revise
the definition of Eligible Inventory hereunder or the advance rates under
Section 2.1(b) above in response to any such legal change.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder shall
be available and until full and final payment of the Obligations, Borrower will
not do any of the following without Foothill's prior written consent, which
consent shall be requested by Borrower only in good faith and considered for
being granted by Foothill in accordance with the standards of good faith and
fair dealing as set forth in and interpreted under the Code:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness set forth in the latest financial
statements of Borrower submitted to Foothill on or prior to the
Closing Date;
(c) Indebtedness secured by Permitted Liens; and
(d) refinancings, renewals, or extensions of Indebtedness permitted
under clauses (b) and (c) of this Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not materially impair the
prospects of repayment of the Obligations by Borrower, (ii) the net cash
proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(d) and so long as the replacement liens secure only those assets or
property that secured the original Indebtedness).
7.3 Restrictions on Fundamental Changes. Enter into any acquisition,
merger, consolidation, reorganization, or recapitalization, or reclassify its
capital stock, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, assign, lease, transfer, or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business, property, or assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise all or substantially all
of the properties, assets, stock, or other evidence of beneficial
ownership of any Person.
7.4 Extraordinary Transactions and Disposal of Assets. Enter into any
transaction not in the ordinary and usual course of Borrower's business,
including the sale, lease, or other disposition of, moving, relocation, or
transfer, whether by sale or otherwise, of any of Borrower's properties or
assets (other than sales of Inventory to buyers in the ordinary course of
Borrower's business as currently conducted).
7.5 Change Name. Change Borrower's name, FEIN, business
structure, or identity, or add any new fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way liable with respect
to the obligations of any third Person except by endorsement of instruments or
items of payment for deposit to the account of Borrower or which are transmitted
or turned over to Foothill.
7.7 Restructure. Make any change in the aggregate of Borrower's financial
structure or the principal nature of the aggregate of Borrower's business
operations, or the date of its fiscal year.
7.8 Prepayments. Except in connection with a refinancing permitted by
Section 7.1(d), prepay any Indebtedness owing to any third Person.
7.9 Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 Capital Expenditures. Make any capital expenditure, or any commitment
therefor, in excess of Five Hundred Thousand Dollars ($500,000) for any
individual transaction or where the aggregate amount of such capital
expenditures, made or committed for in any fiscal year, is in excess of One
Million Dollars ($1,000,000).
7.11 Consignments. Consign any Inventory or sell any
Inventory on ▇▇▇▇ and hold, sale or return, sale on approval, or
other conditional terms of sale.
7.12 Distributions. Make any distribution or declare or
pay any cash dividends on or purchase, acquire, redeem, or retire
any of Borrower's capital stock, of any class, whether now or
hereafter outstanding other than as currently required by
Borrower's Preferred Class A and Class B Stock.
7.13 Accounting Methods. Modify or change its method of accounting or enter
into, modify, or terminate any agreement currently existing, or at any time
hereafter entered into with any third party accounting firm or service bureau
for the preparation or storage of Borrower's accounting records without said
accounting firm or service bureau agreeing to provide Foothill information
regarding the Collateral or Borrower's financial condition. Borrower waives the
right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Foothill pursuant to or in accordance with this Agreement, and agrees that
Foothill may contact directly any such accounting firm or service bureau in
order to obtain such information.
7.14 Investments. Directly or indirectly make or acquire any beneficial
interest in (including stock, partnership interest, or other securities of), or
make any loan, advance, or capital contribution to, any Person.
7.15 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms, that are fully disclosed to Foothill, and that are no
less favorable to Borrower than would be obtained in arm's length transaction
with a non-Affiliate.
7.16 Suspension. Suspend or go out of a substantial
portion of its business.
7.17 Compensation. Increase the annual fee or per-meeting fees paid to
directors during any year by more than fifteen percent (15%) over the prior
year; pay or accrue total cash compensation, during any year, to officers and
senior management employees, other than ▇▇. ▇▇▇▇▇▇▇▇, in an aggregate amount in
excess of one hundred fifteen percent (115%) of that paid or accrued in the
prior year for all such officers and senior management employees other than ▇▇.
▇▇▇▇▇▇▇▇. With respect to ▇▇. ▇▇▇▇▇▇▇▇, Foothill consents to the provisions of
the existing Board of Directors approved compensation agreement between Borrower
and ▇▇. ▇▇▇▇▇▇▇▇.
7.18 Use of Proceeds. Use the proceeds of the advances
made hereunder for any purpose other than: (a) on the Closing Date,
to repay in full the outstanding principal, accrued interest, and accrued fees
and expenses owing to Old Lender; (b) to pay transactional costs and expenses
incurred in connection with this Agreement; and (c) thereafter, consistent with
the terms and conditions hereof, for its lawful and permitted corporate
purposes.
7.19 Change in Location of Chief Executive Office; Inventory and Equipment
with Bailees. Borrower covenants and agrees that it will not, without thirty
(30) days prior written notification to Foothill, relocate its chief executive
office to a new location and so long as, at the time of such written
notification, Borrower provides any financing statements or fixture filings
necessary to perfect and continue perfected Foothill's security interests and
also provides to Foothill a landlord's waiver in form and substance satisfactory
to Foothill. The Inventory and Equipment shall not at any time now or hereafter
be stored with a bailee, warehouseman, or similar party without Foothill's prior
written consent.
7.20 Change or Modification of Written Contracts Regarding Accounts or ▇▇.
▇▇▇▇▇▇▇▇'▇ Compensation. Borrower covenants and agrees that it will not modify
or revise in any manner, without the written consent of Foothill any of the
written contracts identified on Schedule A-1 or any other contract giving rise
to an Eligible Account against which Foothill has made or may make an Advance.
Borrower further covenants and agrees that it will not modify or revise in any
manner, without the written consent of Foothill the terms of the current
compensation agreement between Borrower and ▇▇. ▇▇▇▇▇▇▇▇ to provide in any way
an increase in any sum or amount provided for in such compensation agreement.
7.21 Creation or Adoption of a Plan. Borrower covenants and agrees not to
create or adopt a Plan without the consent of Foothill and providing Foothill
with the required prior notice referred to Section 5.12.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared due and
payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the
provisions of the Bankruptcy Code, would have accrued on such amounts), fees and
charges due Foothill, reimbursement of Foothill Expenses, or other amounts
constituting Obligations);
8.2 If Borrower fails or neglects to perform, keep, or observe any term,
provision, condition, covenant, or agreement contained in this Agreement, in any
of the Loan Documents, or in any other present or future agreement between
Borrower and Foothill provided however that Borrower shall have a grace period
of five (5) calendar days from the due date of performance or observance of any
term, provision, condition, covenant or agreement contained in Sections 6.2,
6.3, 6.4, 6.5 and 6.7 prior to such failure or neglect being an Event of Default
under this Section;
8.3 If there is a material impairment of the prospect of repayment of any
portion of the Obligations owing to Foothill or a material impairment of the
value or priority of Foothill's security interests in the Collateral;
8.4 If any material portion of Borrower's properties or assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower
and any of the following events occur: (a) Borrower consents to
the institution of the Insolvency Proceeding against it; (b) the
petition commencing the Insolvency Proceeding is not timely
controverted; (c) the petition commencing the Insolvency Proceeding is not
dismissed within forty-five (45) calendar days of the date of the filing
thereof; provided, however, that, during the pendency of such period, Foothill
shall be relieved of its obligation to make additional advances or issue
additional L/Cs or L/C Guarantees hereunder; (d) an interim trustee is appointed
to take possession of all or a substantial portion of the properties or assets
of, or to operate all or any substantial portion of the business of, Borrower;
or (e) an order for relief shall have been issued or entered therein;
8.7 If Borrower is enjoined, restrained, or in any way prevented by court
order or administrative agency of any State in which Borrower conducts business
from continuing to conduct all or any material part of its business affairs;
8.8 If a notice of lien, levy, or assessment is filed of record with
respect to any of Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a lien,
whether ▇▇▇▇▇▇ or otherwise, upon any of Borrower's properties or assets and the
same is not paid on the payment date thereof;
8.9 If a judgment or other claim becomes a lien or encumbrance upon any
material portion of Borrower's properties or assets;
8.10 If there is a default in any material agreement to which Borrower is a
party with one or more third Persons resulting in a right by such third Persons,
irrespective of whether exercised, to accelerate the maturity of Borrower's
obligations thereunder;
8.11 If Borrower makes any payment on account of Indebtedness that has been
contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.12 If any misstatement or misrepresentation exists now or hereafter in
any warranty, representation, statement, or report made to Foothill by Borrower
or any officer, employee, agent, or director of Borrower, or if any such
warranty or representation is
withdrawn ;
8.13 If the obligation of any Borrower or other Person
under any Loan Document is limited or terminated by operation of
law or by the third Person thereunder, or any Person under any Loan
Document becomes the subject of an Insolvency Proceeding; or
8.14 If (a) with respect to any Plan, there shall occur any of the
following which could reasonably be expected to have a material adverse effect
on the financial condition of Borrower: (i) the violation of any of the
provisions of ERISA; (ii) the loss by a Plan intended to be a Qualified Plan of
its qualification under Section 401(a) of the IRC; (iii) the incurrence of
liability under Title IV of ERISA; (iv) a failure to make full payment when due
of all amounts which, under the provisions of any Plan or applicable law,
Borrower or any ERISA Affiliate is required to make; (v) the filing of a notice
of intent to terminate a Plan under Sections 4041 or 4041A of ERISA; (vi) a
complete or partial withdrawal of Borrower or an ERISA Affiliate from any Plan;
(vii) the receipt of a notice by the plan administrator of a Plan that the PBGC
has instituted proceedings to terminate such Plan or appoint a trustee to
administer such Plan; (viii) a commencement or increase of contributions to, or
the adoption of or the amendment of, a Plan; and (ix) the assessment against
Borrower or any ERISA Affiliate of a tax under Section 4980B of the IRC; or (b)
the Unfunded Benefit Liability of all of the Plans of Borrower and its ERISA
Affiliates shall, in the aggregate, exceed One Hundred Thousand Dollars
($100,000).
8.15 If Borrower fails to obtain or maintain any license, permit or
registration required by any federal, state, regional or local governmental unit
for the operation of its business in any State or for the sale of pharmaceutical
items and goods from, within or to a State.
8.16 If any federal, state, regional or local governmental unit commences a
cease and desist action prohibiting Borrower from doing business generally or
for a specific act or acts against Borrower or if an enforcement action against
Borrower is commenced against Borrower by any federal, state, regional or local
governmental unit which has or may result, in the reasonable judgement of
Foothill, in a material adverse impact on the business or financial condition of
Borrower.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the
continuation, of an Event of Default Foothill may, at its election,
without notice of its election and without demand, do any one or
more of the following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise,
immediately due and payable;
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement, under any of the Loan Documents, or under any
other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan Documents as to
any future liability or obligation of Foothill, but without affecting Foothill's
rights and security interests in the Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with Account Debtors
for amounts and upon terms which Foothill considers advisable, and in such
cases, Foothill will credit Borrower's loan account with only the net amounts
received by Foothill in payment of such disputed Accounts after deducting all
Foothill Expenses incurred or expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust for
Foothill, segregate all returned Inventory from all other property of Borrower
or in Borrower's possession and conspicuously label said returned Inventory as
the property of Foothill;
(f) Without notice to or demand upon Borrower, make such payments and
do such acts as Foothill considers necessary or reasonable to protect its
security interests in the Collateral. Borrower agrees to assemble the Collateral
if Foothill so requires, and to make the Collateral available to Foothill as
Foothill may designate. Borrower authorizes Foothill to enter the premises where
the Collateral is located, to take and maintain possession of the Collateral, or
any part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien that in Foothill's determination appears to conflict with its
security interests and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants
Foothill a license to enter into possession of such premises and to occupy the
same, without charge, for up to one hundred twenty (120) days in order to
exercise any of Foothill's rights or remedies provided herein, at law, in
equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly waived),
and without constituting a retention of any collateral in satisfaction of an
obligation (within the meaning of Section 9505 of the Code), set off and apply
to the Obligations any and all (i) balances and deposits of Borrower held by
Foothill (including any amounts received in the Lockbox Accounts), or (ii)
indebtedness at any time owing to or for the credit or the account of Borrower
held by Foothill;
(h) Hold, as cash collateral, any and all balances and deposits of
Borrower held by Foothill, and any amounts received in the Lockbox Accounts, to
secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. Foothill is hereby granted a license or other right to use, without
charge, Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and Borrower's
rights under all licenses and all franchise agreements shall inure to Foothill's
benefit;
(j) Sell the Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including Borrower's premises) as Foothill determines
is commercially reasonable. It is not necessary that the Collateral be present
at any such sale;
(k) Foothill shall give notice of the disposition of the
Collateral as follows:
(1) Foothill shall give Borrower and each holder of a security
interest in the Collateral who has filed with Foothill a written request for
notice, a notice in writing of the time and place of public sale, or, if the
sale is a private sale or some other disposition other than a public sale is to
be made of the Collateral, then the time on or after which the private sale or
other disposition is to be made;
(2) The notice shall be personally delivered or
mailed, postage prepaid, to Borrower as provided in Section 12, at
least five (5) days before the date fixed for the sale, or at least five (5)
days before the date on or after which the private sale or other disposition is
to be made; no notice needs to be given prior to the disposition of any portion
of the Collateral that is perishable or threatens to decline speedily in value
or that is of a type customarily sold on a recognized market. Notice to Persons
other than Borrower claiming an interest in the Collateral shall be sent to such
addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also shall give
notice of the time and place by publishing a notice one time at least five (5)
days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any public
sale; and
(m) Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower. Any excess will be
returned, without interest and subject to the rights of third Persons, by
Foothill to Borrower.
9.2 Remedies Cumulative. Foothill's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Foothill shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Foothill of one
right or remedy shall be deemed an election, and no waiver by Foothill of any
Event of Default shall be deemed a continuing waiver. No delay by Foothill shall
constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, rents, assessments,
insurance premiums, or otherwise) due to third Persons, or fails to make any
deposits or furnish any required proof of payment or deposit, all as required
under the terms of this Agreement, then, to the extent that Foothill determines
that such failure by Borrower could have a material adverse effect on Foothill's
interests in the Collateral in its discretion and without prior notice to
Borrower, Foothill may do any or all of the following: (a) make payment of the
same or any part thereof; (b) set up such reserves in Borrower's loan account as
Foothill deems
necessary to protect Foothill from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type described in Section 6.12,
and take any action with respect to such policies as Foothill deems prudent. Any
such amounts paid by Foothill shall constitute Foothill Expenses. Any such
payments made by Foothill shall not constitute an agreement by Foothill to make
similar payments in the future or a waiver by Foothill of any Event of Default
under this Agreement. Foothill need not inquire as to, or contest the validity
of, any such expense, tax, security interest, encumbrance, or lien and the
receipt of the usual official notice for the payment thereof shall be conclusive
evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Foothill on which Borrower may in any way be
liable.
11.2 Foothill's Liability for Collateral. So long as Foothill complies with
its obligations, if any, under Section 9207 of the Code, Foothill shall not in
any way or manner be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or (d) any act
or default of any carrier, warehouseman, bailee, forwarding agency, or other
Person. All risk of loss, damage, or destruction of the Collateral shall be
borne by Borrower.
11.3 Indemnification. Borrower agrees to defend, indemnify, save, and hold
Foothill and its officers, employees, and agents harmless against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
Person arising out of or relating to the transactions contemplated by this
Agreement or any other Loan Document, and (b) all losses (including attorneys
fees and disbursements) in any way suffered, incurred, or paid by Foothill as a
result of or in any way arising out of, following, or consequential to the
transactions contemplated by this Agreement or any other Loan Document other
than those losses caused by Foothill's gross negligence or wilful misconduct.
This provision shall survive the termination of this Agreement.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, or by prepaid telex, TWX, telefacsimile, or telegram (with
messenger delivery specified) to Borrower or to Foothill, as the case may be, at
its address set forth below:
If to any Borrower:
▇▇▇-▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telefacsimile No. ▇▇▇-▇▇▇-▇▇▇▇
If to Foothill: FOOTHILL CAPITAL CORPORATION
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn.: Business Finance Division Manager
Telefacsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 12, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or three
(3) days after the deposit thereof in the mail. Borrower acknowledges and agrees
that notices sent by Foothill in connection with Sections 9504 or 9505 of the
Code shall be deemed sent when deposited in the mail or transmitted by
telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED
HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING
EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES. THE PARTIES AGREE THAT
ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY
OTHER COURT WHERE THE BORROWER HAS A PLACE OF BUSINESS OR CONDUCTS OPERATIONS OR
COLLATERAL IS LOCATED AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY. EACH OF BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13. BORROWER AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND FOOTHILL REPRESENT THAT EACH
HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered to
Foothill may be destroyed or otherwise disposed of by Foothill four (4) months
after they are delivered to or received by Foothill, unless Borrower requests,
in writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1 Effectiveness. This Agreement shall be binding and
deemed effective when executed by Borrower and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties;
provided, however, that Borrower may not assign this Agreement or any rights or
duties hereunder without Foothill's prior written consent and any prohibited
assignment shall be absolutely void. No consent to an assignment by Foothill
shall release Borrower from its Obligations. Foothill may assign
this Agreement and its rights and duties hereunder and no consent or approval by
Borrower is required in connection with any such assignment. Foothill reserves
the right to sell, assign, transfer, negotiate, or grant participations in all
or any part of, or any interest in Foothill's rights and benefits hereunder. In
connection with any such assignment or participation, Foothill may disclose all
documents and information which Foothill now or hereafter may have relating to
Borrower or Borrower's business. To the extent that Foothill assigns its rights
and obligations hereunder to a third Person, Foothill thereafter shall be
released from such assigned obligations to Borrower and such assignment shall
effect a novation between Borrower and such third Person.
15.3 Section Headings. Headings and numbers have been
set forth herein for convenience only. Unless the contrary is
compelled by the context, everything contained in each section
applies equally to this entire Agreement.
15.4 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
15.5 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
15.6 Amendments in Writing. This Agreement can only be
amended by a writing signed by both Foothill and Borrower.
15.7 Counterparts; Telefacsimile Execution. This Agreement may be executed
in any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of a manually executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver a manually executed
counterpart of this Agreement but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
15.8 Revival and Reinstatement of Obligations. If the incurrence or payment
of the Obligations by Borrower of the Obligations or the transfer by either or
both of such parties to Foothill of any property of either or both of such
parties should for any reason subsequently be declared to be void or voidable
under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, and other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Foothill is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that Foothill is required or elects to repay or
restore, and as to all reasonable costs, expenses, and attorneys fees of
Foothill related thereto, the liability of Borrower automatically shall be
revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
15.9 Confidential Information. Foothill will hold all material information
obtained by it from Borrower pursuant to this Agreement concerning the affairs
and business of Borrower not otherwise generally available to the public (the
"Confidential Information") in accordance with Foothill's reasonable and
customary procedures for handling confidential information. It is understood and
agreed by Borrower that Foothill may make disclosures (a) reasonably required by
any bona fide potential or actual assignee, transferee, or participant in
connection with any contemplated or actual assignment or transfer by Foothill of
an interest herein or any participation interest in Foothill's rights hereunder,
(b) of information that has become public as a result of disclosures made by
Persons other than Foothill, its Affiliates, assignees, transferees, or
participants, or (c) as required or requested by any court, governmental or
administrative agency, pursuant to any subpoena or other legal process, or by
any law, statute, regulation, or court order. Unless prohibited by applicable
law, statute, regulation or court order, Foothill shall use reasonable efforts
to notify Borrower of any request by any court, governmental or administrative
agency, or pursuant to any subpoena or other legal process for disclosure of any
Confidential Information concurrent with, or where practicable, prior to the
disclosure thereof.
15.10 Foothill Purchase of Stock of Borrower. Foothill agrees, during the
term of this Agreement, that Foothill will not directly or indirectly purchase
or sell shares of Borrower's common stock without Borrower's consent.
15.11 Integration. This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in Los Angeles, California.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By__________________________
Title:_______________________
Mednet, MPC Corporation,
a Nevada corporation
By M. B. ▇▇▇▇▇▇▇▇
Title: President
Medi-Mail, Inc.,
a Nevada corporation
By M. B. ▇▇▇▇▇▇▇▇
Title: Vice President
Family Pharmaceuticals of America, Inc.,
a South Carolina corporation
By M. B. ▇▇▇▇▇▇▇▇
Title: Vice President
Medi-Claim, Inc.,
a Nevada corporation
By M. B. ▇▇▇▇▇▇▇▇
Title: Vice President
Medi-Phar, Inc.,
a Nevada corporation
By M. B. ▇▇▇▇▇▇▇▇
Title: Vice President
STATE OF CALIFORNIA )
) ss. Los Angeles
COUNTY OF LOS ANGELES)
On December 26, 1995 before me, the undersigned officer,
personally appeared M. B. ▇▇▇▇▇▇▇▇, known to me (or satisfactorily
proven) and acknowledged that he executed the within document as
Vice President of Medi-Mail, Inc., Family Pharmaceuticals of
America, Inc., Medi-Claim, Inc. and Medi-Phar, Inc. and as
President of Mednet, MPC Corporation.
IN WITNESS WHEREOF I hereunto set my hand.
Notary Public
SCHEDULE A-1
List of Approved Account Debtors and
Approved Written Contracts For Medi-Claim, Inc.
and Approved Form of Medi-Claim, Inc. Contracts
No Eligible-Medi-Claim, Inc. Account Debtors exist at the Closing
Date.
No Eligible-Medi-Claim, Inc. Accounts exits at the Closing Date.
No forms of Acceptable Medi-Claim, Inc. Eligible Contracts exist at
the Closing Date. ->