EXHIBIT 10.64
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________________________________________________________________________________
CREDIT AGREEMENT
among
SYNBIOTICS CORPORATION
THE BANKS NAMED HEREIN
and
BANQUE PARIBAS
As Agent
Dated as of July 9, 1997
$15,000,000
________________________________________________________________________________
SECTION 1 DEFINITIONS.......................................................... 1
Section 1.1 Definitions.......................................... 1
SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITIES................................ 24
Section 2.1 Term Loans........................................... 24
Section 2.2 Revolving Loans...................................... 25
Section 2.3 Letters of Credit.................................... 26
Section 2.4 Notice of Borrowing.................................. 29
Section 2.5 Disbursement of Funds................................ 30
Section 2.6 Notes................................................ 31
Section 2.7 Interest............................................. 31
Section 2.8 Interest Periods..................................... 32
Section 2.9 Minimum Amount of Eurodollar Loans................... 34
Section 2.10 Conversion or Continuation........................... 34
Section 2.11 Voluntary Reduction of Commitments................... 35
Section 2.12 Voluntary Prepayments................................ 35
Section 2.13 Mandatory Prepayments................................ 36
Section 2.14 Application of Prepayments........................... 37
Section 2.15 Method and Place of Payment.......................... 37
Section 2.16 Fees................................................. 38
Section 2.17 Interest Rate Unascertainable,
Increased Costs, Illegality.......................... 39
Section 2.18 Funding Losses....................................... 41
Section 2.19 Increased Capital.................................... 42
Section 2.20 Taxes................................................ 42
Section 2.21 Use of Proceeds...................................... 44
Section 2.22 Participations Purchased by Banks
in the Letter of Credit Liability.................... 44
SECTION 3. CONDITIONS PRECEDENT................................................. 46
Section 3.1 Conditions Precedent to Initial Loans................ 46
Section 3.2 Conditions Precedent to All Loans.................... 52
SECTION 4. REPRESENTATIONS AND WARRANTIES....................................... 53
Section 4.1 Corporate Status..................................... 53
Section 4.2 Corporate Power and Authority........................ 53
Section 4.3 No Violation......................................... 53
Section 4.4 Litigation........................................... 54
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Section 4.5 Financial Statements; Financial Condition; etc....... 54
Section 4.6 Solvency............................................. 54
Section 4.7 Material Adverse Change.............................. 54
Section 4.8 Use of Proceeds; Margin Regulations.................. 54
Section 4.9 Governmental Approvals............................... 54
Section 4.10 Security Interests and Liens......................... 55
Section 4.11 Tax Returns and Payments............................. 55
Section 4.12 ERISA................................................ 55
Section 4.13 Investment Company Act; Public
Utility Holding Company Act.......................... 56
Section 4.14 Representations and Warranties in Transaction
Documents............................................ 57
Section 4.15 True and Complete Disclosure......................... 57
Section 4.16 Corporate Structure; Capitalization.................. 58
Section 4.17 Environmental Matters................................ 58
Section 4.18 Patents, Trademarks, etc............................. 59
Section 4.19 Ownership of Property................................ 59
Section 4.20 No Default........................................... 60
Section 4.21 Licenses, etc........................................ 60
Section 4.22 Compliance With Law.................................. 60
Section 4.23 Brokers' Fees........................................ 60
Section 4.24 Labor Matters........................................ 60
SECTION 5. AFFIRMATIVE COVENANTS................................................ 61
Section 5.1 Information Covenants................................ 61
Section 5.2 Books, Records and Inspections....................... 67
Section 5.3 Maintenance of Insurance............................. 68
Section 5.4 Taxes................................................ 68
Section 5.5 Corporate Franchises................................. 68
Section 5.6 Compliance with Law.................................. 69
Section 5.7 Performance of Obligations........................... 69
Section 5.8 Maintenance of Properties............................ 69
Section 5.9 Interest Rate Protection............................. 69
Section 5.10 Additional Collateral................................ 69
SECTION 6. NEGATIVE COVENANTS................................................... 70
Section 6.1 Financial Covenants.................................. 70
Section 6.2 Indebtedness......................................... 72
Section 6.3 Liens................................................ 73
Section 6.4 Restriction on Fundamental Changes................... 74
Section 6.5 Sale of Assets....................................... 75
Section 6.6 Contingent Obligations............................... 75
Section 6.7 Dividends............................................ 75
Section 6.8 Advances, Investments and Loans...................... 76
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Section 6.9 Transactions with Affiliates......................... 76
Section 6.10 Limitation on Voluntary
Payments and Modifications of Certain Documents...... 76
Section 6.11 Changes in Business.................................. 77
Section 6.12 Certain Restrictions................................. 77
Section 6.14 Sales and Leasebacks................................. 77
Section 6.15 Plans................................................ 78
Section 6.16 Fiscal Year; Fiscal Quarter.......................... 78
SECTION 7. EVENTS OF DEFAULT.................................................... 78
Section 7.1 Events of Default................................... 78
Section 7.2 Rights and Remedies................................. 82
SECTION 8. THE AGENT............................................................ 82
Section 8.1 Appointment.......................................... 82
Section 8.2 Delegation of Duties................................. 83
Section 8.3 Exculpatory Provisions............................... 84
Section 8.4 Reliance by Agent.................................... 84
Section 8.5 Notice of Default.................................... 85
Section 8.6 Non-Reliance on Agent and Other Banks................ 85
Section 8.7 Indemnification...................................... 86
Section 8.8 Agent in its Individual Capacity..................... 87
Section 8.9 Resignation by the Agent............................. 87
SECTION 9. MISCELLANEOUS........................................................ 87
Section 9.1 Payment of Expenses, Indemnity etc................... 87
Section 9.2 Right of Setoff...................................... 89
Section 9.3 Notices.............................................. 90
Section 9.4 Successors and Assigns; Participation; Assignments... 90
Section 9.5 Amendments and Waivers............................... 93
Section 9.6 No Waiver; Remedies Cumulative....................... 94
Section 9.7 Sharing of Payments.................................. 95
Section 9.8 Governing Law; Submission to Jurisdiction........... 95
Section 9.9 Counterparts......................................... 96
Section 9.10 Effectiveness........................................ 96
Section 9.11 Headings Descriptive................................. 96
Section 9.12 Marshalling; Recapture............................... 96
Section 9.13 Severability......................................... 97
Section 9.14 Survival............................................. 97
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Section 9.15 Domicile of Loans.................................... 97
Section 9.16 Limitation of Liability.............................. 97
Section 9.17 Calculations; Computations........................... 97
Section 9.18 Waiver of Trial by Jury.............................. 98
Section 9.19 Confidentiality...................................... 98
Schedule 1 -- Banks and Commitments
Schedule 4.4 -- Litigation
Schedule 4.18 -- Subsidiaries; Capital Stock
Schedule 4.22 -- Real Property
Schedule 4.23 -- Brokers' Fees
Schedule 4.24 -- Labor Matters
Schedule 6.02 -- Existing Indebtedness
Schedule 6.03 -- Existing Liens
Schedule 6.06 -- Existing Contingent Obligations
Exhibit A-1 -- Form of Tranche A Note
Exhibit A-2 -- Form of Tranche B Note
Exhibit A-3 -- Form of Revolving Note
Exhibit B -- Form of Security Agreement
Exhibit C -- Form of Pledge Agreement
Exhibit D -- Form of Leasehold Mortgage
Exhibit E-1 -- Form of Opinion of Borrower's Counsel
Exhibit E-2 -- Form of Opinion of Agent's Counsel
Exhibit F -- Form of Borrowing Base Certificate
Exhibit G -- Form of Assignment and Acceptance
Exhibit H -- Form of Environmental Indemnity Agreement
Exhibit I -- Form of Compliance Certificate
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CREDIT AGREEMENT, dated as of July 9, 1997, among Synbiotics
Corporation, a California corporation (the "Borrower"), the Banks (as
hereinafter defined) and Banque Paribas, acting in its capacity as agent for the
Banks.
SECTION 1. DEFINITIONS.
Section 1.1 Definitions. As used herein, the following terms shall
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have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural number the singular.
"Account" shall mean, with respect to any Person, any "account" as
such term is defined in the Uniform Commercial Code as in effect on the date
hereof in the State of California, now or hereafter owned by such Person and any
proceeds arising therefrom and, in any event, shall include, but shall not be
limited to, in the case of the Borrower, Eligible Accounts Receivable and, in
all other cases, all of such Person's rights to payment for goods sold or leased
or services performed by such Person, whether due or to become due, whether now
in existence or arising from time to time hereafter, including, without
limitation, rights evidenced by an account, note, contract, security agreement,
chattel paper, instrument, document or other evidence of indebtedness or
security, together with (a) all security pledged, assigned, hypothecated or
granted to or held by such Person to secure the foregoing, (b) all of such
Person's right, title and interest in and to any goods, the sale of which gave
rise thereto, (c) all guarantees, endorsements and indemnifications on, or of,
any of the foregoing, (d) all powers of attorney for the execution of any
evidence of indebtedness or security or other writing in connection therewith,
(e) all books, records, ledger cards, customer lists and invoices relating
thereto, (f) all evidences of the filing of financing statements and other
statements and the registration of other instruments in connection therewith and
amendments thereto, notices to other creditors or secured parties, and
certificates from filing or other registration officers, (g) all credit
information, reports and
memoranda relating thereto, and (h) all other writings related in any way to the
foregoing.
"Account Debtor" shall mean any Person who is or may become obligated
to the Borrower or one of its Subsidiaries under, with respect to, or on account
of, an Account.
"Acquisition" shall mean the consummation of the transactions
contemplated by the Acquisition Documents.
"Acquisition Documents" shall mean the Stock Purchase Agreement, the
Asset Purchase Agreement and all agreements and instruments executed and
delivered in connection therewith.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control a corporation if
such Person possesses, directly or indirectly, the power to (i) vote 5% or more
of the securities having ordinary voting power for the election of directors of
such corporation or (ii) direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise. For purposes of this Agreement, neither
of SmithKline ▇▇▇▇▇▇▇ nor S.R. One shall be deemed to be an Affiliate of the
Borrower.
"Agent" shall mean Banque Paribas acting in its capacity as agent for
the Banks and any successor agent appointed in accordance with Section 8.9.
"Agent's Office" shall mean the office of the Agent located at ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or such other office as
the Agent may hereafter designate in writing as such to the other parties
hereto.
"Agreement" shall mean this Credit Agreement as the same may from time
to time hereafter be modified, supplemented or amended.
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"Applicable Margin" shall mean as of any date the applicable margin
(expressed as a percentage) determined by reference to the Leverage Ratio of the
Borrower and its Consolidated Subsidiaries for the previous Fiscal Quarter, as
set forth in (i) the following table, with respect to any Tranche A Loans and
Revolving Loans:
===========================================================================================
Leverage Ratio Eurodollar Margin Base Margin
-------------- ----------------- -----------
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less than 4.00:1 3.00% 1.25%
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3.50-4.00:1 2.50% 0.75%
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more than 3.50:1 2.25% 0.50%
===========================================================================================
and (ii) the following table with respect to any Tranche
B Loans:
===========================================================================================
Leverage Ratio Eurodollar Margin Base Margin
-------------- ----------------- -----------
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less than 4.00:1 3.50% 1.50%
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3.50-4.00:1 3.00% 1.25%
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more than 3.50:1 2.75% 1.00%
===========================================================================================
provided, however, that prior to the first anniversary of the Closing Date the
Applicable Margin shall be no lower than (i) with respect to all Tranche A Loans
and Revolving Loans, (x) 2.50% for Eurodollar Loans and (y) 0.75% for Base Rate
Loans and (ii) with respect to all Tranche B Loans, (x) 3.00% for Eurodollar
Loans and (y) 1.25% for Base Rate Loans.
"Asset Purchase Agreement" shall mean the Asset Purchase Agreement,
dated May 14, 1997, between the Borrower and Rhone Merieux, Inc. together with
all schedules and exhibits referred to therein, in the form delivered to the
Agent on the Closing Date without giving effect to any amendment, modification
or waiver thereof effected without the written consent of the Required Banks.
"Assignee" shall have the meaning provided in Section 9.4(c).
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"Assignment and Acceptance" shall have the meaning provided in Section
9.4(c).
"Bankruptcy Code" shall mean Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time, and any successor statute
or statutes.
"Banks" shall mean the persons listed on Schedule 1 hereto and the
persons which from time to time become a party hereto in accordance with Section
9.4(c).
"Base Rate" shall mean, at any particular date, the higher of (x) the
rate which is 1/2 of 1% plus the Federal Funds Effective Rate and (y) the Prime
Rate in effect from time to time.
"Base Rate Loans" shall mean Loans made and/or being maintained at a
rate of interest based upon the Base Rate.
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrowing" shall mean the incurrence of one Type of Loan of one
Facility from all the Banks on a given date (or resulting from conversions or
continuations on a given date), having in the case of Eurodollar Loans the same
Interest Period.
"Borrowing Base" shall mean, as of any date of determination, an
amount equal to the sum of the following, as determined from the Borrowing Base
Certificate most recently delivered to the Agent: (a) 80% of Eligible Accounts
Receivable; and (b) the lesser of (i) 50% of Eligible Inventory and (ii)
$3,500,000, minus (c) any amount outstanding under any Revolving Loan or any
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Letter of Credit.
"Borrowing Base Certificate" shall have the meaning provided in
Section 5.1(e).
"Borrowing Base Supplement" shall mean a report setting forth the
following information for the preceding month: the aging of Accounts; a listing
of inventory; the aging of accounts payable; and a breakdown of ineligible
Accounts and inventory.
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"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in California a legal holiday or a day on which banking institutions are
authorized or required by law or other government actions to close and (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (i) and which is also a day for trading by and between banks
for U.S. dollar deposits in the relevant interbank Eurodollar market.
"Capital Expenditures" shall mean, for any period, all expenditures
(whether paid in cash or accrued as a liability, including the portion of
Capitalized Leases originally incurred during such period that is capitalized on
the consolidated balance sheet of the Borrower and its Subsidiaries) by the
Borrower and its Subsidiaries during such period that, in conformity with GAAP,
are included in "capital expenditures", "additions to property, plant or
equipment" or comparable items in the consolidated financial statements of the
Borrower and its Subsidiaries.
"Capitalized Lease" shall mean (i) any lease of property, real or
personal, the obligations under which are capitalized on the consolidated
balance sheet of the Borrower and its Subsidiaries, and (ii) any other such
lease to the extent that the then present value of the minimum rental commitment
thereunder should, in accordance with GAAP, be capitalized on a balance sheet of
the lessee.
"Capitalized Lease Obligations" shall mean all obligations of the
Borrower and its Subsidiaries under or in respect of Capitalized Leases.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than 90 days from the date of acquisition, (ii) time deposits and certificates
of deposit of any Bank or any domestic commercial bank of recognized standing
having capital and surplus in excess
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of $500,000,000 with maturities of not more than 90 days from the date of
acquisition, (iii) fully secured repurchase obligations with a term of not more
than 7 days for underlying securities of the types described in clause (i)
entered into with any bank meeting the qualifications specified in clause (ii)
above, and (iv) commercial paper issued by the parent corporation of any Bank or
any domestic commercial bank of recognized standing having capital and surplus
in excess of $500,000,000 and commercial paper rated at least A-1 or the
equivalent thereof by Standard & Poor's Corporation or at least P-1 or the
equivalent thereof by ▇▇▇▇▇'▇ Investor Services, Inc. and in each case maturing
within 90 days after the date of acquisition.
"Closing Date" shall mean the date on which the initial Loans are
advanced hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor statute.
"Collateral" shall mean all property and interests in property now
owned or hereafter acquired in or upon which a Lien has been or is purported or
intended to have been granted to the Agent or any Bank under any of the Security
Documents.
"Commitment" shall mean, for each Bank at any given time, the sum of
such Bank's Tranche A Commitment, its Tranche B Commitment and its Revolving
Loan Commitment.
"Commitment Percentage" shall mean, for each Bank at any given time,
the percentage equivalent of such Bank's Commitment divided by the Total
Commitment.
"Company" shall mean Rhone Merieux Diagnostics S.A.S., a French
Societe par actions simplifee.
"Competitor" shall mean any industrial enterprise whose principal
business competes directly with the business of the Borrower, provided that no
-------- ----
bank, financial institution, insurance company or any Affiliate thereof shall be
included in the definition of "Competitor."
6
"Compliance Certificate" shall mean a certificate signed by the chief
financial officer of the Borrower setting forth a reasonably detailed
calculation of the covenants set forth in Sections 6.1(a), (b), (c), (d) and (e)
of the Agreement and attesting to the compliance of the Borrower with the
requirements of the Agreement in respect of such ratios, substantially in the
form of Exhibit I.
"Consolidated Cash Interest Expense" shall mean, for any period,
Consolidated Interest Expense for such period minus the amount of such
-----
Consolidated Interest Expense not paid or payable in cash.
"Consolidated Current Assets" shall mean, at any time, the current
assets of the Borrower and its Subsidiaries at such time, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Current Liabilities" shall mean, at any time, the
current liabilities of the Borrower and its Subsidiaries at such time,
determined on a consolidated basis in accordance with GAAP.
"Consolidated EBITDA" shall mean with respect to any Person, for any
period, the Consolidated Net Income of such Person and its Subsidiaries for such
period adjusted to add thereto (to the extent deducted from revenues in
determining Consolidated Net Income) (i) consolidated income tax expense, (ii)
depreciation and amortization expense and (iii) interest expense, in each case
determined for such period on a consolidated basis for such Person and its
Subsidiaries in accordance with GAAP.
"Consolidated Interest Expense" shall mean, for any fiscal period of
the Borrower, the total interest expense (including, without limitation,
interest expense attributable to Capitalized Leases in accordance with GAAP) of
the Borrower and its Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Income" for any period, means the net income (or
loss) of the Borrower and its Subsidiaries on a consolidated basis for such
period
7
(taken as a single accounting period) determined in accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean, at any time, the sum of
the amount by which the total consolidated assets of the Borrower and its
Subsidiaries minus the intangible assets of the Borrower and its Subsidiaries
-----
exceeds the total consolidated liabilities of the Borrower and its Subsidiaries
at such time, as determined in accordance with GAAP.
"Consolidated Total Indebtedness" shall mean, at any time, all
Indebtedness of the Borrower and its Subsidiaries, as determined in accordance
with GAAP.
"Consolidated Working Capital" shall mean at any time an amount equal
to Consolidated Current Assets minus Consolidated Current Liabilities at such
time.
"Contingent Obligation" as to any Person shall mean any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") (but excluding any Subsidiary of the first Person) in any
manner, whether directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (x) for the purchase or payment of any
such primary obligation or (y) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of such primary obligation
against loss in respect thereof; provided, however, that the term Contingent
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Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or
8
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder) as determined by such
Person in good faith.
"Credit Exposure" shall have the meaning provided in Section 9.4(b).
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Default Rate" shall have the meaning provided in Section 2.7(c).
"Delinquent Account" shall mean any account that remains unpaid for
more than 90 days past the original invoice due date.
"Dividends" shall have the meaning provided in Section 6.7.
"Domestic Lending Office" shall mean, as to any Bank, the office of
such Bank designated as such on Annex I, or such other office designated by such
Bank from time to time by written notice to the Agent and the Borrower.
"Eligible Accounts Receivable" shall mean the gross dollar amount of
the Borrower's Accounts which arise in the ordinary course of business and which
conform to the warranties contained herein and in the Security Documents and
which shall not have become unacceptable to the Required Banks in their
reasonable judgment, and less reserves for any other matter affecting the
creditworthiness of Account Debtors, and excluding:
(a) Accounts with respect to goods not yet delivered or accepted or
services not yet performed;
(b) Delinquent Accounts;
(c) Accounts owed by Overdue Account Parties or Parties which are not
Solvent;
(d) cooperative advertising Accounts;
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(e) Accounts subject to any dispute, offset, counterclaim (including,
without limitation, any "contra" claims), credit hold or defense
whatsoever;
(f) Accounts subject to the Federal Assignment of Claims Act, 41
U.S.C. Section 15;
(g) Accounts with respect to which the Account Debtor is a non-U.S.
Person (other than RM and its successors);
(h) Accounts that are denominated in a currency other than Dollars;
(i) ▇▇▇▇ and hold Accounts (or deferred shipment transactions);
(j) consigned sale Accounts;
(k) Accounts with non-standard sale terms;
(l) The amount of Accounts due from any Account Debtor which is in
excess of 10% of the then-existing value of the total Accounts due to the
Borrower, less any reserves; provided that with respect to Accounts due
from RM, Vedco or ▇▇▇▇▇ ▇▇▇▇▇▇, only amounts in excess of 25% of the then-
existing value of the total Accounts due to the Borrower shall be excluded
from Eligible Accounts Receivable, less any reserves, (i) with respect to
Accounts due from RM, and (ii) with respect to Accounts due from Vedco or
▇▇▇▇▇ ▇▇▇▇▇▇, as long as the Borrower has delivered to the Agent the
quarterly financial statements, satisfactory in form and substance to the
Agent, of Vedco or ▇▇▇▇▇ ▇▇▇▇▇▇, as applicable;
(m) Accounts that have been pledged to secure any Indebtedness other
than Indebtedness created pursuant to the Loan Documents;
(n) Accounts not reflected in the general ledger of the Borrower;
(o) credits in past due Accounts; and
(p) Accounts from Affiliates of the Borrower.
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"Eligible Inventory" shall mean the dollar value shown on the
consolidated financial statements of the Borrower of all tangible personal
property wheresoever located which is owned by the Borrower and held for sale or
to be furnished under contracts of sale, and which meet all of the following
specifications: (a) the inventory is lawfully owned by the Borrower, is not
subject to any lien, claim, security interest or prior assignment (other than
those Liens contemplated in Sections 6.3(a), (b), (c) and (f)) and, in the case
of finished goods, has at least six months remaining until its expiry, except
that finished goods with initial time to expiry of twelve months or less may be
included in Eligible Inventory until such time as such goods have four months
remaining until their expiry; (b) the Borrower has the right of assignment
thereof and the power to grant liens and security interests therein; (c) the
inventory was acquired in the ordinary course of the Borrower's business; (d) no
document of title has been created or issued with respect to such inventory; (e)
the inventory is readily marketable for sale by the Borrower; and (f) the
inventory is not otherwise regarded by the Required Banks, in their reasonable
judgment, as unsuitable collateral for Loans and Letters of Credit; less
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(without duplication) the following amounts recorded in the general ledger of
the Borrower in accordance with GAAP:
(A) the cost of inventory not located in the United States or at
places of business of the Borrower;
(B) that amount for purchase discount reserve;
(C) that amount for obsolescence reserve;
(D) that amount for damaged inventory;
(E) that amount for unprocessed invoices;
(F) that amount for customer return reserve;
(G) that amount for work in process;
(H) that amount for packaging and labels;
(I) that amount prepaid for inventory; and
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(J) that amount in respect of goods which the Borrower has decided to
discontinue producing.
"Environmental Affiliate" shall mean, with respect to any Person, any
other Person whose liability for any Environmental Claim such Person has or may
have retained, assumed or otherwise become liable for (contingently or
otherwise), either contractually or by operation of law.
"Environmental Approvals" shall mean any permit, license, approval,
ruling, variance, exemption or other authorization required under applicable
Environmental Laws.
"Environmental Claim" shall mean, with respect to any Person, any
notice, claim, demand or similar communication (written or oral) by any other
Person alleging potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, fines or penalties arising out of, based on or resulting from
(i) the presence, or release into the environment, of any Material of
Environmental Concern at any location, whether or not owned by such Person or
(ii) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law.
"Environmental Indemnity Agreement" shall have the meaning provided in
Section 3.1(a)(vi).
"Environmental Laws" shall mean all federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including without limitation, laws
and regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to
12
time. Section references to ERISA are to ERISA, as in effect at the date of
this Agreement and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Controlled Group" means a group consisting of any ERISA Person
and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control with such Person
that, together with such Person, are treated as a single employer under
regulations of the PBGC.
"ERISA Person" shall have the meaning set forth in Section 3(9) of
ERISA for the term "person."
"ERISA Plan" means (i) any Plan that (x) is not a Multiemployer Plan
and (y) has Unfunded Benefit Liabilities in excess of $50,000 and (ii) any Plan
that is a Multiemployer Plan.
"Eurocurrency Reserve Requirements" shall mean, with respect to each
day during an Interest Period for Eurodollar Loans, that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Federal
Reserve Board or other governmental authority or agency having jurisdiction with
respect thereto for determining the maximum reserves (including, without
limitation, basic, supplemental, marginal and emergency reserves) for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D) maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate" shall mean, with respect to any Loan to be
made, continued as or converted into a Eurodollar Loan, the London Inter-Bank
Offered Rate (determined by the Agent), rounded upward to the nearest 1/16th of
one percent (0.0625%), at which dollar deposits are offered to Banque Paribas by
major banks in the London interbank market at or about 11:00 a.m., London time,
on the Interest Rate Determination Day with respect to such Loan in an aggregate
amount approximately equal to the amount of such Loan and for a period of time
comparable to the number of days in the applicable Interest Period. The
determination of the Eurodollar Base Rate by the Agent shall be conclusive in
the absence of manifest error.
13
"Eurodollar Lending Office" shall mean, as to any Bank, the office of
such Bank designated as such on Annex I, or such other office designated by such
Bank from time to time by written notice to the Agent and the Borrower.
"Eurodollar Loans" shall mean Loans made and/or being maintained at a
rate of interest based upon the Eurodollar Rate.
"Eurodollar Rate" shall mean with respect to each day during an
Interest Period for Eurodollar Loans, a rate per annum determined for such day
in accordance with the following formula (rounded upwards to the nearest whole
multiple of 1/100th of one percent):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default" shall have the meaning provided in Section 7.
"Excess Cash Flow" shall mean, with respect to any fiscal period of
the Borrower, a positive number, if any, equal to (i) Consolidated Net Income
for such period plus (ii) to the extent deducted in the calculation of
----
Consolidated Net Income for such period, depreciation and amortization expense,
plus (iii) federal and state income taxes expensed but not paid in cash for such
----
period, plus (or minus) (iv) decreases (or increases) in Consolidated Working
---- -----
Capital (other than decreases or increases in any cash included therein) from
the last day of the preceding fiscal period to the last day of such fiscal
period, minus (v) the aggregate amount actually paid in cash by the Borrower and
-----
its Subsidiaries during such fiscal period for Capital Expenditures permitted
pursuant to Section 6.1(g) (except to the extent financed with the proceeds of
purchase money Indebtedness or insurance), minus (vi) all principal repayments
-----
and prepayments of the Loans made during such fiscal period, provided that
repayments or prepayments of Revolving Loans other than pursuant to Section
2.13(d) shall not be included in the computation of Excess Cash Flow, minus
-----
(vii) all regularly scheduled principal payments made during such fiscal period
in respect of other Indebtedness to the extent such Indebtedness and payments
are permitted to be incurred and made hereunder.
14
"Facility" shall mean either the Term Loans or the Revolving Loans
(including any Letters of Credit).
"Federal Funds Effective Rate" shall mean for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average Federal Funds transactions with members of the Federal Reserve System
arranged by Federal Funds brokers as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three Federal Funds brokers of recognized standing
selected by the Agent.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System as constituted from time to time.
"Fee Letter" shall mean that certain letter, dated the date hereof,
from the Agent to the Borrower, in respect of certain fees payable by the
Borrower.
"Fees" shall mean all amounts payable pursuant to Section 2.16.
"Final Maturity Date" shall mean the later of the Revolving Loan
Maturity Date, the Tranche A Loan Maturity Date and the Tranche B Loan Maturity
Date.
"Fixed Charges" shall mean, without duplication, for any period, (i)
all Consolidated Cash Interest Expense for such period, plus (ii) scheduled
----
payments due in such period for principal of the Term Loans and other permitted
Indebtedness, plus (iii) all rents accrued in such period under Capitalized
----
Leases under which the Borrower or any of its Subsidiaries is the lessee, plus
----
(iv) all cash taxes paid by the Borrower for such period.
"GAAP" shall mean United States generally accepted accounting
principles as in effect on the date hereof and consistent with those utilized in
the preparation of the financial statements referred to in Section 4.05.
15
"Governmental Authority" shall mean any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States or
foreign.
"ICG Warrants" shall have the meaning provided in Section 4.16.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade payables on terms of 30 days or
less incurred in the ordinary course of business of such Person), (ii) all
indebtedness of such Person evidenced by a note, bond, debenture or similar
instrument, (iii) the principal component of all Capitalized Lease Obligations
of such Person, (iv) the face amount of all letters of credit issued for the
account of such Person and, without duplication, all unreimbursed amounts drawn
thereunder, (v) all indebtedness of any other Person secured by any Lien on any
property owned by such Person, whether or not such indebtedness has been
assumed, (vi) all Contingent Obligations of such Person, and (vii) all payment
obligations of such Person under any interest rate protection agreement
(including, without limitation, any interest rate swaps, caps, floors, collars
and similar agreements) and currency swaps and similar agreements.
"Interest Rate Determination Date" shall mean each date for
calculating the Eurodollar Base Rate for purposes of determining the interest
rate in respect of an Interest Period. The Interest Rate Determination Date
shall be the second Business Day prior to the first day of the related Interest
Period for such Eurodollar Loan.
"Interest Period" shall have the meaning provided in Section 2.8.
"Issuing Bank" shall mean Banque Paribas or any other Bank which shall
be designated in writing from time to time by the Agent as the issuing bank
hereunder and shall consent in writing to such designation.
"Leasehold Mortgage" shall have the meaning set forth in Section
3.1(a)(v).
16
"Letter of Credit" shall mean any standby letter of credit issued
pursuant hereto by the Issuing Bank for the account of the Borrower.
"Letter of Credit Liability" shall mean, as of any date of
determination, the aggregate face amount of all drafts which may then or
thereafter be presented by beneficiaries under all Letters of Credit then
outstanding plus without duplication the face amount of all drafts which have
been presented under Letters of Credit but have not yet been honored.
"Letter of Credit Request" shall have the meaning provided in Section
2.3(b).
"Leverage Ratio" shall have the meaning provided in Section 6.1(a)
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same effect as any of
the foregoing and the filing of any financing statement or similar instrument
under the Uniform Commercial Code or comparable law of any jurisdiction,
domestic or foreign.
"Loans" shall mean and include the Term Loans and the Revolving Loans
(including the Letters of Credit).
"Loan Documents" shall mean this Agreement, the Notes, the Warrant,
the Environmental Indemnity Agreement, each Letter of Credit, each Letter of
Credit Request, each Compliance Certificate, each Borrowing Base Certificate,
each Notice of Borrowing, each Notice of Conversion or Continuation and the
Security Documents.
"Margin Stock" shall have the meaning provided such term in Regulation
U and Regulation G of the Federal Reserve Board.
"Material Adverse Effect" shall mean a material adverse effect upon
(i) the business, operations,
17
properties, assets, prospects or condition (financial or otherwise) of the
Borrower and its Subsidiaries (after giving effect to the Acquisition), taken as
a whole, or (ii) the ability of the Borrower to perform, or of the Agent or any
of the Banks to enforce, in all material respects, any of the Obligations.
"Materials of Environmental Concern" shall mean and include chemicals,
pollutants, contaminants, wastes, toxic substances, petroleum and petroleum
products.
"Multiemployer Plan" shall mean a Plan which is a "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA.
"Net Sale Proceeds" shall mean all cash proceeds of each sale or other
disposition of assets by the Borrower (other than sales of inventory in the
ordinary course of business), if such proceeds exceed $100,000 in respect of any
transaction or series of related transactions, in each case net of (i)
reasonable expenses incurred or reasonably expected to be incurred in connection
with such sale or disposition, (ii) any income, franchise, transfer or other tax
payable by the Borrower in connection with such sale or disposition and (iii)
any Indebtedness secured by a Lien on such property or assets and required to be
repaid as a result of such sale or other disposition.
"Notes" shall mean and include each Revolving Note, each Tranche A
Note and each Tranche B Note.
"Notice of Borrowing" shall have the meaning provided in Section 2.4.
"Notice of Conversion or Continuation" shall have the meaning provided
in Section 2.10.
"Obligations" shall mean all obligations, liabilities and indebtedness
of every nature of the Borrower from time to time owing to the Agent or any Bank
under or in connection with this Agreement or any other Loan Document.
"Overdue Account Party" shall mean any Account Debtor or consolidated
group including such Account Debtor, of whose aggregate Accounts owed to the
Borrower
18
or its Subsidiaries greater than 15% are Delinquent Accounts.
"Participant" shall have the meaning provided in Section 9.4(b).
"Payment Date" shall mean the last day of each August, November,
February and May of each year.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"Person" shall mean and include any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or agency, department or instrumentality
thereof.
"Plan" means any employee benefit plan subject to Title IV of ERISA,
the funding requirements of which, in whole or in part:
(i) were the responsibility of the Borrower or a member of its
ERISA Controlled Group at any time within the five years immediately
preceding the date hereof,
(ii) are currently the responsibility of the Borrower or a
member of its ERISA Controlled Group, or
(iii) hereafter become the responsibility of the Borrower or a
member of its ERISA Controlled Group,
including any such plans as may have been, or may hereafter be, terminated for
whatever reason.
"Pledge Agreement" shall have the meaning provided in Section
3.1(a)(iv).
"Prime Rate" shall mean the rate of interest from time to time
announced by Banque Paribas at the Agent's Office as its prime commercial
lending rate.
19
"Pro Rata Share" as to any Bank shall mean a fraction (expressed as a
percentage), the numerator of which shall be the aggregate amount of such Bank's
Commitments and the denominator of which shall be the Total Commitment.
"Regulation D" shall mean Regulation D of the Federal Reserve Board as
from time to time in effect and any successor to all or any portion thereof.
"Reportable Event" has the meaning set forth in Section 4043(b) of
ERISA (other than a Reportable Event as to which the provision of 30 days notice
to the PBGC is waived under applicable regulations), or is the occurrence of any
of the events described in Section 4068(a) or 4063(a) of ERISA.
"Required Banks" shall mean Banks holding more than 66 2/3% of the
principal amount of Loans outstanding (including any Letter of Credit Liability)
or, if no Loans are outstanding, more than 66 2/3% of the Total Commitments;
provided that, if at any time there are two and only two Banks, at such time
"Required Banks" shall mean both Banks.
"Revolving Loan Commitment" shall mean at any time, for any Bank, the
amount set forth opposite such Bank's name on Annex I hereto under the heading
"Revolving Loan Commitment," as such amount may be reduced from time to time
pursuant to Sections 2.11 or 9.4(c).
"Revolving Loan Maturity Date" shall mean May 31, 2002.
"Revolving Loans" shall have the meaning provided in Section 2.2(a).
"Revolving Notes" shall have the meaning provided in Section 2.6(a).
"RM" shall mean Rhone Merieux S.A., a French societe anonyme, and its
successors and assigns.
"RM Rights" shall have the meaning provided in Section 4.16.
20
"Security Agreement" shall have the meaning provided in Section
3.1(a)(iii) hereof.
"Security Documents" shall mean and include the Security Agreement,
the Pledge Agreement, and the Leasehold Mortgage.
"Sellers" shall mean RM and Institut de Selection Animale, S.A., a
French societe anonyme.
"Solvent" as to any Person shall mean that (i) the sum of the assets
of such Person, both at a fair valuation and at present fair salable value, will
exceed its liabilities, including contingent liabilities, (ii) such Person will
have sufficient capital with which to conduct its business as presently
conducted and as proposed to be conducted and (iii) such Person has not incurred
debts, and does not intend to incur debts, beyond its ability to pay such debts
as they mature. For purposes of this definition, "debt" means any liability on a
claim, and "claim" means (x) a right to payment, whether or not such right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured, or (y)
a right to an equitable remedy for breach of performance if such breach gives
rise to a payment, whether or not such right to an equitable remedy is reduced
to judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured, or unsecured. With respect to any such contingent liabilities, such
liabilities shall be computed at the amount which, in light of all the facts and
circumstances existing at the time, represents the amount which can reasonably
be expected to become an actual or matured liability.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement,
dated May 14, 1997, among Sellers and the Borrower, together with all schedules
and exhibits referred to therein, in the form delivered to the Agent on the
Closing Date, without giving effect to any amendment, modification or waiver
thereof effected without the written consent of the Required Banks.
"Subsidiary" of any Person shall mean and include (i) any corporation
50% or more of whose stock of any class or classes having by the terms thereof
ordinary
21
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person, directly or indirectly through
Subsidiaries, is either a general partner or has a 50% or more equity interest
at the time.
"Term Loan" shall have the meaning provided in Section 2.1.
"Term Loan Commitment" shall mean the sum of the Tranche A Commitments
and the Tranche B Commitments.
"Termination Event" shall mean (i) a Reportable Event, or (ii) the
initiation of any action by the Borrower, any member of the Borrower's ERISA
Controlled Group or any ERISA Plan fiduciary to terminate an ERISA Plan or the
treatment of an amendment to an ERISA Plan as a termination under ERISA, or
(iii) the institution of proceedings by the PBGC under Section 4042 of ERISA to
terminate an ERISA Plan or to appoint a trustee to administer any ERISA Plan.
"Title Insurance" shall have the meaning provided in Section 3.1(k).
"Total Commitment" shall mean, at any time, the sum of the Commitments
of all of the Banks at such time.
"Total Revolving Loan Commitment" shall have the meaning set forth in
Section 2.2(a).
"Tranche A Commitment" shall mean at any time, for any Bank, the
amount set forth opposite such Bank's name in Annex I hereto under the heading
"Tranche A Commitment", as the same may be reduced from time to time pursuant to
Sections 2.1, 2.12, 2.13 or 9.4(d).
"Tranche A Note" shall have the meaning provided in Section 2.6(a).
"Tranche B Commitment" shall mean at any time, for any Bank, the
amount set forth opposite such Bank's
22
name in Annex I hereto under the heading "Tranche B Commitment," as the same may
be reduced from time to time pursuant to Sections 2.1, 2.12, 2.13 or 9.4(d).
"Tranche B Note" shall have the meaning provided in Section 2.6(a).
"Tranche A Loan Maturity Date" shall mean May 31, 2002.
"Tranche B Loan Maturity Date" shall mean May 31, 2003.
"Transaction Costs" shall mean all costs and expenses paid or payable
by the Borrower relating to the Transactions including, without limitation,
investment banking fees, financing fees, advisory fees, appraisal fees, legal
fees and accounting fees.
"Transactions" shall mean each of the transactions contemplated by the
Loan Documents.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan.
----
"Unfunded Benefit Liabilities" means with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all benefit
liabilities under such Plan as defined in Section 4001(a)(16) of ERISA, exceeds
(ii) the fair market value of all Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plan (on the basis
of assumptions prescribed by the PBGC for the purpose of Section 4044 of ERISA).
"Warrant" shall mean that certain Warrant to purchase common stock of
the Warrantholder, issued by the Borrower to the Warrantholder and dated as of
the date of this Agreement.
"Warrantholder" shall mean Banque Paribas.
23
SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITIES.
-------------------------------------
Section 2.1 Term Loans. Subject to and upon the terms and conditions
----------
herein set forth, each Bank severally and not jointly agrees to make (i) a
single loan to the Borrower on the Closing Date of a sum not to exceed the
Tranche A Commitment of such Bank (each such loan, a "Tranche A Loan") and (ii)
a single loan to the Borrower on the Closing Date of a sum not to exceed the
Tranche B Commitment of such Bank (each such loan, a "Tranche B Loan," and
together with the Tranche A Loan, the "Term Loans"). The aggregate principal
amount of the Tranche A Commitments shall not exceed $5,000,000 (the "Total
Tranche A Commitment") and the aggregate principal amount of the Tranche B
Commitments shall not exceed $5,000,000 (the "Total Tranche B Commitments"). The
Term Loan Commitments shall expire on July 31, 1997 if not utilized on or prior
to such date. All unutilized Term Loan Commitments shall expire simultaneously
with the making of the Term Loans on the Closing Date. Each Term Loan of each
Bank made on the Closing Date shall be initially made as a Base Rate Loan and
may thereafter be maintained at the option of the Borrower as a Base Rate Loan
or a Eurodollar Loan, in accordance with the provisions hereof. Once repaid,
Term Loans may not be reborrowed. The Tranche A Loans shall mature on the
Tranche A Loan Maturity Date and shall be repaid, without premium or penalty, by
the Borrower, in amounts equal to the installments set forth below, on the
Payment Date specified below for each such installment:
Payment Date Amount of Installment
------------ ---------------------
August 31, 1997 $250,000
November 30, 1997 $250,000
February 28, 1998 $250,000
May 31, 1998 $250,000
August 31, 1998 $250,000
November 30, 1998 $250,000
February 28, 1999 $250,000
May 31, 1999 $250,000
August 31, 1999 $250,000
November 30, 1999 $250,000
February 28, 2000 $250,000
May 31, 2000 $250,000
August 31, 2000 $250,000
November 30, 2000 $250,000
24
February 28, 2001 $250,000
May 30, 2001 $250,000
August 31, 2001 $250,000
November 30, 2001 $250,000
February 28, 2002 $250,000
May 31, 2002 $250,000
provided that any amount outstanding on the Tranche A Loan Maturity Date after
giving effect to the above payments shall be due and payable on such date.
The Tranche B Loan shall mature on the Tranche B Loan Maturity Date
and shall be due and payable in full on such date, without premium or penalty,
by the Borrower, in an amount equal to the Tranche B Commitment on such date.
Section 2.2 Revolving Loans. (a) Subject to and upon the terms and
---------------
conditions herein set forth, each Bank severally and not jointly agrees, at any
time and from time to time on and after the Closing Date and prior to the
Revolving Loan Maturity Date, to make revolving loans (collectively, "Revolving
Loans") to the Borrower, which Revolving Loans (inclusive of any Letter of
Credit Liability) shall not exceed in aggregate principal amount at any time
outstanding (which amount shall include any Letter of Credit Liability) (x) with
respect to Loans outstanding from all Banks, the lesser of (i) the Total
Revolving Loan Commitment at such time and (ii) the Borrowing Base, and (y) with
respect to Loans outstanding from any Bank, such Bank's Commitment. The sum of
the Revolving Loan Commitments of all of the Banks (the "Total Revolving Loan
Commitment") on the Closing Date shall be $5,000,000. The Revolving Loan
Commitments shall expire on July 31, 1997 if the Closing Date has not occurred
on or prior to such date. The Revolving Loans of each Bank made on the Closing
Date shall be initially made as a Base Rate Loan and may thereafter be
maintained at the option of the Borrower as a Base Rate Loan or a Eurodollar
Loan, in accordance with the provisions hereof.
(b) Revolving Loans may be voluntarily prepaid (without premium
or penalty) pursuant to Section 2.12, and, subject to the other provisions of
this Agreement, any amounts so prepaid may be reborrowed. Each Bank's Revolving
Loan Commitment shall expire, and
25
each Revolving Loan shall mature on, the Revolving Loan Maturity Date, without
further action on the part of the Banks or the Agent.
(c) Except as otherwise provided in Section 2.9, each Borrowing
of Revolving Loans shall be in the aggregate minimum amount of $100,000 or any
integral multiple of $100,000 in excess thereof.
Section 2.3 Letters of Credit. (a) Provided that the Borrower is in
-----------------
compliance with all of the terms and conditions for the making of Revolving
Loans by the Banks, the Borrower shall have the right to request, through a
Letter of Credit Request pursuant to Section 2.3(b), the Issuing Bank to deliver
from time to time Letters of Credit, and the Issuing Bank shall promptly upon
such request issue the requested Letter of Credit, each of which shall be in a
form approved by the Issuing Bank; provided that the maximum Letter of Credit
Liability at any one time outstanding shall not exceed $1,000,000. Each drawing
under a Letter of Credit shall be payable in full upon the date thereof by the
Borrower, without notice or demand of any kind. Subject to the terms and
conditions otherwise applicable to advances of the Revolving Loans hereunder,
the Borrower may request a Revolving Loan hereunder to be used to reimburse the
Issuing Bank for the amount so drawn. The liability of the Borrower to reimburse
the Issuing Bank for the amounts drawn under Letters of Credit shall be included
within the terms "Revolving Loan" and "Loan" for all purposes of this Agreement,
and any amounts so drawn shall bear interest until paid in full (whether out of
the proceeds of a Revolving Loan otherwise permitted hereunder or otherwise) at
the Base Rate, subject to Section 2.7(c). The Borrower's Obligation to reimburse
the Issuing Bank for any and all amounts drawn under any Letter of Credit and
all interest thereon shall be secured by the Collateral. The Borrower's
obligations to repay any and all drawings under any Letter of Credit and any and
all other amounts payable to Issuing Bank, Agent or any other Bank hereunder
shall be absolute, irrevocable and unconditional under any and all circumstances
whatsoever and irrespective of any set-off, counterclaim or defense to payment
which the Borrower may have or have had against Issuing Bank, Agent or any other
Bank (except such as may arise out of Issuing Bank's, Agent's or any other
Bank's gross negligence or willful
26
misconduct hereunder) or any other Person, including, without limitation, any
setoff, counterclaim or defense based upon or arising out of:
(A) Any lack of validity or
enforceability of this Agreement or any of the other Loan
Documents or such Letter of Credit;
(B) Any amendment or waiver of or any
consent to or departure from the terms of the Loan Documents
or such Letter of Credit;
(C) The existence of any claim, setoff,
defense or other right which the Borrower or any other
Person may have at any time against, any beneficiary or any
transferee of such Letter of Credit (or any Person for whom
any such beneficiary or any such transferee may be acting),
Issuing Bank, Agent or any other Bank or any other Person,
whether in connection with such Letter of Credit, the Loan
Documents or any unrelated transaction;
(D) Any demand, statement or any other
document presented under such Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect,
or any statement therein being untrue or inaccurate in any
respect whatsoever or any variations in punctuation,
capitalization, spelling or format of the drafts or any
statements presented in connection with any drawing under
such Letter of Credit;
(E) The surrender or impairment of any
security for the performance or
27
observance of any of the terms of such Letter of Credit or
the Loan Documents; and
(F) The failure, for any reason, of any
Bank to fund advances to the Borrower hereunder for any
purpose.
Nothing contained herein shall constitute a waiver of any rights or remedies of
the Borrower against Issuing Bank, Agent or any other Bank arising out of the
gross negligence or willful misconduct of issuing Bank, Agent or any such other
Bank.
(b) Whenever the Borrower desires the issuance of a Letter of
Credit, it shall deliver to the Agent and the Issuing Bank a written notice no
later than 10:00 A.M. California time at least five Business Days prior to the
proposed date of issuance (each such notice, a "Letter of Credit Request"). Such
Letter of Credit Request shall specify (i) the proposed date of issuance (which
shall be a Business Day under the laws of the jurisdiction of the Issuing Bank),
(ii) the face amount of the Letter of Credit, which shall not be less than
$50,000, (iii) the expiration date of the Letter of Credit shall not exceed the
Business Day prior to the Revolving Loan Termination Date, (iv) the name and
address of the beneficiary of the Letter of Credit, and (v) a precise
description of the documents and the verbatim text of any certificate to be
presented by the beneficiary of such Letter of Credit which, if presented by
such beneficiary prior to the expiration date of such Letter of Credit, would
require the Issuing Bank to make payments under the Letter of Credit (provided
that the Issuing Bank, in its sole discretion, may require changes in any such
documents and certificates). The Issuing Bank shall notify the Agent of the
issuance of each Letter of Credit promptly following the issuance thereof.
Promptly after receipt of notice of the issuance of a Letter of Credit, the
Agent shall notify each Bank and the Borrower of the issuance thereof and the
amount of each Bank's respective participation therein.
(c) The payment of drafts under any Letter of Credit shall be
made in accordance with the terms of such Letter of Credit and, in that
connection,
28
the Issuing Bank shall be entitled to honor any drafts and accept any documents
presented to it by the beneficiary of such Letter of Credit in accordance with
the terms of such Letter of Credit and believed by the Issuing Bank to be
genuine. The Issuing Bank shall not have any duty to the Borrower or any Bank to
inquire as to the accuracy or authenticity of any draft or other drawing
documents which may be presented to it, but shall be responsible only to
determine that the documents which are required to be presented before payment
or acceptance of a draft under any Letter of Credit have been delivered and that
they comply on their face with the requirements of that Letter of Credit.
(d) The Borrower, the Banks, each Issuing Bank and the Agent
agree that, in the event that an Issuing Bank and the Borrower enter into any
letter of credit application or agreement in relation to any Letter of Credit
which contains provisions that are inconsistent with the express provisions of
this Section 2.3, then the provisions of this Section 2.3 shall be controlling.
Section 2.4 Notice of Borrowing. (a) Whenever the Borrower desires
-------------------
to borrow Revolving Loans or Term Loans hereunder, it shall give the Agent at
the Agent's Office prior to 10:00 A.M., California time, at least one Business
Day's prior telex, telecopy or telephonic notice (promptly confirmed in writing)
of each Base Rate Loan, and at least three Business Days' prior telex, telecopy
or telephonic notice (promptly confirmed in writing) of each Eurodollar Loan to
be made hereunder. Each such notice (a "Notice of Borrowing") shall be
irrevocable and shall specify (i) the aggregate principal amount of the
requested Loans, (ii) whether such Loans shall be Term Loans or Revolving Loans,
(iii) the date of Borrowing (which shall be a Business Day), and (iv) whether
such Loans shall consist of Base Rate Loans or Eurodollar Loans and, if
Eurodollar Loans, the initial Interest Period to be applicable thereto
(provided, that no Eurodollar Loans may be requested or made when any Default or
Event of Default has occurred and is continuing).
(b) Promptly after receipt of a Notice of Borrowing, the Agent
shall provide each Bank with a copy thereof and inform each Bank as to its Pro
Rata Share of the Loans requested thereunder.
29
Section 2.5 Disbursement of Funds. (a) No later than 1:00 P.M.,
---------------------
California time, on the date specified in each Notice of Borrowing, each Bank
will make available its Pro Rata Share of the Loans requested to be made on such
date, in U.S. dollars and immediately available funds, at the Agent's Office.
After the Agent's receipt of the proceeds of such Loans, the Agent will make
available to the Borrower by depositing (in such account of the Borrower as the
Agent shall be instructed from time to time by the Borrower) the aggregate of
the amounts so made available in the type of funds actually received.
(b) Unless the Agent shall have been notified by any Bank prior
to the date of a Borrowing that such Bank does not intend to make available to
the Agent its portion of the Loans to be made on such date, the Agent may assume
that such Bank has made such amount available to the Agent on such date and the
Agent in its sole discretion may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such corresponding amount
is not in fact made available to the Agent by such Bank and the Agent has made
such amount available to the Borrower, the Agent shall be entitled to recover
such corresponding amount on demand from such Bank. If such Bank does not pay
such corresponding amount forthwith upon the Agent's demand therefor, the Agent
shall promptly notify the Borrower and the Borrower shall immediately repay such
corresponding amount to the Agent. The Agent shall also be entitled to recover
from such Bank or the Borrower, as the case may be, interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Agent to the Borrower to the date such
corresponding amount is recovered by the Agent, at a rate per annum equal to the
then applicable rate of interest, calculated in accordance with Section 2.7, for
the respective Loans. Nothing herein shall be deemed to relieve any Bank from
its obligation to fulfill its commitments hereunder or to prejudice any rights
which the Borrower may have against any Bank as a result of any default by such
Bank hereunder. Notwithstanding anything contained herein or in any other Loan
Document to the contrary, the Agent may apply all funds and proceeds of
Collateral available for the payment of any Obligations first to repay any
amount owing by any Bank
30
to the Agent as a result of such Bank's failure to fund its Loans hereunder.
Section 2.6 Notes. (a) The Borrower's obligation to pay the
-----
principal of, and interest on, each Bank's Loans (including Loans made pursuant
to Section 2.3(a)) shall be evidenced by (i) in the case of (x) such Bank's
Tranche A Loans, a promissory note (a "Tranche A Note") duly executed and
delivered by the Borrower substantially in the form of Exhibit A-1 hereto in a
principal amount equal to such Bank's Tranche A Loan with blanks appropriately
completed in conformity herewith, and (y) such Bank's Tranche B Loans, a
promissory note (a "Tranche B Note") duly executed and delivered by the Borrower
substantially in the form of Exhibit A-2 hereto in a principal amount equal to
such Bank's Tranche B Loan with blanks appropriately completed in conformity
herewith and (ii) in the case of such Bank's Revolving Loans, a promissory note
(a "Revolving Note") duly executed and delivered by the Borrower substantially
in the form of Exhibit A-3 hereto in a principal amount equal to such Bank's
Revolving Loan Commitment, with blanks appropriately completed in conformity
herewith. Each Note issued to a Bank shall (x) be payable to the order of such
Bank, (y) be dated the Closing Date, and (z) mature on the Tranche A Loan
Maturity Date, the Tranche B Loan Maturity Date or the Revolving Loan Maturity
Date, as applicable.
(b) Each Bank is hereby authorized, at its option, either (i) to
endorse on the schedule attached to its Revolving Note (or on a continuation of
such schedule attached to such Note and made a part thereof) an appropriate
notation evidencing the date and amount of each Revolving Loan evidenced thereby
and the date and amount of each principal and interest payment in respect
thereof, or (ii) to record such Revolving Loans and such payments in its books
and records. Such schedule or such books and records, as the case may be, shall
constitute prima facie evidence of the accuracy of the information contained
therein.
Section 2.7 Interest. (a) The Borrower agrees to pay interest in
--------
respect of the unpaid principal amount of each Base Rate Loan from the date of
the making of such Loan until such Loan shall be paid in full at a rate per
annum which shall be equal to the sum of the
31
Base Rate in effect from time to time plus the Applicable Margin, such rate to
change as and when the Base Rate or the Applicable Margin changes, such interest
to be computed on the basis of the actual number of days elapsed over a year of
365 or 366 days.
(b) The Borrower agrees to pay interest in respect of the unpaid
principal amount of each Eurodollar Loan from the date of the making of such
Loan until such Loan shall be paid in full at a rate per annum which shall be
equal to the sum of the Eurodollar Rate plus the Applicable Margin, such rate to
change as and when the Applicable Margin changes, such interest to be computed
on the basis of a 360-day year.
(c) In the event that, and for so long as, any Event of Default
shall have occurred and be continuing, the outstanding principal amount of all
Loans and, to the extent permitted by law, overdue interest in respect of all
Loans, shall bear interest at a rate per annum (the "Default Rate") equal to the
sum of two percent (2%) plus the interest rate otherwise applicable hereunder to
such principal amount in effect from time to time.
(d) Interest on each Loan shall accrue from and including the
date of the Borrowing thereof to but excluding the date of any repayment thereof
(provided that any Loan borrowed and repaid on the same day shall accrue one
day's interest) and shall be payable (i) in respect of each Base Rate Loan,
quarterly in arrears on each Payment Date, (ii) in respect of each Eurodollar
Loan, on the last day of each Interest Period applicable to such Loan and, in
the case of an Interest Period of six months, on the date occurring three months
from the first day of such Interest Period and on the last day of such Interest
Period, and (iii) in the case of all Loans, on any prepayment or conversion (on
the amount prepaid or converted), at maturity (whether by acceleration or
otherwise) and, after such maturity, on demand.
(e) The Agent shall, upon determining the Eurodollar Rate for
any Interest Period, promptly notify the Borrower and the Banks thereof.
Section 2.8 Interest Periods. (a) The Borrower shall, in each
----------------
Notice of Borrowing or Notice of
32
Conversion or Continuation in respect of the making of, conversion into or
continuation of a Eurodollar Loan, select the interest period (each an "Interest
Period") applicable to such Eurodollar Loan, which Interest Period shall, at the
option of the Borrower, be either a one-month, two-month, three-month or six-
month period, provided that:
(i) the initial Interest Period for any
Eurodollar Loan shall commence on the date of the making of
such Loan (including the date of any conversion from a Base
Rate Loan) and each Interest Period occurring thereafter in
respect of such Loan shall commence on the date on which the
next preceding Interest Period expires;
(ii) if any Interest Period would otherwise
expire on a day which is not a Business Day, such Interest
Period shall expire on the next succeeding Business Day,
provided, however, that if any Interest Period would
otherwise expire on a day which is not a Business Day but is
a day of the month after which no further Business Day
occurs in such month, such Interest Period shall expire on
the next preceding Business Day;
(iii) if any Interest Period begins on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period, such
Interest Period shall end on the last Business Day of such
calendar month;
(iv) no Interest Period in respect of any
Revolving Loan, Tranche A Loan or Tranche B Loan shall
extend beyond the Revolving Maturity Date, the Tranche A
Loan Maturity Date or the Tranche B Loan Maturity Date, as
applicable; and
(v) no Interest Period in respect of a Term Loan
shall extend beyond any date upon which a repayment of the
Term Loans is required to be made pursuant to Section 2.1
unless the aggregate principal amount of Term
33
Loans which are Base Rate Loans or which have Interest
Periods which will expire on or before such date is equal to
or in excess of the amount of the Term Loan repayment
required to be made on such date.
(b) If upon the expiration of any Interest Period, the Borrower
has failed to elect a new Interest Period to be applicable to the respective
Eurodollar Loan as provided above, the Borrower shall be deemed to have elected
to convert such Eurodollar Loans into Base Rate Loans effective as of the
expiration date of such current Interest Period.
Section 2.9 Minimum Amount of Eurodollar Loans. All borrowings,
----------------------------------
conversions, continuations, payments, prepayments and selection of Interest
Periods hereunder shall be made or selected so that, after giving effect
thereto, (i) the aggregate principal amount of any Borrowing comprised of
Eurodollar Loans shall not be less than $500,000 or an integral multiple of
$100,000 in excess thereof, and (ii) there shall be no more than four
Borrowings comprised of Eurodollar Loans outstanding at any time.
Section 2.10 Conversion or Continuation. (a) Subject to the other
--------------------------
provisions hereof, the Borrower shall have the option (i) to convert at any time
all or any part of outstanding Base Rate Loans which comprise part of the same
Borrowing to Eurodollar Loans, (ii) to convert all or any part of outstanding
Eurodollar Loans which comprise part of the same Borrowing to Base Rate Loans,
on the expiration date of the Interest Period applicable thereto, or (iii) to
continue all or any part of outstanding Eurodollar Loans which comprise part of
the same Borrowing as Eurodollar Loans for an additional Interest Period, on the
expiration of the Interest Period applicable thereto; provided that no Loan may
--------
be continued as, or converted into, a Eurodollar Loan when any Event of Default
has occurred and is continuing.
(b) In order to elect to convert or continue a Loan under this
Section 2.10, the Borrower shall deliver an irrevocable notice thereof (a
"Notice of Conversion or Continuation") to the Agent no later than 10:00 A.M.,
California time, (i) at least one Business Day in advance of the proposed
conversion date in the
34
case of a conversion to a Base Rate Loan and (ii) at least three Business Days
in advance of the proposed conversion or continuation date in the case of a
conversion to, or a continuation of, a Eurodollar Loan. A Notice of Conversion
or Continuation shall specify (w) the requested conversion or continuation date
(which shall be a Business Day), (x) the amount and Facility of the Loan to be
converted or continued, (y) whether a conversion or continuation is requested,
and (z) in the case of a conversion to, or a continuation of, a Eurodollar Loan,
the requested Interest Period. Promptly after receipt of a Notice of Conversion
or Continuation under this Section 2.10(b), the Agent shall provide each Bank
with a copy thereof.
Section 2.11 Voluntary Reduction of Commitments. Upon at least three
----------------------------------
Business Day's prior irrevocable written notice (or telephonic notice promptly
confirmed in writing) to the Agent (which notice the Agent shall promptly
transmit to each of the Banks), the Borrower shall have the right, without
premium or penalty, to permanently reduce each Bank's Pro Rata Share of all or
part of the Total Revolving Loan Commitment, provided that any such partial
reduction shall be in the minimum aggregate amount of $1,000,000 or any integral
multiple of $100,000 in excess thereof.
Section 2.12 Voluntary Prepayments. The Borrower shall have the
---------------------
right to prepay (without premium or penalty) the Loans in whole or in part from
time to time on the following terms and conditions: (i) the Borrower shall give
the Agent written notice (or telephonic notice promptly confirmed in writing),
which notice shall be irrevocable, of its intent to prepay the Loans, at least
three Business Days prior to a prepayment of Eurodollar Loans and at least one
Business Day prior to a prepayment of Base Rate Loans, which notice shall
specify the amount of such prepayment and what Types of Loans and which
Facilities are to be prepaid and, in the case of Eurodollar Loans, the specific
Borrowing(s) pursuant to which made, and which notice the Agent shall promptly
transmit to each of the Banks, (ii) each prepayment shall be in an aggregate
principal amount of $500,000 with respect to Eurodollar Loans and $100,000 with
respect to Base Rate Loans or any integral multiple of $100,000 in excess
thereof, (iii) prepayments of Eurodollar Loans made pursuant to this Section may
only
35
be made on the last day of the Interest Period applicable thereto, and (iv)
partial prepayments of the Term Loans shall be applied to the scheduled
installments of principal thereof in the inverse order of maturity.
Section 2.13 Mandatory Prepayments. (a) On or before the 60th day
---------------------
after each date after the Closing Date on which the Borrower or any of its
Subsidiaries receives any Net Sale Proceeds, the Borrower shall prepay (without
premium or penalty) the outstanding Term Loans in an amount equal to 100% of the
amount of such Net Sale Proceeds, in accordance with the provisions of Section
2.14; except that such Net Sale Proceeds may be used to replace the disposed
assets by other assets which are, in the reasonable opinion of the Agent,
similar to the disposal assets, within 60 days of the receipt by the Borrower of
such Net Sale Proceeds.
(b) On each date after the Closing Date on which the Borrower or
any of its Subsidiaries receives any proceeds from any capital contribution or
from the issuance of any equity securities (excluding the exercise of employee
stock options), the Borrower shall prepay the outstanding Term Loans in an
amount equal to 50% of such proceeds (net of any underwriting discounts or
commissions and any other reasonable costs or expenses directly attributable to
such incurrence or issuance), in accordance with the provisions of Section 2.14.
(c) On the date on which the audited financial statements of the
Borrower are delivered to each Bank pursuant to Section 5.1(b), the Borrower
shall prepay the outstanding Term Loans in the following amounts: (i) if the
Leverage Ratio exceeds or is equal to 3.0:1, 75% of Excess Cash Flow; (ii) if
the Leverage Ratio is less than 3.0:1 but greater than or equal to 2.0:1, 50% of
the Excess Cash Flow; and (iii) if the Leverage Ratio is less than 2.0:1, no
such payment is required.
(d) On each day on which the sum of (x) Revolving Loans
outstanding plus (y) the Letter of Credit Liability exceeds either (i) the Total
Revolving Loan Commitment or (ii) the Borrowing Base, the Borrower shall prepay
the Revolving Loans to the extent that the outstanding principal amount of the
Revolving Loans plus
36
the Letter of Credit Liability exceeds either the Total Revolving Loan
Commitment or the Borrowing Base.
Section 2.14 Application of Prepayments. All prepayments of the
--------------------------
Loans required by Section 2.13(a)-(c) shall be applied first, to prepay the Term
-----
Loans pro rata between the Tranche A Loans and the Tranche B Loans based on the
amounts then outstanding under each of the Tranche A Loans and the Tranche B
Loans and pro rata among the Banks until such Term Loans shall have been repaid
in full, together with accrued and unpaid interest thereon, second, to prepay
------
the Revolving Loans until such Revolving Loans shall have been repaid in full,
together with accrued and unpaid interest thereon, third to provide cash
-----
collateral for any outstanding Letter of Credit and fourth to all other
------
outstanding Obligations. All prepayments of the Tranche A Loans shall be
applied to the scheduled installments of principal thereof in the inverse order
of maturity.
Section 2.15 Method and Place of Payment. (a) Except as otherwise
---------------------------
specifically provided herein, all payments and prepayments under this Agreement
and the Notes shall be made to the Agent for the account of the Banks entitled
thereto not later than 12:00 noon, California time, on the date when due and
shall be made in lawful money of the United States of America in immediately
available funds at the Agent's Office, and any funds received by the Agent after
such time shall, for all purposes hereof (including the following sentence), be
deemed to have been paid on the next succeeding Business Day. Except as
otherwise specifically provided herein, the Agent shall thereafter cause to be
distributed on the date of receipt thereof to each Bank in like funds its Pro
Rata Share of payments so received.
(b) Whenever any payment to be made hereunder or under any Note
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and, with respect
to payments of principal, interest shall be payable at the applicable rate
during such extension.
(c) All payments made by the Borrower hereunder and under the
other Loan Document shall be made
37
irrespective of, and without any reduction for, any setoff or counterclaims.
Section 2.16 Fees. (a) The Borrower agrees to pay (without
----
duplication) the fees in the amounts and on the dates specified in the Fee
Letter.
(b) The Borrower agrees to pay to the Agent for the account of
each Bank a commitment fee, computed at the per annum rate of 1/2 of 1% on the
average daily unused portion (minus any undrawn amounts on outstanding Letters
of Credit) of the Revolving Loan Commitment, from and including the Closing Date
to the Revolving Loan Maturity Date, payable quarterly in arrears on each
Payment Date and on the Revolving Loan Maturity Date or such earlier date, if
any, on which the Revolving Loan Commitment shall terminate in accordance with
the terms hereof.
(c) The Borrower agrees to pay to the Agent for the ratable
benefit of the Banks a letter of credit commitment fee in an amount equal to the
sum of (i) the face amount of any Letter of Credit multiplied by (ii) the
percentage amount set forth under the heading "Eurodollar Margin" in the
definition of "Applicable Margin" which would then be applicable to the Borrower
with respect to Revolving Loans outstanding in an amount equal to the aggregate
daily undrawn amount of all Letters of Credit outstanding; provided that prior
to the first anniversary of the Closing Date such percentage amount shall be no
less than 2.50%.
(d) Such fees as described in clause (c) above shall accrue from
the date of issuance of each Letter of Credit to the date of the expiration or
cancellation thereof, and shall be due and payable in arrears quarterly on each
Payment Date, on the Revolving Facility Maturity Date, and on any other date on
which the Revolving Loans are paid in full and the Revolving Loan Commitment
permanently terminated.
(e) The fees described in clauses (a), (b) and (c) above shall
be computed on the basis of the actual number of days elapsed over a year of 365
or 366 days.
38
Section 2.17 Interest Rate Unascertainable, Increased Costs,
-----------------------------------------------
Illegality. (a) In the event that the Agent, in the case of clause (i) below,
----------
or any Bank, in the case of clauses (ii) and (iii) below, shall have determined
(which determination shall, absent manifest error, be final and conclusive and
binding upon all parties hereto):
(i) on any date for determining the
Eurodollar Rate for any Interest Period, that by reason of
any changes arising after the date of this Agreement
affecting the interbank Eurodollar market, adequate and fair
means do not exist for ascertaining the applicable interest
rate on the basis provided for in the definition of the
Eurodollar Rate; or
(ii) at any time, that the relevant
Eurodollar Rate applicable to any of its Loans shall not
represent the effective pricing to such Bank for funding or
maintaining a Eurodollar Loan, or such Bank shall incur
increased costs or reductions in the amounts received or
receivable hereunder in respect of any Eurodollar Loan, in
any such case because of (x) any change since the date of
this Agreement in any applicable law or governmental rule,
regulation, guideline or order or any interpretation thereof
and including the introduction of any new law or
governmental rule, regulation, guideline or order (such as
for example but not limited to a change in official reserve
requirements, but, in all events, excluding reserves
required under Regulation D of the Federal Reserve Board to
the extent included in the computation of the Eurodollar
Rate), whether or not having the force of law and whether or
not failure to comply therewith would be unlawful, and/or
(y) other circumstances affecting such Bank or the interbank
Eurodollar market or the position of such Bank in such
market; or
(iii) at any time, that the making or
continuance by it of any Eurodollar Loan has become unlawful
by compliance by such Bank in good faith with any law or
governmental
39
rule, regulation, guideline or order (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful) or
has become impracticable as a result of a contingency occurring after the
date of this Agreement which materially and adversely affects the interbank
Eurodollar market;
then, and in any such event, the Agent or such Bank shall, promptly after making
such determination, give notice (by telephone promptly confirmed in writing) to
the Borrower and (if applicable) the Agent of such determination (which notice
the Agent shall promptly transmit to each of the other Banks). Thereafter (x)
in the case of clause (i) above, the Borrower's right to request Eurodollar
Loans shall be suspended, and any Notice of Borrowing or Notice of Conversion or
Continuation given by the Borrower with respect to any Borrowing of Eurodollar
Loans which has not yet been made shall be deemed cancelled and rescinded by the
Borrower, (y) in the case of clause (ii) above, the Borrower shall pay to such
Bank, upon such Bank's delivery of written demand therefor to the Borrower with
a copy to the Agent, such additional amounts (in the form of an increased rate
of interest, or a different method of calculating interest, or otherwise, as
such Bank in its sole discretion shall determine) as shall be required to
compensate such Bank for such increased costs or reduction in amounts received
or receivable hereunder and (z) in the case of clause (iii) above, the Borrower
shall take one of the actions specified in clause (b) below as promptly as
possible and, in any event, within the time period required by law. The written
demand provided for in clause (y) shall, absent manifest error, be final and
conclusive and binding upon all of the parties hereto.
(b) In the case of any Eurodollar Loan or requested Eurodollar Loan
affected by the circumstances described in clause (a)(ii) above, the Borrower
may, and in the case of any Eurodollar Loan affected by the circumstances
described in clause (a)(iii) above the Borrower shall, either (i) if any such
Eurodollar Loan has not yet been made but is then the subject of a Notice of
Borrowing or a Notice of Conversion or Continuation, be deemed to have cancelled
and rescinded such notice, or (ii) if any such Eurodollar Loan is then
outstanding,
40
require the affected Bank to convert each such Eurodollar Loan into a Base Rate
Loan at the end of the applicable Interest Period or such earlier time as may be
required by law, in each case by giving the Agent notice (by telephone promptly
confirmed in writing) thereof on the Business Day that the Borrower was notified
by the Bank pursuant to clause (a) above; provided, however, that all Banks
-------- -------
whose Eurodollar Loans are affected by the circumstances described in clause (a)
above shall be treated in the same manner under this clause (b).
(c) In the event that the Agent determines at any time following
its giving of notice based on the conditions described in clause (a)(i) above
that none of such conditions exist, the Agent shall promptly give notice thereof
to the Borrower and the Banks, whereupon the Borrower's right to request
Eurodollar Loans from the Banks and the Banks' obligation to make Eurodollar
Loans shall be restored.
(d) In the event that a Bank determines at any time following
its giving of a notice based on the conditions described in clause (a)(iii)
above that none of such conditions exist, such Bank shall promptly give notice
thereof to the Borrower and the Agent, whereupon the Borrower's right to request
Eurodollar Loans from such Bank and such Bank's obligation to make Eurodollar
Loans shall be restored.
Section 2.18 Funding Losses. The Borrower shall compensate each Bank, upon
--------------
such Bank's delivery of a written demand therefor to the Borrower, with a copy
to the Agent (which demand shall, absent manifest error, be final and conclusive
and binding upon all of the parties hereto), for all reasonable losses, expenses
and liabilities (including, without limitation, any loss, expense or liability
incurred by such Bank in connection with the liquidation or reemployment of
deposits or funds required by it to make or carry its Eurodollar Loans), that
such Bank sustains: (i) if for any reason (other than a default by such Bank) a
Borrowing of, or conversion from or into, or a continuation of, Eurodollar Loans
does not occur on a date specified therefor in a Notice of Borrowing or Notice
of Conversion or Continuation (whether or not rescinded, cancelled or withdrawn
or deemed rescinded, cancelled or withdrawn, pursuant to Section 2.17(a) or
2.17(b) or otherwise),
41
(ii) if any repayment (including, without limitation, payment after
acceleration) or conversion of any of its Eurodollar Loans occurs on a date
which is not the last day of the Interest Period applicable thereto, (iii) if
any prepayment of any of its Eurodollar Loans is not made on any date specified
in a notice of prepayment given by the Borrower, or (iv) as a consequence of any
default by the Borrower in repaying its Eurodollar Loans or any other amounts
owing hereunder in respect of its Eurodollar Loans when required by the terms of
this Agreement. Calculation of all amounts payable to a Bank under this Section
2.18 shall be made on the assumption that such Bank has funded its relevant
Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at
the Eurodollar Rate in an amount equal to the amount of such Eurodollar Loan
with a maturity equivalent to the Interest Period applicable to such Eurodollar
Loan, and through the transfer of such Eurodollar deposit from an offshore
office of such Bank to a domestic office of such Bank in the United States of
America, provided that each Bank may fund its Eurodollar Loans in any manner
that it in its sole discretion chooses and the foregoing assumption shall only
be made in order to calculate amounts payable under this Section 2.18.
Section 2.19 Increased Capital. If any Bank shall have determined at
-----------------
any time that such Bank shall incur increased costs or reductions in the amounts
received or receivable hereunder with respect to any Loan because of any change
since the date of this Agreement in any applicable law or governmental rule,
regulation, order or request (whether or not having the force of law) (or in the
interpretation or administration thereof and including the introduction of any
new law or governmental rule, regulation, order or request), then from time to
time, upon such Bank's delivering a written demand therefor to the Agent and the
Borrower (with a copy to the Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank or Person for such
increased costs or reduction.
Section 2.20 Taxes. (a) All payments made by the Borrower under
-----
this Agreement shall be made free and clear of, and without reduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied,
42
collected, withheld or assessed by any governmental authority excluding, in the
case of the Agent and each Bank, net income and franchise taxes imposed on the
Agent or such Bank by the jurisdiction under the laws of which the Agent or such
Bank is organized or any political subdivision or taxing authority thereof or
therein, or by any jurisdiction in which such Bank's Domestic Lending Office or
Eurodollar Lending Office, as the case may be, is located or any political
subdivision or taxing authority thereof or therein (all such non-excluded taxes,
levies, imposts, deductions, charges or withholdings being hereinafter called
"Taxes"). If any Taxes are required to be withheld from any amounts payable to
the Agent or any Bank hereunder or under the Notes, the amounts so payable to
the Agent or such Bank shall be increased to the extent necessary to yield to
the Agent or such Bank (after payment of all Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and the Notes. Whenever any Taxes are payable by the Borrower, as
promptly as possible thereafter, the Borrower shall send to the Agent for its
own account or for the account of such Bank, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent the required receipts or other
required documentary evidence, the Borrower shall indemnify the Agent and the
Banks for any incremental taxes, interest or penalties that may become payable
by the Agent or any Bank as a result of any such failure. The agreements in
this Section 2.20 shall survive the termination of this Agreement and the
payment of the Notes and all other Obligations.
(b) Each Bank that is not incorporated under the laws of the
United States of America or a state thereof (including each Purchasing Bank that
becomes a party to this Agreement pursuant to Section 9.04) agrees that, prior
to the first date on which any payment is due to it hereunder, it will deliver
to the Borrower and the Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the
case may be, certifying in each case that such Bank is entitled to receive
payments under this Agreement and the Notes payable to it, without deduction or
withholding of any United States federal income taxes.
43
Each Bank which delivers to the Borrower and the Agent a Form 1001 or 4224
pursuant to the preceding sentence further undertakes to deliver to the Borrower
and the Agent two further copies of such letter and Form 1001 or 4224, or
successor applicable forms, or other manner of certification, as the case may
be, on or before the date that any such letter or form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent letter and form previously delivered by it to the Borrower, and such
extensions or renewals thereof as may reasonably be requested by the Borrower,
certifying in the case of a Form 1001 or 4224 that such Bank is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes, unless in any such case an event (including,
without limitation, any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required which renders
all such forms inapplicable or which would prevent such Bank from duly
completing and delivering any such letter or form with respect to it and such
Bank advises the Borrower that it is not capable of receiving payments without
any deduction or withholding of United States federal income tax.
Section 2.21 Use of Proceeds. The proceeds of the Term Loans and the
---------------
Revolving Loans made on the Closing Date shall be used to finance the
Acquisition and to pay the Transaction Costs. The proceeds of the Revolving
Loans made after the Closing Date shall be used for the Borrower's working
capital purposes.
Section 2.22 Participations Purchased by Banks in the Letter of
--------------------------------------------------
Credit Liability.
----------------
(a) On the date of the issuance of each Letter of Credit, the
Issuing Bank shall be deemed irrevocably and unconditionally to have sold and
transferred to each Bank (other than the Issuing Bank) and each Bank shall be
deemed to have irrevocably and unconditionally purchased and received from the
Issuing Bank, an undivided interest and participation, to the extent of such
Bank's Commitment Percentage in effect from time to time, in such Letter of
Credit and all Letter of Credit Liability with respect thereto. The Revolving
Commitment of each Bank hereunder shall include that Bank's share of the Letter
of Credit Liability.
44
(b) In the event that any reimbursement obligation under this
Agreement is not paid when due to the Issuing Bank with respect to any Letter of
Credit, the Issuing Bank shall promptly notify the Agent to that effect, and the
Agent shall promptly notify each Bank (other than the Issuing Bank) of the
amount of such reimbursement obligation and each Bank other than the Issuing
Bank shall immediately pay to the Agent for distribution to the Issuing Bank, in
lawful money of the United States and in same day funds, an amount equal to such
Bank's Commitment Percentage then in effect of the amount of such unpaid
reimbursement obligation.
(c) The obligation of each Bank other than the Issuing Bank to
make Payments under subsection (b) above shall be unconditional and irrevocable
and shall be made under all circumstances, including, without limitation,
following the occurrence of any Default or any Event of Default or any of the
circumstances referred to in Section 2.3 hereof.
(d) Prior to the occurrence of any Event of Default, the Agent
shall promptly distribute to each Bank its Commitment Percentage (or other
applicable share as expressly provided herein) of all amounts received on
account of the obligations of the Borrower to repay amounts drawn under any
Letter of Credit (in like funds as received). Following the occurrence of an
Event of Default, all amounts received by the Agent on account of such
obligations shall be disbursed by the Agent as follows:
(i) First, to the payment of expenses incurred by the
Agent in the performance of its duties and enforcement of its rights under
the Loan Documents, including, without limitation, all costs and expenses
of collection, reasonable attorneys' fees, court costs and foreclosure
expenses;
(ii) Then, to the Banks, pro rata in accordance with their
respective Commitment Percentages until all outstanding reimbursement
obligations for drawing on such Letter of Credit and interest accrued
thereon have been paid in full; and
45
(iii) Then, and if but only if there remains any
available amount which has not been drawn under such Letter of
Credit, to the Agent to hold as cash collateral for the
obligation of the Borrower to reimburse any future drawings on
such Letter of Credit, the Borrower hereby granting to the Agent,
for the pro rata, pari passu benefit of the Banks, a first
perfected security interest therein and hereby irrevocably
agreeing that amounts so held may be applied from time to time in
reimbursement of drawings on such Letter of Credit as the same
may occur, until the expiration of such Letter of Credit and
payment in full of all amounts due with respect to any drawing
thereon.
(e) If any payment received from the Borrower on account of any
reimbursement obligation with respect to any Letter of Credit and distributed to
a Bank under Section 2.22(d) hereof is thereafter recovered from the Issuing
Bank, each Bank which received such distribution shall, upon demand by the
Agent, repay to the Issuing Bank such Bank's ratable share of the amount so
recovered together with an amount equal to such Bank's ratable share (according
to the proportion of (i) the amount of such Bank's required repayment to (ii)
the total amount so recovered) of any interest of other amount paid or payable
by the Issuing Bank in respect of the total amount so recovered.
SECTION 3. CONDITIONS PRECEDENT.
Section 3.1 Conditions Precedent to Initial Loans. The obligation of
-------------------------------------
each Bank to make its initial Loans is subject to the satisfaction on the
Closing Date of the following conditions precedent:
(a) Loan Documents.
--------------
(i) Credit Agreement. The Borrower shall have executed
----------------
and delivered this Agreement to the Agent.
(ii) Notes. The Borrower shall have executed and delivered
-----
to each of the
46
Banks the appropriate Notes in the amount, maturity and as
otherwise provided herein.
(iii) Security Agreement. The Borrower shall have
executed and delivered to the Agent a security agreement
substantially in the form set forth as Exhibit B hereto (as
amended, modified or supplemented from time to time, the
"Security Agreement").
(iv) Pledge Agreement. The Borrower shall have
executedand delivered to the Agent a pledge agreement
substantially in the form set forth as Exhibit C hereto (as
amended, modified or supplemented from time to time, the "Pledge
Agreement").
(v) Leasehold Mortgage. The Borrower shall have
execute and delivered to the Agent a leasehold mortgage
substantially in the form set forth as Exhibit D hereto (as
amended, modified or supplemented from time to time, the
"Leasehold Mortgage").
(vi) Environmental Indemnity Agreement. The
Borrower shall have executed and delivered to the Agent an
environmental indemnity agreement substantially in the form set
forth as Exhibit H hereto (as amended, modified or supplemented
from time to time, the "Environmental Indemnity Agreement").
(vii) Warrant. The Borrower shall have issued
the Warran to the Warrantholder.
(b) Opinions of Counsel.
(i) The Agent shall have received a legal opinion,
dated the Closing Date, from ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP,
counsel to the Borrower, substantially in the form set forth as
Exhibit E-1 hereto.
(ii) The Agent shall have received the legal
opinions issued by the Borrower's and the Sellers' counsel in
47
connection with the Acquisition Documents, each of which opinions
shall either provide that it may be relied on by the Agent and the
Banks or shall be accompanied by a letter to such effect addressed to
the Agent and the Banks by the counsel issuing such opinion.
(iii) The Agent shall have received a legal opinion,
dated the Closing Date, from Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP,
substantially in the form set forth in Exhibit E-2 hereto.
(c) Corporate Documents. The Agent shall have received the
-------------------
Articles of Incorporation of the Borrower as amended, modified or supplemented
to the Closing Date, certified to be true, correct and complete by the Secretary
of State of the State of California as of a date not more than five days prior
to the Closing Date, together with a good standing certificate from such
Secretary of State of the State of California to be dated a date not more than
eight days prior to the Closing Date.
(d) Certified Resolutions, etc. The Agent shall have received a
--------------------------
certificate of the Secretary or Assistant Secretary of the Borrower and dated
the Closing Date certifying (i) the names and true signatures of the incumbent
officers of the Borrower authorized to sign the applicable Loan Documents, (ii)
the By-Laws of the Borrower as in effect on the Closing Date, (iii) the
resolutions of the Borrower's Board of Directors approving and authorizing the
execution, delivery and performance of all Transaction Documents executed by the
Borrower, and (iv) that there have been no changes in the Articles of
Incorporation of the Borrower since the date of the most recent certification
thereof by the Secretary of State of the State of California.
(e) Acquisition Documents. The Agent shall have received copies
---------------------
of the Acquisition Documents and any amendments or supplements thereto,
certified as of the Closing Date by the Secretary or Assistant Secretary of the
Borrower to be true, correct and complete copies of such documents.
48
(f) Officer's Certificate. The Agent and the Banks shall have
---------------------
received a certificate of the Chief Financial Officer of the Borrower, dated the
Closing Date, certifying that (i) the Acquisition Documents are in full force
and effect and no material term or condition thereof has been amended from the
form thereof delivered to the Agent, or waived, except as disclosed to the Agent
or its counsel prior to the execution of this Agreement, (ii) the Borrower and,
to the best of his or her knowledge, the other parties to the Acquisition
Documents, have performed or complied in all material respects with all
agreements and conditions contained in such Acquisition Documents and any
agreements or documents referred to therein required to be performed or complied
with by each of them on or before the Closing Date, and (iii) subject to the
foregoing, neither the Borrower nor, to the best of his or her knowledge, any
such other party is in default in the performance or compliance with any of the
material terms or provisions thereof, except to the extent that performance
thereof or compliance therewith or default has been waived with the prior
written consent of the Banks.
(g) Insurance. The Agent shall have received an independent
---------
insurance profile on the Borrower prepared by ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ or such other
Person as the Agent shall appoint, which profile shall reflect insurance on the
Borrower's operations satisfactory to the Agent, and the Agent shall have been
named as an additional insured on each policy identified on such profile.
(h) Lien Search Reports. The Agent shall have received
-------------------
satisfactory reports of Uniform Commercial Code, tax lien, judgment and
litigation searches conducted by a search firm acceptable to the Agent and the
Banks with respect to the Borrower in each of the locations set forth in
Schedule II of the Security Agreement.
(i) UCC-1 Financing Statements. The Agent shall have received
--------------------------
acknowledgment copies (or other evidence of filing) of each UCC-1 financing
statement relating to the Collateral and all of the security interests created
under the Loan Documents shall, except for Liens permitted pursuant to Section
6.3, be perfected first priority security interests.
49
(j) Pledged Stock. The Agent shall have received (i) an original
--------------
of the declaration ▇▇ ▇▇▇▇ signed by the pledgor substantially in the form
-------------------
attached to the Pledge Agreement, (ii) a certified copy by the account holder of
the Company's share transfer register and shareholder's account evidencing the
registration of the pledge and (iii) an attestation de nantissement de compte
-------------------------------------
d'instruments financiers delivered by the account holder in accordance with the
------------------------
Pledge Agreement.
(k) Title Insurance. The Agent shall have received a paid policy
---------------
of mortgagee title insurance (the "Title Insurance") with respect to the
Mortgaged Premises (as defined in the Leasehold Mortgage), in amount
satisfactory to the Banks and issued by a title insurance company satisfactory
to the Agent and the Banks.
(l) Corporate Structure. The corporate structure of the Borrower
-------------------
after giving effect to the Acquisition shall be satisfactory to the Banks.
(m) Financial Statements. The Agent shall have received the
--------------------
audited financial statements of the Company for the fiscal year ending December
31, 1996 and the unaudited financial statements of the Company for the fiscal
period ending on March 31, 1997.
(n) Environmental Matters. The Agent shall (i) be satisfied that
---------------------
neither the Company, any of its Subsidiaries nor the Borrower is subject to any
present or contingent environmental liability which could have a Material
Adverse Effect and (ii) have received an environmental audit report in form and
substance satisfactory to the Agent and the Banks prepared by an independent
environmental consultant acceptable to the Agent and the Banks with respect to
the properties and business of the Company, each of its Subsidiaries, the
Borrower and each of their Environmental Affiliates.
(o) Funds Flow Instructions. The Agent and the Banks shall have
-----------------------
received detailed instructions satisfactory to them describing the funds flow in
connection with the Transactions on the Closing Date.
(p) Fees and Expenses. The Agent shall have received, for its
-----------------
account and for the account of
50
each Bank, as applicable, all Fees and other fees and expenses due and payable
hereunder on or before the Closing Date, including, without limitation, the
reasonable fees and expenses accrued through the Closing Date, of Skadden, Arps,
Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP and any other counsel retained by the Agent.
(q) Consents, Licenses, Approvals, etc. The Agent shall have
-----------------------------------
received copies of all consents, licenses and approvals, if any, required in
connection with the execution, delivery and performance by the Seller, the
Company, the Borrower and the validity and enforceability, of the Loan
Documents, or in connection with the Transactions, and such consents, licenses
and approvals shall be in full force and effect.
(r) Consummation of Acquisition. The Acquisition shall have been
---------------------------
consummated in accordance with the terms of the Acquisition Documents.
(s) Due Diligence Review. The Agent shall have completed to its
--------------------
satisfaction a due diligence review of the Borrower and its operations,
including, without limitation, a review of the material contracts to which the
Borrower is a party, an evaluation of the Borrower's products, tours of the
Borrower's plants and interviews with the managers thereof, and a review of
matters relating to Environmental Laws and Environmental Approvals, including
any reports prepared in respect of any locations of operations of the Borrower.
(t) Borrowing Base Certificate. The Agent shall have received a
--------------------------
Borrowing Base Certificate from the Borrower satisfactory to the Agent,
completed using relevant data from May 31, 1997.
(u) Additional Matters. The Agent shall have received such other
------------------
certificates, opinions, documents and instruments relating to the Transactions
as may have been reasonably requested by the Agent or any Bank, and all
corporate and other proceedings and all other related documents (including,
without limitation, all documents referred to herein and not appearing as
exhibits hereto) and all legal matters in connection with the Transactions shall
be satisfactory in form and substance to the Banks.
51
Section 3.2 Conditions Precedent to All Loans. The obligation of each
---------------------------------
Bank to make any Loan (including the initial Loans made on the Closing Date) is
subject to the satisfaction on the date such Loan is made of the following
conditions precedent:
(a) Representations and Warranties. The representations and
------------------------------
warranties contained herein and in the other Loan Documents (other than
representations and warranties which expressly speak only as of a different
date) shall be true and correct in all material respects on such date both
before and after giving effect to the making of such Loans.
(b) No Default or Event of Default. No Default or Event of
------------------------------
Default shall have occurred and be continuing on such date either before or
after giving effect to the making of such Loans.
(c) No Injunction. No law or regulation shall have been adopted,
-------------
no order, judgment or decree of any Governmental Authority shall have been
issued, and no litigation shall be pending or threatened, which in the
reasonable judgment of the Banks would enjoin, prohibit or restrain, or impose
or result in the imposition of any material adverse condition upon, the making
or repayment of the Loans or the consummation of the Transactions.
(d) Notice of Borrowing. The Agent shall have received a fully
-------------------
executed Notice of Borrowing in respect of the Loans to be made on such date.
The acceptance of the proceeds of each Loan shall constitute a
representation and warranty by the Borrower to each of the Banks that all of the
conditions required to be satisfied under this Section 3 in connection with the
making of such Loan have been satisfied.
All of the Notes, certificates, agreements, legal opinions and other
documents and papers referred to in this Section 3, unless otherwise specified,
shall be delivered to the Agent for the account of each of the Banks and, except
for the Notes, in sufficient counterparts for each of the Banks, and shall be
satisfactory in form and substance to each Bank in its sole discretion.
52
SECTION 4. REPRESENTATIONS AND WARRANTIES.
In order to induce the Banks to enter into this Agreement and to make
the Loans, the Borrower makes the following representations and warranties,
which shall survive the execution and delivery of this Agreement and the Notes
and the making of the Loans:
Section 4.1 Corporate Status. The Borrower (i) is a duly organized
----------------
and validly existing corporation in good standing under the laws of the State of
California, (ii) has the corporate power and authority to own its property and
assets and to transact the business in which it is engaged or presently proposes
to engage and (iii) has duly qualified and is authorized to do business and is
in good standing as a foreign corporation in every jurisdiction in which it owns
or leases real property or in which the nature of its business requires it to be
so qualified.
Section 4.2 Corporate Power and Authority. The Borrower has the
-----------------------------
corporate power and authority to execute, deliver and carry out the terms and
provisions of each of the Loan Documents to which it is a party and has taken
all necessary corporate action to authorize the execution, delivery and
performance by it of such Loan Documents. The Borrower has duly executed and
delivered each such Loan Document, and each such Loan Document constitutes its
legal, valid and binding obligation, enforceable in accordance with its terms.
Section 4.3 No Violation. Neither the execution, delivery or
------------
performance by the Borrower of the Loan Documents to which it is a party, nor
compliance by it with the terms and provisions thereof nor the consummation of
the Acquisition or the Transactions, (i) will contravene any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality or (ii) will conflict or be
inconsistent with or result in any breach of, any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any Lien
(except pursuant to the Security Documents) upon any of the property or assets
of the Borrower pursuant to the terms of any indenture, mortgage, deed of trust,
agreement or other instrument to
53
which the Borrower is a party or by which it or any of its property or assets is
bound or to which it may be subject, or (iii) will violate any provision of the
Articles of Incorporation or By-Laws of the Borrower.
Section 4.4 Litigation. Except as set forth on Schedule 4.4, there
----------
are no actions, suits or proceedings pending or threatened (i) with respect to
any of the Acquisition, the Transactions or the Loan Documents or (ii) that
could, individually or in the aggregate, result in a Material Adverse Effect.
Section 4.5 Financial Statements; Financial Condition; etc. Each of
----------------------------------------------
the financial statements delivered pursuant to Sections 3.1(m) were prepared in
accordance with GAAP consistently applied and fairly present the financial
condition and the results of operations of the entities covered thereby on the
dates and for the periods covered thereby, except as disclosed in the notes
thereto and, with respect to interim financial statements, subject to normally
recurring year-end adjustments. The Borrower has no material liability
(contingent or otherwise) not reflected in such financial statements or in the
notes thereto.
Section 4.6 Solvency. On the Closing Date and after and giving
--------
effect to the Transactions, the Borrower will be Solvent.
Section 4.7 Material Adverse Change. Since December 31, 1996,
-----------------------
there has occurred no event, act or condition which has had, or could have, a
Material Adverse Effect.
Section 4.8 Use of Proceeds; Margin Regulations. All proceeds of
-----------------------------------
each Loan will be used by the Borrower only in accordance with the provisions of
Section 2.21. No part of the proceeds of any Loan will be used by the Borrower
to purchase or carry any Margin Stock or to extend credit to others for the
purpose of purchasing or carrying any Margin Stock. Neither the making of any
Loan nor the use of the proceeds thereof will violate or be inconsistent with
the provisions of Regulations G, T, U or X of the Federal Reserve Board.
Section 4.9 Governmental Approvals. No order, consent, approval,
----------------------
license, authorization, or validation
54
of, or filing, recording or registration with, or exemption by, any governmental
or public body or authority, or any subdivision thereof, is required on the part
of the Borrower to authorize, or is required on the part of the Borrower in
connection with (i) the execution, delivery and performance of any Loan Document
or the consummation of any of the Transactions or (ii) the legality, validity,
binding effect or enforceability of any Loan Document, except those listed on
Schedule 4.9 that have already been duly made or obtained and remain in full
force and effect.
Section 4.10 Security Interests and Liens. The Security Documents
----------------------------
create, as security for the Obligations, valid and enforceable security
interests in and Liens on all of the Collateral, in favor of the Agent for the
ratable benefit of the Banks, and subject to no other Liens. Upon the
satisfaction of the conditions precedent described in Sections 3.1(i) and
3.1(j), such security interests in and Liens on the Collateral shall be superior
to and prior to the rights of all third parties (except as disclosed on Schedule
4.10 and except with respect to Liens permitted pursuant to Section 6.3), and no
further recordings or filings are or will be required in connection with the
creation, perfection or enforcement of such security interests and Liens, other
than the filing of continuation statements in accordance with applicable law.
Section 4.11 Tax Returns and Payments. The Borrower has filed all
------------------------
tax returns required to be filed by it and has paid all taxes and assessments
payable by it which have become due, other than those not yet delinquent or
those that are reserved against in accordance with GAAP which are being
diligently contested in good faith by appropriate proceedings.
Section 4.12 ERISA. The Borrower neither has nor has had any Plans.
-----
No accumulated funding deficiency (as defined in Section 412 of the Code or
Section 302 of ERISA) or Reportable Event has occurred with respect to any Plan.
There are no Unfunded Benefit Liabilities under any Plan. The Borrower and each
member of its ERISA Controlled Group have complied with the requirements of
Section 515 of ERISA with respect to each Multiemployer Plan and is not in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to
55
any Multiemployer Plan. The aggregate potential total withdrawal liability, and
the aggregate potential annual withdrawal liability payments of the Borrower and
the members of its ERISA Controlled Group as determined in accordance with Title
IV of ERISA as if the Borrower and the members of its ERISA Controlled Group had
completely withdrawn from all Multiemployer Plans is not greater than $50,000
and $50,000, respectively. To the best knowledge of the Borrower and each
member of its ERISA Controlled Group, no Multiemployer Plan is or is likely to
be in reorganization (as defined in Section 4241 of ERISA or Section 418 of the
Code) or is insolvent (as defined in Section 4245 of ERISA). No material
liability to the PBGC (other than required premium payments), the Internal
Revenue Service, any Plan or any trust established under Title IV of ERISA has
been, or is expected by the Borrower or any member of its ERISA Controlled Group
to be, incurred by the Borrower or any member of its ERISA Controlled Group.
Except as otherwise disclosed on Schedule 4.12 hereto, neither the Borrower nor
any member of its ERISA Controlled Group has any contingent liability with
respect to any post-retirement benefit under any "welfare plan" (as defined in
Section 3(1) of ERISA), other than liability for continuation coverage under
Part 6 of Title I of ERISA. No lien under Section 412(n) of the Code or 302(f)
of ERISA or requirement to provide security under Section 401(a)(29) of the Code
or Section 307 of ERISA has been or is reasonably expected by the Borrower or
any member of its ERISA Controlled Group to be imposed on the assets of the
Borrower or any member of its ERISA Controlled Group. Each Plan is in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other federal or state law. There has been no prohibited transaction
(for purposes of Section 406 of ERISA and Section 4975 of the Code) or violation
of the fiduciary responsibility rules of ERISA with respect to any Plan.
Section 4.13 Investment Company Act; Public Utility Holding Company
------------------------------------------------------
Act. The Borrower is not (x) an "investment company" or a company "controlled"
---
by an "investment company," within the meaning of the Investment Company Act of
1940, as amended, (y) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company" or a
"subsidiary company" within the meaning of the
56
Public Utility Holding Company Act of 1935, as amended, or (z) subject to any
other federal or state law or regulation which purports to restrict or regulate
its ability to borrow money.
Section 4.14 Representations and Warranties in Transaction Documents.
-------------------------------------------------------
All representations and warranties made by the Borrower in the Acquisition
Documents, and, to the best of the Borrower's knowledge, all representations
made by each other Person in such Acquisition Documents, are as of the Closing
Date true and correct in all material respects. None of such representations
and warranties are inconsistent in any material respect with the representations
and warranties of the Borrower made herein or in any other Loan Document.
Section 4.15 True and Complete Disclosure. All factual information
----------------------------
(taken as a whole) furnished by or on behalf of the Borrower in writing to the
Agent or any Bank on or prior to the Closing Date, for purposes of or in
connection with this Agreement, the Transactions and the Acquisition is, and all
other such factual information (taken as a whole) hereafter furnished by or on
behalf of the Borrower in writing to the Agent or any Bank will be, true and
accurate in all material respects on the date as of which such information is
dated or furnished and not incomplete by omitting to state any material fact
necessary to make such information (taken as a whole) not misleading at such
time. As of the Closing Date, there are no facts, events or conditions known to
the Borrower which, individually or in the aggregate, have or reasonably could
be expected to have a Material Adverse Effect. The projections and pro forma
financial information included in such information are based on good faith
estimates and assumptions believed by the Persons furnishing such projections
and information to be reasonable at the time made, it being recognized by the
Banks that such projections as to future events are not to be viewed as facts
and that any actual results during the period or periods covered by any such
projections may differ from the projected results. Except as expressed herein,
the Borrower makes no representations or warranties with respect to such
projections and pro forma financial information.
57
Section 4.16 Corporate Structure; Capitalization. Schedule 4.16
-----------------------------------
hereto sets forth, both before and after giving effect to the Acquisition, the
number of authorized and issued shares of capital stock of the Borrower and each
of its Subsidiaries and the registered owner(s) of each such Subsidiary. All of
such stock has been duly and validly issued and is fully paid and non-
assessable. Neither the Borrower nor any such Subsidiary has outstanding any
securities convertible into or exchangeable for its capital stock nor does the
Borrower or any such Subsidiary have outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock, except for (i) the rights and
obligations set forth in Article 3 of the Stock Restriction and Rights
Agreement, dated as of July 9, 1997, between the Borrower and RM (the "RM
Rights"), (ii) options granted under the Borrower's various stock option plans,
and (iii) the International Canine Genetics, Inc. options and warrants assumed
by the Borrower (the "ICG Warrants").
Section 4.17 Environmental Matters. (a) (i) Each of the Borrower and
---------------------
its Environmental Affiliates is in compliance in all material respects with all
applicable Environmental Laws, (ii) each of the Borrower and its Environmental
Affiliates has all Environmental Approvals required to operate its businesses as
presently conducted or as reasonably anticipated to be conducted, (iii) none of
the Borrower nor any of its Environmental Affiliates has received any material
communication (written or oral), whether from a governmental authority, citizens
group, employee or otherwise, that alleges that such Borrower or Environmental
Affiliate is not in full compliance with all Environmental Laws, and (iv) to the
Borrower's best knowledge after due inquiry, there are no circumstances that may
prevent or interfere with such full compliance in the future.
(b) To the best of the Borrower's knowledge after due inquiry,
there is no Environmental Claim pending or threatened against the Borrower or
its Environmental Affiliates.
(c) To the best of the Borrower's knowledge after due inquiry,
there are no past or present
58
actions, activities, circumstances, conditions, events or incidents, including,
without limitation, the release, emission, discharge or disposal of any Material
of Environmental Concern, that could form the basis of any Environmental Claims
against the Borrower or any of its Environmental Affiliates.
(d) Without in any way limiting the generality of the foregoing,
(i) there are no on-site or (except for properly permitted off-site disposal
sites) off-site locations in which the Borrower or its Environmental Affiliate
has stored, disposed or arranged for the disposal of Materials of Environmental
Concern, (ii) there are no underground storage tanks located on property owned
or leased by the Borrower or its Environmental Affiliate, (iii) there is no
friable asbestos in any building, building component, structure or office space
owned or leased by the Borrower or its Environmental Affiliate, and (iv) no
polychlorinated biphenyls (PCB's) are used or stored at any property owned or
leased by the Borrower or its Environmental Affiliate.
Section 4.18 Patents, Trademarks, etc. The Borrower and each of its
------------------------
Subsidiaries has obtained and holds in full force and effect all patents,
trademarks, servicemarks, trade names, copyrights and other such rights, free
from burdensome restrictions, which are necessary for the operation of its
business as presently conducted. No material product, process, method,
substance, part or other material presently sold by or employed by the Borrower
or any of its Subsidiaries in connection with such business infringes any
patent, trademark, service ▇▇▇▇, trade name, copyright, license or other right
owned by any other Person. There is not pending or overtly threatened any claim
or litigation against or affecting the Borrower or any of its Subsidiaries
contesting its right to sell or use any such product, process, method,
substance, part or other material, except as set forth on Schedule 4.4.
Section 4.19 Ownership of Property. Schedule 4.19 sets forth all the
---------------------
real property owned or leased by the Borrower and identifies the street address,
the current owner (and current record owner, if different) and whether such
property is leased or owned. The Borrower has good and marketable fee simple
title to or
59
valid leasehold interests in all of such real property and good title to all of
its personal property subject to no Lien of any kind except Liens permitted
hereby. The Borrower enjoys peaceful and undisturbed possession under all of
its respective leases.
Section 4.20 No Default. The Borrower is not in default under or
----------
with respect to any Acquisition Document or any other agreement, instrument or
undertaking to which it is a party or by which it or any of its property is
bound in any respect which could result in a Material Adverse Effect. No
Default or Event of Default exists.
Section 4.21 Licenses, etc. The Borrower and each of its
-------------
Subsidiaries has obtained and holds in full force and effect, all franchises,
licenses, permits, certificates, authorizations, qualifications, accreditations,
easements, rights of way and other rights, consents and approvals which are
necessary for the operation of their respective businesses as presently
conducted.
Section 4.22 Compliance With Law. The Borrower and each of its
-------------------
Subsidiaries is in compliance with all material laws, rules, regulations,
orders, judgments, writs and decrees relevant to their respective businesses.
Section 4.23 Brokers' Fees. Except as set forth on Schedule 4.23,
-------------
the Borrower has no obligation to any Person in respect of any finder's,
brokers, investment banking or other similar fee in connection with the
Acquisition.
Section 4.24 Labor Matters. Except as set forth on Schedule 4.24,
-------------
there are no collective bargaining agreements or Multiemployer Plans covering
the employees of the Company, any of its Subsidiaries or the Borrower, and none
of such Persons has suffered any strikes, walkouts, work stoppages or other
material labor difficulty within the last five years.
60
SECTION 5. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that on and after the Closing Date
and until the Total Commitment has terminated, and the Obligations are paid in
full:
Section 5.1 Information Covenants. The Borrower will furnish to each
---------------------
Bank:
(a) Quarterly Financial Statements. Within 45 days after the
------------------------------
close of each quarterly accounting period in each fiscal year of the Borrower,
the consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as at the end of such quarterly period and the related consolidated
and consolidating statements of income, cash flow and retained earnings for such
quarterly period and for the elapsed portion of the fiscal year ended with the
last day of such quarterly period, and in each case setting forth comparative
figures for the related periods in the prior fiscal year.
(b) Annual Financial Statements. Within 90 days after the close
---------------------------
of each fiscal year of the Borrower, the consolidated and consolidating balance
sheet of the Borrower and its Subsidiaries as at the end of such fiscal year and
the related consolidated and consolidating statements of income, cash flow and
retained earnings for such fiscal year, setting forth comparative figures for
the preceding fiscal year and, with respect to such consolidated financial
statements, certified without qualification by Price Waterhouse LLP or other
independent certified public accountants of recognized national standing
reasonably acceptable to the Required Banks, in each case together with a report
of such accounting firm stating that in the course of its regular audit of the
consolidated financial statements of the Borrower, which audit was conducted in
accordance with generally accepted auditing standards, such accounting firm has
obtained no knowledge of any Default or Event of Default, or if in the opinion
of such accounting firm such a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof.
(c) Monthly Financial Statements. Within 30 days after the end
----------------------------
of each monthly reporting period in
61
each fiscal year of the Borrower, the consolidated and consolidating balance
sheet of the Borrower and its Subsidiaries as at the end of such monthly
reporting period and the related consolidated and consolidating statements of
income, cash flow and retained earnings for such monthly reporting period and
for the elapsed portion of the fiscal year ended on the last day of such monthly
reporting period, and in each case setting forth comparative figures for the
related periods in the prior fiscal year.
(d) Compliance Certificates. Within 45 days after the end of
-----------------------
each fiscal quarter, and simultaneously with the delivery of annual financing
statements pursuant to Section 5.1(b), a Compliance Certificate with respect to
the preceding fiscal quarter or fiscal year, as applicable, the calculations of
which shall be based on the preliminary unaudited financial statements (in
respect of quarterly Compliance Certificates only). As soon as practicable after
the delivery of the quarterly Compliance Certificates, in the event of any
material variance in the actual calculation of the ratios set forth in the
Compliance Certificate, the Borrower shall deliver a revised Compliance
Certificate setting forth the actual calculation of such ratios.
(e) Borrowing Base Certificates. (i) On or before the twentieth
---------------------------
Business Day of each month, a borrowing base certificate in the form of Exhibit
F (each, a "Borrowing Base Certificate") setting forth the Borrowing Base as of
the last day of the preceding month, together with a Borrowing Base Supplement;
provided that nothing contained herein shall prevent the Borrower from
delivering to the Agent a Borrowing Base Certificate or Borrowing Base
Supplement more frequently than as set forth above; and (ii) each Borrowing Base
Supplement and Borrowing Base Certificate delivered to the Agent shall be
certified by the chief financial officer of the Borrower.
(f) Management Letters. Promptly after the Borrower's receipt
------------------
thereof, a copy of any "management letter" or other material audit-related
report received by the Borrower from its certified public accountants.
62
(g) Budgets. Within 60 days after the first day of each fiscal
-------
year of the Borrower, a budget and financial forecast of results of operations
and sources and uses of cash (in form satisfactory to the Required Banks)
prepared by the Borrower for such fiscal year, accompanied by a written
statement of the assumptions used in connection therewith, together with a
certificate of the chief financial officer of the Borrower to the effect that
such budget and financial forecast and assumptions are reasonable and represent
the Borrower's good faith estimate of its future financial requirements and
performance. The financial statements required to be delivered pursuant to
clauses (a), (b) and (c) above shall be accompanied by a comparison of the
actual financial results set forth in such financial statements to those
contained in the forecasts delivered pursuant to this clause (g) together with
an explanation of any material variations from the results anticipated in such
forecasts.
(h) Officer's Certificates. At the time of the delivery of the
----------------------
financial statements under clauses (a) and (b) above, a certificate of the chief
financial officer of the Borrower which certifies (x) that such financial
statements fairly present the financial condition and the results of operations
of the Borrower and its Subsidiaries on the dates and for the periods indicated,
subject, in the case of interim financial statements, to normally recurring
year-end adjustments and (y) that such officer has reviewed the terms of the
Loan Documents and has made, or caused to be made under his or her supervision,
a review in reasonable detail of the business and condition of the Borrower and
its Subsidiaries during the accounting period covered by such financial
statements, and that as a result of such review such officer has concluded that
no Default or Event of Default has occurred during the period commencing at the
beginning of the accounting period covered by the financial statements
accompanied by such certificate and ending on the date of such certificate or,
if any Default or Event of Default has occurred, specifying the nature and
extent thereof and, if continuing, the action the Borrower proposes to take in
respect thereof. Such certificate shall set forth the calculations required to
establish (i) whether the Borrower was in compliance with the provisions of
Section 6.1 during and as at the end of the accounting period covered by the
financial statements
63
accompanied by such certificate, and (ii) in the case of the financial
statements delivered pursuant to clauses (b) above, the amount of Excess Cash
Flow for the respective fiscal year.
(i) Notice of Default or Litigation. Promptly and in any event
-------------------------------
within five Business Days after the Borrower obtains knowledge thereof, notice
of (i) the occurrence of any Default or Event of Default, (ii) any litigation or
governmental proceeding pending or threatened against the Borrower which
reasonably could be expected to have a Material Adverse Effect and (iii) any
other event, act or condition which reasonably could be expected to have a
Material Adverse Effect.
(j) ERISA.
-----
(i) As soon as possible and in any
event within 10 days after the Borrower or any member
of its ERISA Controlled Group knows, or has reason to
know, that:
(A) any Termination Event with
respect to a Plan has occurred or will occur, or
(B) any condition exists with
respect to a Plan which presents a material risk of
termination of the Plan or imposition of an excise tax
or other liability on the Borrower or any member of its
ERISA Controlled Group, or
(C) the Borrower or any member of
its ERISA Controlled Group has applied for a waiver of
the minimum funding standard under Section 412 of the
Code or Section 302 of ERISA, or
(D) the Borrower or any member of
its ERISA Controlled Group has engaged in a "prohibited
transaction," as defined in Section
64
4975 of the Code or as described in Section 406 of
ERISA, that is not exempt under Section 4975 of the
Code and Section 408 of ERISA, or
(E) the aggregate present value
of the Unfunded Benefit Liabilities under all Plans has
in any year increased by $50,000 or to an amount in
excess of $50,000, or
(F) any condition exists with
respect to a Multiemployer Plan which presents a
material risk of a partial or complete withdrawal (as
described in Section 4203 or 4205 of ERISA) by the
Borrower or any member of its ERISA Controlled Group
from a Multiemployer Plan, or
(G) the Borrower or any member of
its ERISA Controlled Group is in "default" (as defined
in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan, or
(H) a Multiemployer Plan is in
"reorganization" (as defined in Section 418 of the Code
or Section 4241 of ERISA) or is "insolvent" (as defined
in Section 4245 of ERISA), or
(I) the potential withdrawal
liability (as determined in accordance with Title IV of
ERISA) of the Borrower and the members of its ERISA
Controlled Group with respect to all Multiemployer
Plans has in any year increased by $50,000 or to an
amount in excess of $100,000, or
65
(J) there is an action brought
against the Borrower or any member of its ERISA
Controlled Group under Section 502 of ERISA with
respect to its failure to comply with Section 515 of
ERISA,
a certificate of the president or chief financial officer of the Borrower
setting forth the details of each of the events described in clauses (A) through
(J) above as applicable and the action which the Borrower or the applicable
member of its ERISA Controlled Group proposes to take with respect thereto,
together with a copy of any notice or filing from the PBGC or which may be
required by the PBGC or other agency of the United States government with
respect to each of the events described in clauses (A) through (J) above, as
applicable.
(ii) As soon as possible and in any
event within two Business Days after the receipt by the
Borrower or any member of its ERISA Controlled Group of
a demand letter from the PBGC notifying the Borrower or
such member of its ERISA Controlled Group of its final
decision finding liability and the date by which such
liability must be paid, a copy of such letter, together
with a certificate of the president or chief financial
officer of the Borrower setting forth the action which
the Borrower or such member of its ERISA Controlled
Group proposes to take with respect thereto.
(k) SEC Filings. Promptly upon transmission thereof, copies of
-----------
all regular and periodic financial information, proxy materials and other
information and reports, if any, which the Borrower shall file with the
Securities and Exchange Commission or any governmental agencies substituted
therefor or which the Borrower shall send to its stockholders.
(l) Environmental. Promptly and in any event within five
-------------
Business Days after the existence of any of the following conditions, a
certificate of the
66
chief executive officer or chief financial officer of the Borrower specifying in
detail the nature of such condition and the Borrower's or Environmental
Affiliate's proposed response thereto: (i) the receipt by the Borrower or any of
its Environmental Affiliates of any communication (written or oral), whether
from a governmental authority, citizens group, employee or otherwise, that
alleges that the Borrower or Environmental Affiliate is not in compliance in any
material respect with applicable Environmental Laws, (ii) the Borrower or any of
its Environmental Affiliates shall obtain actual knowledge that there exists any
Environmental Claim pending or threatened against the Borrower or such
Environmental Affiliate that could reasonably be expected to have a Material
Adverse Effect, or (iii) any release, emission, discharge or disposal of any
Material of Environmental Concern that could form the basis of any Environmental
Claim against the Borrower or any of its Environmental Affiliates that could
reasonably be expected to have a Material Adverse Effect.
(m) RM Financial Information. Within five days of their
------------------------
delivery to the Borrower pursuant to the Stock Purchase Agreement, certified
copies of each of the Financial Statements (as defined in the Stock Purchase
Agreement).
(n) Other Information. From time to time, such other
-----------------
information or documents (financial or otherwise) as any Bank may reasonably
request.
Section 5.2 Books, Records, Inspections and Collateral Audits. The
-------------------------------------------------
Borrower shall, and shall cause each of its Subsidiaries to, keep proper books
of record and account in which full, true and correct entries in conformity with
GAAP and all requirements of law shall be made of all dealings and transactions
in relation to its business and activities. The Borrower shall, and shall cause
each of its Subsidiaries to, permit officers and designated representatives of
any Bank to visit and inspect any of the properties of the Borrower or any of
its Subsidiaries, and examine the books of record and account of the Borrower or
any of its Subsidiaries, and discuss the affairs, finances and accounts of the
Borrower or any of its Subsidiaries with, and be advised as to the same by, its
and their officers and independent accountants, all upon reasonable notice and
at such
67
reasonable times as such Bank may desire. The Borrower shall, and shall cause
each of its Subsidiaries to, permit the Agent (at the instruction of the
Required Banks) or its representatives or agents, at the expense of the
Borrower, to conduct audits to inspect, review and evaluate the Collateral, no
more than once a year, and, at the expense of the Banks, to conduct such audits
in excess of once a year; provided that if an Event of Default has occurred and
is continuing, the Agent (at the instruction of the Required Banks) may conduct,
at the expense of the Borrower, such additional audits from time to time as
deemed necessary by the Required Banks.
Section 5.3 Maintenance of Insurance. The Borrower shall, and shall
------------------------
cause each of its Subsidiaries to, (a) maintain with financially sound and
reputable insurance companies insurance on itself and its properties in at least
such amounts and against at least such risks as are customarily insured against
in the same general area by companies engaged in the same or a similar business,
which insurance shall in any event not provide for materially less coverage than
the insurance in effect on the Closing Date, and (b) furnish to the Agent from
time to time, upon written request, the policies under which such insurance is
issued, certificates of insurance and such other information relating to such
insurance as the Agent may reasonably request.
Section 5.4 Taxes. (a) The Borrower shall pay or cause to be paid,
-----
and shall cause each of its Subsidiaries to pay or cause to be paid, when due,
all taxes, charges and assessments and all other lawful claims required to be
paid by the Borrower or such Subsidiaries, except as contested in good faith and
by appropriate proceedings diligently conducted, if adequate reserves have been
established with respect thereto in accordance with GAAP.
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries to, file or consent to the filing of any consolidated tax return
with any Person (other than the Borrower and its Subsidiaries).
Section 5.5 Corporate Franchises. The Borrower shall, and shall
--------------------
cause each of its Subsidiaries to, do or cause to be done, all things necessary
to
68
preserve and keep in full force and effect its existence and its material
patents, trademarks, servicemarks, tradenames, copyrights, franchises, licenses,
permits, certificates, authorizations, qualifications, accreditations,
easements, rights of way and other rights, consents and approvals.
Section 5.6 Compliance with Law. The Borrower shall, and shall cause
-------------------
each of its Subsidiaries to, comply in all material respects with all applicable
laws, rules, statutes, regulations, decrees and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of their business and the ownership of their property,
including, without limitation, ERISA and all Environmental Laws.
Section 5.7 Performance of Obligations. The Borrower shall, and
--------------------------
shall cause each of its Subsidiaries to perform, to the extent necessary to
avoid a Material Adverse Effect, all of its obligations under the terms of each
mortgage, indenture, security agreement, debt instrument, lease, undertaking and
contract by which it or any of its properties is bound or to which it is a
party.
Section 5.8 Maintenance of Properties. The Borrower shall, and shall
-------------------------
cause each of its Subsidiaries to, ensure that, to the extent necessary to avoid
a Material Adverse Effect, its properties used or useful in its business are
kept in good repair, working order and condition, normal wear and tear excepted.
Section 5.9 Interest Rate Protection. The Borrower shall, no later
------------------------
than 90 days after the Closing Date, enter into interest rate protection
agreements with counterparties and subject to terms and conditions satisfactory
to the Agent and the Banks, which agreements shall protect the Borrower against
interest rate fluctuations in respect of 75% of the scheduled maximum
outstanding amount of the Term Loans.
Section 5.10 Additional Collateral. The Borrower will, and will
---------------------
cause each Subsidiary to, grant to the Agent security interests, mortgages and
deeds of trust in such of its assets and properties (whether now existing or
hereafter acquired) as are not covered by the
69
Security Documents, as may be required from time to time by the Required Banks
(collectively, the "Additional Security"). All such Additional Security shall be
granted at the Borrower's expense pursuant to documentation reasonably
satisfactory in form and substance to the Required Banks and shall constitute
valid and enforceable perfected security interests, mortgages and deeds of trust
superior to and prior to the rights of all third persons and subject to no other
Liens (except with respect to Liens permitted pursuant to Section 6.3). The
Additional Security or instruments related thereto shall be duly recorded or
filed by the Borrower in such manner and in such places as are required by law
to establish, perfect, preserve and protect the Liens in favor of the Agent
granted pursuant to the Security Documents and all taxes, fees and other charges
payable in connection therewith shall be paid in full by the Borrower.
SECTION 6. NEGATIVE COVENANTS.
The Borrower covenants and agrees that on and after the Closing Date
until the Total Commitment has terminated, and the Obligations are paid in full:
Section 6.1 Financial Covenants.
-------------------
(a) Leverage Ratio. The Borrower shall not permit the ratio of
--------------
Consolidated Total Indebtedness to Consolidated EBITDA (for the most recent four
consecutive fiscal quarters) of the Borrower (the "Leverage Ratio") to exceed,
at the end of any fiscal quarter ending during any period listed below, the
ratio set forth opposite such period:
Period Ratio
------ -----
Closing Date to and including
December 31, 1997 4.4:1.0
January 1, 1998 to and including
March 31, 1998 3.0:1.0
April 1, 1998 and thereafter 2.0:1.0
Provided, however, that if such Leverage Ratio is not met for any Measurement
Period (i) but would have been met had Consolidated Total Indebtedness been
$200,000 or less than it in fact was on the last day such Measurement
70
Period and (ii) as of such date the Borrower had an amount of cash on deposit in
its Deposit Accounts not less than $1,500,000, then the Leverage Ratio will be
deemed to be met for such Measurement Period, so long as such Leverage Ratio was
in fact met (and not deemed to have been met) for the preceding Measurement
Period.
(b) Interest Coverage Ratio. The Borrower shall not permit the
-----------------------
ratio of Consolidated EBITDA to Consolidated Cash Interest Expense for any four
consecutive fiscal quarters of the Borrower (taken as one accounting period) to
be less than 2.5:1.0.
(c) Fixed Charge Coverage Ratio. The Borrower shall not permit
---------------------------
the ratio of Consolidated EBITDA to Fixed Charges for any four consecutive
fiscal quarters of the Borrower (taken as one accounting period) ended during
any period set forth below, to be less than the ratio set forth opposite such
period:
Period Ratio
------ -----
Closing Date to and including
December 31, 1997 0.8:1.0
January 1, 1998 to and including
March 31, 1998 1.0:1.0
April 1, 1998 to and including
June 30, 1998 1.4:1.0
July 1, 1998 and thereafter 1.8:1.0
(d) Capital Expenditures. The Borrower shall not make or incur
--------------------
(or commit to make or incur) and shall not permit any of its Subsidiaries to
make or incur (or commit to make or incur) Capital Expenditures in any fiscal
year which exceed, in the aggregate, $1,000,000; provided that if the maximum
--------
amount set forth above for any period exceeds the aggregate amount of Capital
Expenditures made or incurred (or committed to be made or incurred) during such
period, then the maximum amount set forth above for the following period (but
not any subsequent periods) shall be increased by the amount of such excess.
(e) Minimum Consolidated Tangible Net Worth. The Borrower shall
---------------------------------------
not permit Consolidated Tangible Net Worth (i) from the Closing Date to December
31, 1997, to be less than the sum of (a) $9,006,000 plus (b) 100% of the net
proceeds received by the Borrower or
71
any of its Subsidiaries after the Closing Date through the sale of equity of the
Borrower or any of its Subsidiaries and (ii) thereafter at any time to be less
than the sum of (a) $9,006,000 plus (b) 75% of cumulative Consolidated Net
Income for all fiscal quarters ending after the Closing Date (determined without
making any reduction in the amount thereof by reason of any net loss arising in
any fiscal quarter) plus (c) 100% of the net proceeds received by the Borrower
or any of its Subsidiaries after the Closing Date through the sale of equity of
the Borrower or any of its Subsidiaries.
Section 6.2 Indebtedness. The Borrower shall not, and shall not
------------
permit any of its Subsidiaries to, create, incur, assume, suffer to exist or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, other than:
(a) Indebtedness hereunder and under the other Loan Documents;
(b) Indebtedness outstanding on the Closing Date and set forth
on Schedule 6.2 hereto;
(c) Indebtedness permitted under Section 6.6;
(d) Indebtedness of the Borrower of the type described in clause
(vii) of the definition of Indebtedness to the extent required under Section
5.09;
(e) Indebtedness with respect to Capitalized Leases and other
purchase money Indebtedness permitted pursuant to Section 6.3(g), in each case
incurred to finance Capital Expenditures permitted under Section 6.1, not in
excess of $250,000 in the aggregate at any one time outstanding; provided that
any such Indebtedness shall not exceed 90% of the lesser of the purchase price
or the fair market value of the asset so financed; and
(f) Other Indebtedness created, incurred or assumed after the
date hereof not enumerated in clauses (a) through (e) above, provided that the
aggregate outstanding principal amount of such Indebtedness shall not exceed
$200,000 at any one time outstanding.
72
Section 6.3 Liens. The Borrower shall not, and shall not permit any
-----
of its Subsidiaries to, create, incur, assume or suffer to exist, directly or
indirectly, any Lien on any of its property now owned or hereafter acquired,
other than:
(a) Liens existing on the Closing Date and set forth on Schedule
6.3 hereto;
(b) Liens for taxes not yet due or which are being contested in
good faith by appropriate proceedings diligently conducted and with respect to
which adequate reserves are being maintained in accordance with GAAP;
(c) Statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by Law (other than
any Lien imposed by ERISA or pursuant to any Environmental Law) created in the
ordinary course of business for amounts not yet due or which are being contested
in good faith by appropriate proceedings diligently conducted and with respect
to which adequate bonds have been posted;
(d) Liens (other than any Lien imposed by ERISA or pursuant to
any Environmental Law) incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(e) Easements, rights-of-way, zoning and similar restrictions
and other similar charges or encumbrances not interfering with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries and which do
not detract materially from the value of the property to which they attach or
impair materially the use thereof by the Borrower or any of its Subsidiaries or
materially adversely affect the security interests of the Agent or the Banks
therein;
73
(f) Liens granted to the Agent for the benefit of the Banks
pursuant to the Security Documents securing the Obligations;
(g) purchase money security interests on any property acquired
or held by the Borrower or its Subsidiaries in the ordinary course of business,
securing Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such property; provided that (i) any such Lien
attaches to such property concurrently with or within 20 days after the
acquisition thereof, (ii) such Lien attaches solely to the property so acquired
in such transaction and (iii) the principal amount of the debt secured thereby
does not exceed 90% of the lesser of the purchase price or the fair market value
of the asset so financed; and
(h) Liens created pursuant to Capitalized Leases permitted under
this Agreement, provided that such Liens are only in respect of the property or
--------
assets subject to, and secure only, the respective Capitalized Lease.
Section 6.4 Restriction on Fundamental Changes.
----------------------------------
(a) The Borrower shall not, and shall not permit any of its
Subsidiaries to, enter into any merger or consolidation, or liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution), discontinue its business
or convey, lease, sell, transfer or otherwise dispose of, in one transaction or
series of transactions, all or any substantial part of its business or property,
whether now or hereafter acquired, except (i) as otherwise permitted under
Section 6.5, and (ii) any wholly-owned Subsidiary of the Borrower may merge into
or convey, sell, lease or transfer all or substantially all of its assets to,
the Borrower or any other wholly-owned Subsidiary of the Borrower.
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries to, except in connection with the Acquisition, (i) acquire by
purchase or otherwise any property or assets of, or stock or other evidence of
beneficial ownership of, any Person, except purchases of intellectual property,
inventory, equipment, materials and supplies in the ordinary course of
74
Borrower's or such Subsidiary's business, (ii) create any Subsidiary, or (iii)
enter into any partnership or joint venture.
(c) Borrower shall not and shall not permit any of its
Subsidiaries to, amend its articles of incorporation or by-laws.
Section 6.5 Sale of Assets. The Borrower shall not, and shall not
--------------
permit any of its Subsidiaries to, convey, lease, sell, transfer or otherwise
dispose of (or agree to do so at any future time) all or any part of its
property or assets, except (i) sales of inventory in the ordinary course of
business and (ii) sales of equipment which is uneconomic, obsolete or no longer
useful in its business provided that the aggregate net book value of all
equipment so sold does not exceed $12,000 per fiscal year.
Section 6.6 Contingent Obligations. Except for Contingent
----------------------
Obligations constituting Indebtedness permitted under Section 6.2(f), the
Borrower shall not, and shall not permit any of its Subsidiaries to, create or
become or be liable with respect to any Contingent Obligation, except:
(a) pursuant to the Security Documents; and
(b) Contingent Obligations which are in existence on the Closing
Date and which are set forth on Schedule 6.6.
Section 6.7 Dividends. The Borrower shall not, and shall not permit
---------
any of its Subsidiaries to, declare or pay any dividends (other than dividends
payable solely in common stock), or return any capital to, its stockholders or
authorize or make any other distribution, payment or delivery of property or
cash to its stockholders as such, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, any shares of any class of its capital stock
now or hereafter outstanding (or any options or warrants issued with respect to
its capital stock), or set aside any funds for any of the foregoing purposes
(all the foregoing "Dividends"); except that (i) so long as no Event of Default
is continuing and given the prior written consent
75
of the Required Banks (made in their reasonable judgment taking into account the
credit status of the Borrower but otherwise not to be unreasonably withheld),
the Borrower may call the ICG Warrants and exercise or honor the exercise of the
RM Rights, and (ii) except that Dividends may be made to the Borrower or any of
its Subsidiaries by any of its wholly-owned Subsidiaries.
Section 6.8 Advances, Investments and Loans. The Borrower shall not,
-------------------------------
and shall not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or directly or indirectly purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to any Person, except that the following shall be permitted:
(a) accounts receivable owned by the Borrower and its
Subsidiaries, if created in the ordinary course of the business of the Borrower
and its Subsidiaries and payable or dischargeable in accordance with customary
trade terms;
(b) loans and advances to the Borrower by any of its
Subsidiaries, or by the Borrower to any of its Subsidiaries in an aggregate
amount not to exceed $1,000,000 outstanding at any time;
(c) loans and advances by the Borrower and its Subsidiaries to
their employees in the ordinary course of its business not exceeding $20,000 in
the aggregate at any one time outstanding; and
(d) the Borrower and its Subsidiaries may acquire and hold Cash
Equivalents.
Section 6.9 Transactions with Affiliates. The Borrower shall not,
----------------------------
and shall not permit any of its Subsidiaries to, enter into any transaction or
series of related transactions, whether or not in the ordinary course of
business, with any Affiliate, other than on terms and conditions substantially
as favorable to the Borrower or such Subsidiary as would be obtainable at the
time in a comparable arm's-length transaction with a Person other than an
Affiliate.
Section 6.10 Limitation on Voluntary Payments and Modifications of
-----------------------------------------------------
Certain Documents. The Borrower
-----------------
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shall not, and shall not permit any of its Subsidiaries to, (a) make any sinking
fund payment or voluntary or optional payment or prepayment on or redemption or
acquisition for value of (including, without limitation, by way of depositing
with the trustee with respect thereto money or securities before due for the
purpose of paying when due) or exchange of any Indebtedness other than the
Indebtedness hereunder and under the other Loan Documents, or (b) amend, modify
or waive, or permit the amendment, modification or waiver of, any provision of
any Acquisition Document.
Section 6.11 Changes in Business. The Borrower shall not, and shall
-------------------
not permit any of its Subsidiaries to, enter into any business which is
substantially different from that conducted by the Borrower on the Closing Date
after giving effect to the Transactions.
Section 6.12 Certain Restrictions. The Borrower shall not, and shall
--------------------
not permit any of its Subsidiaries or any Person controlling the Borrower to,
enter into any agreement (other than the Loan Documents as in effect on the
Closing Date) which restricts the ability of the Borrower or any of its
Subsidiaries to (a) enter into amendments, modifications or waivers of the Loan
Documents, (b) create, incur, assume, suffer to exist or otherwise become liable
with respect to any Indebtedness, or (c) pay any Dividend.
Section 6.13 Sales and Leasebacks. Except for Capitalized Lease
--------------------
Obligations constituting Indebtedness permitted under Section 6.2(f), the
Borrower shall not, and shall not permit any of its Subsidiaries to, become
liable, directly or indirectly, with respect to any lease, whether an operating
lease or a Capitalized Lease, of any property (whether real or personal or
mixed) whether now owned or hereafter acquired, (i) which the Borrower or such
Subsidiary has sold or transferred or is to sell or transfer to any other
Person, or (ii) which the Borrower or such Subsidiary intends to use for
substantially the same purposes as any other property which has been or is to be
sold or transferred by the Borrower or such Subsidiary to any other Person in
connection with such Lease.
77
Section 6.14 Plans. The Borrower shall not, nor shall it permit any
-----
member of its ERISA Controlled Group to, take any action which would increase
the aggregate present value of the Unfunded Benefit Liabilities under all Plans
to an amount in excess of $50,000.
Section 6.15 Fiscal Year; Fiscal Quarter. The Borrower shall not,
---------------------------
and shall not permit any of its Subsidiaries to, change its fiscal year or any
of its fiscal quarters.
SECTION 7. EVENTS OF DEFAULT
Section 7.1 Events of Default. Each of the following events, acts,
-----------------
occurrences or conditions shall constitute an Event of Default under this
Agreement, regardless of whether such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of law or pursuant to or
as a result of compliance by any Person with any judgment, decree, order, rule
or regulation of any court or administrative or governmental body:
(a) Failure to Make Payments. The Borrower shall (i) default in
------------------------
the payment when due of any principal of the Loans or (ii) default, and such
default shall continue unremedied for five (5) or more days, in the payment when
due of any interest on the Loans or in the payment when due of any Fees or any
other amounts owing hereunder.
(b) Breach of Representation or Warranty. Any representation or
------------------------------------
warranty made by the Borrower herein or in any other Loan Document or in any
certificate or statement delivered pursuant hereto or thereto shall prove to be
false or misleading in any material respect on the date as of which made or
deemed made.
(c) Breach of Covenants.
-------------------
(i) The Borrower shall fail to perform or
observe any agreement, covenant or obligation arising under
Section 6.
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(ii) The Borrower shall fail to perform or
observe any agreement, covenant or obligation arising under
this Agreement (except those described in subsections (a),
(b) and (c)(i) above) or any other Loan Document, and such
failure shall continue for five days (or, in the case of a
breach under any other Loan Document, such longer grace
period provided under such Loan Document) after the earlier
to occur of (i) the provision of notice by the Agent of such
failure or (ii) actual knowledge by the Borrower or its
Subsidiary, as applicable, of such failure.
(d) Default Under Other Agreements. The Borrower shall default
------------------------------
in the payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) of any amount owing in respect of any
Indebtedness (other than the Obligations) in the aggregate principal amount of
$50,000 or more (and such default shall continue after the applicable grace
and/or cure period, if any); or the Borrower shall default in the performance or
observance of any obligation or condition with respect to any such Indebtedness
or any other event shall occur or condition exist, if the effect of such
default, event or condition is to accelerate the maturity of any such
Indebtedness or to permit (without regard to any required notice or lapse of
time) the holder or holders thereof, or any trustee or agent for such holders,
to accelerate the maturity of any such Indebtedness, or any such Indebtedness
shall become or be declared to be due and payable prior to its stated maturity
other than as a result of a regularly scheduled payment.
(e) Bankruptcy, etc. (i) The Borrower shall commence a
voluntary case concerning itself under the Bankruptcy Code; or (ii) an
involuntary case is commenced against the Borrower and the petition is not
controverted within 10 days, or is not dismissed within 60 days, after
commencement of the case; or (iii) a custodian (as defined in the Bankruptcy
Code) is appointed for, or takes charge of, all or substantially all of the
property of the Borrower or the Borrower commences any other proceedings under
any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of
79
any jurisdiction whether now or hereafter in effect relating to the Borrower or
there is commenced against the Borrower any such proceeding which remains
undismissed for a period of 30 days; or (iv) any order of relief or other order
approving any such case or proceeding is entered; or (v) the Borrower is
adjudicated insolvent or bankrupt; or (vi) the Borrower suffers any appointment
of any custodian or the like for it or any substantial part of its property to
continue undischarged or unstayed for a period of 30 days; or (vii) the Borrower
makes a general assignment for the benefit of creditors; or (viii) the Borrower
shall fail to pay, or shall state that it is unable to pay its debts generally
as they become due; or (ix) the Borrower shall call a meeting of its creditors
with a view to arranging a composition or adjustment of its debts; or (x) the
Borrower shall by any act or failure to act consent to, approve of or acquiesce
in any of the foregoing; or (xi) any corporate action is taken by the Borrower
for the purpose of effecting any of the foregoing.
(f) ERISA. (i) Any Termination Event shall occur, or (ii) any
-----
Plan shall incur an "accumulated funding deficiency" (as defined in Section 412
of the Code or Section 302 of ERISA), whether or not waived or (iii) the
Borrower or a member of its ERISA Controlled Group shall have engaged in a
transaction which is prohibited under Section 4975 of the Code or Section 406 of
ERISA which could result in the imposition of liability in excess of $100,000 on
the Borrower or any member of its ERISA Controlled Group, or (iv) the Borrower
or any member of its ERISA Controlled Group shall fail to pay when due an amount
which it shall have become liable to pay to the PBGC, any Plan or a trust
established under Title IV of ERISA, or (v) a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that an ERISA
Plan must be terminated or have a trustee appointed to administer any ERISA
Plan, or (vi) the Borrower or a member of its ERISA Controlled Group suffers a
partial or complete withdrawal from a Multiemployer Plan or is in "default" (as
defined in Section 4219(c)(5) of ERISA) with respect to payments to a
Multiemployer Plan, or (vii) a proceeding shall be instituted against the
Borrower or any member of its ERISA Controlled Group to enforce Section 515 of
ERISA, or (viii) any other event or condition shall occur or exist with respect
to any Plan
80
which could subject the Borrower or any member of its ERISA Controlled Group to
any tax, penalty or other liability in excess of $50,000.
(g) Security Documents. Any of the Security Documents shall for
------------------
any reason cease to be in full force and effect, or shall cease to give the
Agent the Liens, rights, powers and privileges purported to be created thereby
including, without limitation, a perfected first priority (except as permitted
pursuant to Section 6.3) security interest in, and Lien on, all of the
Collateral in accordance with the terms thereof.
(h) Change of Control. One Person and its Affiliates shall
-----------------
beneficially own and control at any time at least 40% of the issued and
outstanding shares of each class of capital stock of the Borrower entitled
(without regard to the occurrence of any contingency) to vote for the election
of members of the board of directors of the Borrower.
(i) Judgments. One or more judgments or decrees in an aggregate
---------
amount of $50,000 or more shall be entered by a court or courts of competent
jurisdiction against the Borrower (other than any judgment as to which, and only
to the extent, a reputable insurance company has acknowledged coverage of such
claim in writing) and any such judgments or decrees shall not be stayed,
discharged, paid, bonded or vacated within 30 days.
(j) Environmental Matters. (i) Any Environmental Claim shall
---------------------
have been asserted against the Borrower or any Environmental Affiliate thereof
which, if determined adversely, could reasonably be expected to have a Material
Adverse Effect, (ii) any release, emission, discharge or disposal of any
Material of Environmental Concern shall have occurred, and such event could form
the basis of an Environmental Claim against the Borrower or any Environmental
Affiliate thereof which, if determined adversely, could have a Material Adverse
Effect, or (iii) the Borrower or its Environmental Affiliate shall have failed
to obtain any Environmental Approval necessary for the management, use, control,
ownership, or operation of its business, property or assets or any such
Environmental Approval shall be revoked, terminated, or otherwise cease to be in
81
full force and effect, in each case, if the existence of such condition could
have a Material Adverse Effect.
Section 7.2 Rights and Remedies. Upon the occurrence of any Event of
-------------------
Default described Section 7.1(e), the Commitments shall automatically and
immediately terminate and the unpaid principal amount of and any and all accrued
interest on the Loans and any and all accrued Fees and other Obligations shall
automatically become immediately due and payable, with all additional interest
from time to time accrued thereon and without presentation, demand, or protest
or other requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and notice of acceleration), all of which are hereby expressly waived by the
Borrower, and the obligation of each Bank to make any Loan hereunder shall
thereupon terminate; and upon the occurrence and during the continuance of any
other Event of Default, the Agent shall at the request, or may with the consent,
of the Required Banks, by written notice to Borrower, (i) declare that the
Commitments are terminated, whereupon the Commitments and the obligation of each
Bank to make any Loan hereunder shall immediately terminate, (ii) terminate any
Letter of Credit that may be terminated in accordance with its terms, (iii)
direct the Borrower to pay (and the Borrower agrees that upon receipt of such
notice it will pay) to the Agent at the Agent's office an amount of cash, to be
held in the Cash Collateral Account (as defined in the Security Agreement),
equal to the Letter of Credit Liability and (iv) declare the unpaid principal
amount of and any and all accrued and unpaid interest on the Loans and any and
all accrued Fees and other Obligations to be, and the same shall thereupon be,
immediately due and payable with all additional interest from time to time
accrued thereon and without presentation, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and notice of acceleration), all of which are hereby expressly waived by
Borrower.
SECTION 8. THE AGENT
Section 8.1 Appointment. Each Bank hereby irrevocably designates and
-----------
appoints Banque Paribas as the
82
Agent of such Bank under this Agreement and each other Loan Document, and each
such Bank irrevocably authorizes Banque Paribas as the Agent for such Bank, to
take such action on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to the Agent by the terms of this Agreement and each other
Loan Document, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Agent shall be read into this Agreement or
otherwise exist against the Agent. Notwithstanding anything to the contrary
herein, the Issuing Bank shall act on behalf of the Banks with respect to the
Letters of Credit (and all conditions precedent to the issuance or extension
thereof) until such time and except for so long as the Agent may elect to act
for the Issuing Bank with respect thereto; provided, however, that the Issuing
-------- -------
Bank shall have all of the benefits and immunities (i) for acts taken or
omissions suffered by the Issuing Bank in connection with the Letters of Credit
as fully as if the term "Agent" as used in this Section 8 included the Issuing
Bank with respect to such acts or omissions, and (ii) as additionally provided
in this Agreement with respect to the Issuing Bank. The provisions of this
Section 8 are solely for the benefit of the Agent and the Banks and the Borrower
shall have no rights as a third party beneficiary or otherwise under any of the
provisions hereof. In performing its functions and duties hereunder and under
the other Loan Documents, the Agent shall act solely as the agent of the Banks
and does not assume nor shall be deemed to have assumed any obligation or
relationship of trust or agency with or for the Borrower or any of their
respective successors and assigns.
Section 8.2 Delegation of Duties. The Agent may execute any of its
--------------------
duties under this Agreement or the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or
83
misconduct or any agents or attorneys-in-fact selected by it with reasonable
care.
Section 8.3 Exculpatory Provisions. The Agent shall not be (i)
----------------------
liable for any action lawfully taken or omitted to be taken by it or any Person
described in Section 8.2 under or in connection with this Agreement or any other
Loan Document (except for its or such Person's own gross negligence or willful
misconduct), or (ii) responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties made by the Borrower
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, this Agreement or any other Loan Document or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement, or any other Loan Document or for any failure of the Borrower
to perform its obligations hereunder or thereunder. The Agent shall not be
under any obligation to any Bank to ascertain or to inquire as to the observance
or performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Borrower. This Section is intended solely to govern the
relationship between the Agent, on the one hand, and the Banks, on the other.
Section 8.4 Reliance by Agent. The Agent shall be entitled to rely,
-----------------
and shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless the
Agent shall have received an executed Assignment and Acceptance in respect
thereof. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Banks as it deems appropriate
or it shall first be
84
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement and the other Loan Documents in
accordance with a request of the Required Banks, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Banks and
all future holders of the Notes.
Section 8.5 Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has received notice from a Bank or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall promptly give notice thereof to the Banks. The Agent
shall take such action with respect to such Default or Event of Default as shall
be directed by the Required Banks; provided that unless and until the Agent
--------
shall have received such directions, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as the Agent shall deem advisable and in the best
interests of the Banks.
Section 8.6 Non-Reliance on Agent and Other Banks. Each Bank
-------------------------------------
expressly acknowledges that neither the Agent, nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of the Borrower,
shall be deemed to constitute any representation or warranty by the Agent. Each
Bank represents and warrants to the Agent that it has, independently and without
reliance upon the Agent or any other Bank and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, prospects, financial and
other conditions and creditworthiness of the Borrower and made its own decision
to make its Loans hereunder and enter into this Agreement. Each Bank also
represents that it will, independently and without reliance upon the
85
Agent or any other Bank, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, prospects, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required under the Loan Documents to be furnished to the
Banks by the Agent, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
operations, property, prospects, financial and other condition or
creditworthiness of the Borrower which may come into the possession of the Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
Section 8.7 Indemnification. The Banks agree to indemnify the Agent
---------------
and its officers, directors, employees, representatives and agents (to the
extent not reimbursed by the Borrower and without limiting the obligation of the
Borrower to do so), ratably according to their Pro Rata Shares, from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including, without limitation, the fees and disbursements of counsel
for the Agent or such Person in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
the Agent or such Person shall be designated a party thereto) that may at any
time (including, without limitation, at any time following the payment of the
Obligations) be imposed on, incurred by or asserted against the Agent or such
Person as a result of, or arising out of, or in any way related to or by reason
of, any of the Transactions or the execution, delivery or performance of any
Loan Document (but excluding any such liabilities, obligations, losses, damages,
penalties,actions, judgments, suits, costs, expenses or disbursements resulting
solely from the gross negligence or willful misconduct of the Agent or such
Person as finally determined by a court of competent jurisdiction).
86
Section 8.8 Agent in its Individual Capacity. The Agent and its
--------------------------------
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower as though the Agent were not the Agent
hereunder. With respect to Loans made or renewed by it and any Note issued to
it, the Agent shall have the same rights and powers under this Agreement as any
Bank and may exercise the same as though it were not the Agent, and the terms
"Bank" and "Banks" shall include the Agent in its individual capacity.
Section 8.9 Resignation by the Agent. (a) The Agent may resign from
------------------------
the performance of all of its functions and duties hereunder and/or under the
other Loan Documents by giving 15 Business Days' prior written notice to the
Borrower and the Banks. Such resignation shall take effect upon the appointment
of a successor Agent pursuant to clauses (b) and (c) below or as otherwise
provided below.
(b) Upon any such notice of resignation, the Banks shall appoint a
successor Agent hereunder or thereunder who shall be a commercial bank or trust
company reasonably acceptable to the Borrower.
(c) If a successor Agent shall not have been so appointed within such
15 Business Day period, the Agent, with the consent of the Borrower, may then
appoint a successor Agent who shall serve as Agent hereunder or thereunder until
such time, if any, as the Banks appoint a successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to clause (b)
or (c) above by the 20th Business Day after the date such notice of resignation
was given by the Agent, the Agent's resignation shall become effective and the
Banks shall thereafter perform all the duties of the Agent hereunder and/or
under any other Loan Document until such time, if any, as the Banks appoint a
successor Agent as provided above.
SECTION 9. MISCELLANEOUS
Section 9.1 Payment of Expenses, Indemnity, etc. The Borrower
------------------------------------
shall:
87
(a) whether or not the transactions hereby contemplated are
consummated, pay all reasonable out-of-pocket costs and expenses of the Agent in
connection with the negotiation, preparation, execution and delivery of the Loan
Documents and the documents and instruments referred to therein, the creation,
perfection or protection of the Agent's Liens in the Collateral (including,
without limitation, fees and expenses for title and lien searches and filing and
recording fees), and any amendment, waiver or consent relating to any of the
Loan Documents (including, without limitation, as to each of the foregoing, the
reasonable fees and disbursements of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP,
special counsel to the Agent and any other attorneys retained by the Agent) and
of the Agent and each Bank in connection with the preservation of rights under,
and enforcement of, the Loan Documents and the documents and instruments
referred to therein or in connection with any restructuring or rescheduling of
the Obligations (including, without limitation, the reasonable fees and
disbursements of counsel for the Agent, the Issuing Bank and each of the Banks
and the costs of the Agent and the Issuing Bank in connection with the issuance
of Letters of Credit);
(b) pay, and hold the Agent and each of the Banks harmless from
and against, any and all present and future stamp, excise and other similar
taxes with respect to the foregoing matters and hold the Agent and each Bank
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such Bank)
to pay such taxes; and
(c) indemnify the Agent and each Bank, its officers, directors,
employees, representatives and agents (each an "Indemnitee") from, and hold each
of them harmless against, any and all losses, liabilities, claims, damages,
expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnitee in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that may at any time (including, without limitation, at any time
following the
88
payment of the Obligations) be imposed on, asserted against or incurred by any
Indemnitee as a result of, or arising out of, or in any way related to or by
reason of, (i) any of the Transactions or the execution, delivery or performance
of any Loan Document (except the Environmental Indemnity Agreement), (ii) the
grant to the Agent and the Banks of any Lien in any property or assets of the
Borrower or any stock or other equity interest in the Borrower, and (iii) the
exercise by the Agent and the Banks of their rights and remedies (including,
without limitation, foreclosure) under any agreements creating any such Lien
(but excluding, as to any Indemnitee, any such losses, liabilities, claims,
damages, expenses, obligations, penalties, actions, judgments, suits, costs or
disbursements incurred by reason of the gross negligence or willful misconduct
of such Indemnitee as finally determined by a court of competent jurisdiction).
The Borrower's obligations under this Section shall survive the termination of
this Agreement and the payment of the Obligations.
Section 9.2 Right of Setoff. (a) In addition to any rights now or
---------------
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
any Event of Default, each Bank is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to the
Borrower or to any other Person, any such notice being hereby expressly waived,
to set off and to appropriate and apply any and all deposits (general or
special, time or demand, provisional or final) and any other indebtedness at any
time held or owing by such Bank (including, without limitation, by branches and
agencies of such Bank wherever located) to or for the credit or the account of
the Borrower against and on account of the Obligations of the Borrower to such
Bank under this Agreement or under any of the other Loan Documents, including,
without limitation, all interests in Obligations purchased by such Bank pursuant
to Section 9.7, and all other claims of any nature or description arising out of
or connected with this Agreement or any other Loan Document, irrespective of
whether or not such Bank shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
89
(b) Notwithstanding the foregoing clause (a), neither any Issuing
Bank nor any Bank shall exercise a right of setoff, banker's lien or
counterclaim or take any court or administrative action to enforce any provision
of this Agreement or any Note or any Letter of Credit (or participation therein)
if such setoff or action would constitute an "action" within the meaning of
Section 726 of the California Code of Civil Procedure, as amended from time to
time, which would impair the validity, priority or enforceability of the Lien on
the real property without the consent of the Required Banks, and any attempted
exercise by any Issuing Bank or any Bank of any such right without obtaining the
prior consent of the Required Banks shall be null and void. This clause (b)
shall be solely for the benefit of each Issuing Bank and each of the Banks
hereunder.
Section 9.3 Notices. Except as otherwise expressly provided herein,
-------
all notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by telecopy), and shall be deemed to
have been duly given or made when delivered by hand, or five days after being
deposited in the United States mail, postage prepaid, or, in the case of
telecopy notice, when sent or, if not sent during business hours on a Business
Day, then on the next Business Day, or, in the case of a nationally recognized
overnight courier service, one Business Day after delivery to such courier
service, addressed, in the case of each party hereto, at its address specified
opposite its signature below or on the appropriate Assignment and Acceptance, or
to such other address as may be designated by any party in a written notice to
the other parties hereto.
Section 9.4 Successors and Assigns; Participation; Assignments.
--------------------------------------------------
(a) Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the Borrower, the Banks, the Agent, all future
holders of the Notes and their respective successors and assigns, except that
the Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of each Bank. No Bank may
participate, assign or sell any of its Credit Exposure (as defined in clause (b)
below) except as required by
90
operation of law, in connection with the merger, consolidation or dissolution of
any Bank or as provided in this Section 9.4.
(b) Participation. Any Bank may at any time sell to one or more
-------------
Persons (each a "Participant") participating interests in any Loan owing to such
Bank, any Note held by such Bank, any Commitment of such Bank and or any other
interest of such Bank hereunder (in respect of any such Bank, its "Credit
Exposure"). Notwithstanding any such sale by a Bank of participating interests
to a Participant, such Bank's rights and obligations under this Agreement shall
remain unchanged, such Bank shall remain solely responsible for the performance
thereof, such Bank shall remain the holder of any such Note for all purposes
under this Agreement (except as expressly provided below), and the Borrower and
the Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement. The
Borrower agrees that if any Obligations are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence and during the
continuance of an Event of Default, each Participant shall be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this Agreement
or any Note, provided that such right of setoff shall be subject to the
obligations of such Participant to share with the Banks, and the Banks agree to
share with such Participant, as provided in subsection 9.6. The Borrower also
agrees that each Participant shall be entitled to the benefits of Sections 2.17,
2.18 and 2.19. Each Bank agrees that any agreement between such Bank and any
such Participant in respect of such participating interest shall not restrict
such Bank's right to agree to any amendment, supplement, waiver or modification
to this Agreement or any other Loan Document, except where the result of any of
the foregoing would be to extend the final maturity of any Obligation or any
regularly scheduled installment thereof or reduce the rate or extend the time of
payment of interest thereon or reduce the principal amount thereof or release
all or substantially all of the Collateral (except as expressly provided in the
Loan Documents).
91
(c) Assignments. Any Bank may, in the ordinary course of its
-----------
business and in accordance with applicable law, at any time assign to any Bank
or any affiliate thereof or, with the consent of the Agent, which consent shall
not be unreasonably withheld, to any other Person (each an "Assignee") all or
any part of its Credit Exposure, in a minimum amount of $5,000,000. The
Borrower, the Agent and the Banks agree that to the extent of any assignment the
Assignee shall be deemed to have the same rights and benefits under the Loan
Documents and the same rights of setoff and obligation to share pursuant to
Section 9.7 as it would have had if it were a Bank hereunder; provided that the
Borrower and the Agent shall be entitled to continue to deal solely and directly
with the assignor Bank in connection with the interests so assigned to the
Assignee unless and until (i) written notice of such assignment, together with
payment instructions, addresses and related information with respect to the
Assignee, shall have been given to the Borrower and the Agent by such Bank and
the Assignee; (ii) such Bank and its Assignee shall have delivered to the
Borrower and the Agent (A) an Assignment and Acceptance in the form of Exhibit G
(an "Assignment and Acceptance") together with delivery to the Borrower of any
Note or Notes subject to such Assignment and (B) if applicable to the Assignee,
the forms required to be delivered pursuant to Section 2.20(b); and (iii) such
Bank shall have paid to the Agent, for its own account, an assignment fee of
$3000. Any such assignment requiring the approval of the Agent shall also
require the approval of the Borrower (such approval not to be unreasonably
withheld or delayed), provided that the Borrower's failure to approve or
disapprove such assignment within five days after receiving written notice
hereof shall be deemed approval by the Borrower of such assignment, and provided
further that no such approval from the Borrower shall be required during the
continuation of an Event of Default. Notwithstanding any provision to the
contrary contained herein, no Bank may assign any part of its Credit Exposure or
Commitment or other rights or obligations of such Bank to any Person which is a
Competitor.
(d) Replacement Notes. Within 30 Business Days after its receipt
-----------------
of notice by the Agent that the Agent has received an executed Assignment and
Acceptance and payment of the processing fee, the
92
Borrower shall execute and deliver to the Agent new Notes evidencing such
Assignee's assigned Loans and Commitment and, if the assignor Bank has retained
a portion of its Loans and Commitment, replacement Notes in the principal amount
of the Loans retained by the assignor Bank (such Notes to be in exchange for,
but not in payment of, the Notes held by such Bank). Immediately upon compliance
with the provisions of Section 9.4(c), this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitment of the assigning Bank pro tanto.
--- -----
(e) Assignments to Federal Reserve Bank. Notwithstanding any
-----------------------------------
other provision contained in this Agreement or any other Loan Document to the
contrary, any Bank may assign all or any portion of the Loans or Notes held by
it to any Federal Reserve Bank or the United States Treasury as collateral
security pursuant to Regulation A of the Board of Governors of the Federal
Reserve System and any Operating Circular issued by such Federal Reserve Bank,
provided that any payment in respect of such assigned Notes or Loans made by the
Borrower to or for the account of the assigning and/or pledging Bank in
accordance with the terms of this Agreement shall satisfy the Borrower's
obligations hereunder in respect of such assigned Loans or Notes to the extent
of such payment. No such assignment shall release the assigning Bank from its
obligations hereunder.
Section 9.5 Amendments and Waivers. Neither this Agreement, any
----------------------
Note, any other Loan Document to which the Borrower is a party nor any terms
hereof or thereof may be amended, supplemented, modified or waived except in
accordance with the provisions of this Section. The Required Banks and the
Borrower may, from time to time, enter into written amendments, supplements,
modifications or waivers for the purpose of adding, deleting, changing or
waiving any provisions to this Agreement, the Notes, or the other Loan Documents
to which the Borrower is a party, provided, that no such amendment, supplement,
--------
modification or waiver shall (a) extend either the Final Maturity Date or any
installment or required prepayment of any Obligations or reduce the
93
rate or extend the time of payment of interest on any Obligations, or reduce the
principal amount of any Obligations or reduce any fee payable to the Banks
hereunder, or release all or substantially all of the Collateral (except as
expressly contemplated by the Loan Documents) or change the amount of any
Commitment of any Bank, or amend, modify or waive any provision of this Section
9.5 or the definition of Required Banks, or consent to or permit the assignment
or transfer by the Borrower of any of its rights and obligations under this
Agreement or any other Loan Document, in each case without the written consent
of all the Banks, or (b) amend, modify or waive any provision of Section 8 or
any other provision of any Loan Document if the effect thereof is to affect the
rights or duties of the Agent, without the written consent of the then Agent.
Any such amendment, supplement, modification or waiver shall apply to each of
the Banks equally and shall be binding upon the Borrower, the Banks, the Agent
and all future holders of the Notes. In the case of any waiver, the Borrower,
the Banks and the Agent shall be restored to their former position and rights
hereunder and under the outstanding Notes, and any Default or Event of Default
waived shall be deemed to be cured and not continuing, but no such waiver shall
extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereon.
Section 9.6 No Waiver; Remedies Cumulative. No failure or delay on
------------------------------
the part of the Agent or any Bank or any holder of a Note in exercising any
right, power or privilege hereunder or under any other Loan Document and no
course of dealing between the Borrower and the Agent or any Bank or the holder
of any Note shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Loan
Document preclude any other or further exercise thereof of the exercise of any
other right, power or privilege hereunder or thereunder. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Agent or any Bank or the holder of any Note would
otherwise have. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Agent, the Banks
or the holder of any Note to any other or further action in any circumstances
without notice or demand.
94
Section 9.7 Sharing of Payments. Each of the Banks agrees that if
-------------------
it should receive any amount hereunder (whether by voluntary payment, by
realization upon security, by the exercise of the right of setoff or banker's
lien, by counterclaim or cross action, by the enforcement of any right under the
Loan Documents, or otherwise) which is applicable to the payment of any
Obligations, of a sum which with respect to the related sum or sums received by
other Banks is in a greater proportion than the total of such Obligation then
owed and due to such Bank bears to the total of such Obligation then owed and
due to all of the Banks immediately prior to such receipt, then such Bank
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Banks an interest in such Obligations owing to such
Banks in such amount as shall result in a proportional participation by all of
the Banks in such amount; provided that if all or any portion of such excess
amount is thereafter recovered from such Bank, such purchase shall be rescinded
and the purchase price restored to the extent of such recovery, but without
interest.
Section 9.8 Governing Law; Submission to Jurisdiction. (a) THIS
-----------------------------------------
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).
(b) Any legal action or proceeding with respect to this
Agreement or any other Loan Document and any action for enforcement of any
judgment in respect thereof may be brought in the courts of the State of
California or of the United States of America for the Central District of
California, and, by execution and delivery of this Agreement, the Borrower
hereby accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any thereof. The Borrower irrevocably consents to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Borrower at its address set forth opposite its signature
below. The Borrower hereby irrevocably waives
95
any objection which it may now or hereafter have to the laying of venue of any
of the aforesaid actions or proceedings arising out of or in connection with
this Agreement or any other Loan Document brought in the courts referred to
above and hereby further irrevocably waives and agrees not to plead or claim in
any such court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum. Nothing herein shall affect the right of
the Agent, any Bank or any holder of a Note to serve process in any other manner
permitted by law or to commence legal proceedings or otherwise proceed against
the Borrower in any other jurisdiction.
Section 9.9 Counterparts. This Agreement may be executed in any
------------
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
Section 9.10 Effectiveness. This Agreement shall become effective
-------------
on the date on which all of the parties hereto shall have signed a counterpart
hereof and shall have delivered the same to the Agent which delivery, in the
case of the Banks, may be given to the Agent by telecopy (with the originals
delivered promptly to the Agent via overnight courier service).
Section 9.11 Headings Descriptive. The headings of the several
--------------------
Sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
Section 9.12 Marshalling; Recapture. Neither the Agent nor any Bank
----------------------
shall be under any obligation to ▇▇▇▇▇▇▇▇ any assets in favor of the Borrower or
any other party or against or in payment of any or all of the Obligations. To
the extent any Bank receives any payment by or on behalf of the Borrower, which
payment or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to the Borrower
or its estate, trustee, receiver, custodian or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such payment or repayment, the
96
obligation or part thereof which has been paid, reduced or satisfied by the
amount so repaid shall be reinstated by the amount so repaid and shall be
included within the liabilities of the Borrower to such Bank as of the date such
initial payment, reduction or satisfaction occurred.
Section 9.13 Severability. In case any provision in or obligation
------------
under this Agreement or the Notes or the other Loan Documents shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
Section 9.14 Survival. All indemnities set forth herein including,
--------
without limitation, in Sections 2.17, 2.18, 2.19, 2.20, 8.7 and 9.1 shall
survive the execution and delivery of this Agreement and the Notes and the
making and repayment of the Loans hereunder.
Section 9.15 Domicile of Loans. Each Bank may transfer and carry
-----------------
its Loans at, to or for the account of any branch office, subsidiary or
affiliate of such Bank.
Section 9.16 Limitation of Liability. No claim may be made by the
-----------------------
Borrower or any other Person against the Agent or any Bank or the Affiliates,
directors, officers, employees, attorneys or agent of any of them for any
special, indirect, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by this Agreement or any other Transactions, or
any act, omission or event occurring in connection therewith; and the Borrower
hereby waives, releases and agrees not to ▇▇▇ upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
Section 9.17 Calculations; Computations. The financial statements
--------------------------
to be furnished to the Agent and the Banks pursuant hereto shall be made and
prepared in accordance with GAAP consistently applied throughout the periods
involved and consistent with GAAP as used in the preparation of the financial
statements referred to in
97
Section 4.5, and, except as otherwise specifically provided herein, all
computations determining compliance with Section 6.1 hereof shall utilize GAAP.
Section 9.18 Waiver of Trial by Jury. TO THE EXTENT PERMITTED BY
-----------------------
APPLICABLE LAW, EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY
WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
OR ANY MATTER ARISING HEREUNDER OR THEREUNDER.
Section 9.19 Confidentiality. Each Bank agrees to take and to cause
---------------
its Affiliates to take normal and reasonable precautions and exercise due care
to maintain the confidentiality of all information identified as "confidential"
or "secret" by the Borrower and provided to it by the Borrower or any of its
Subsidiaries, or by the Agent on the Borrower's or such Subsidiary's behalf,
under this Agreement or any other Loan Document, and neither it nor any of its
Affiliates shall use any such information other than in connection with or in
enforcement of this Agreement and the other Loan Documents or in connection with
other business now or hereafter existing or contemplated with the Borrower or
any of its Subsidiaries; except to the extent such information (i) was or
becomes generally available to the public other than as a result of disclosure
by the Bank, or (ii) was or becomes available on a non-confidential basis from a
source other than the Borrower, provided that such source is not bound by a
confidentiality agreement with the Borrower known to the Bank; provided,
--------
however, that any Bank may disclose such information (A) at the request or
-------
pursuant to any requirement of any Governmental Authority to which the Bank is
subject or in connection with an examination of such Bank by any such authority;
(B) pursuant to subpoena or other court process; (C) when required to do so in
accordance with the provisions of any applicable law, rule, statute, regulation,
decree or order of any Governmental Authority; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent, any
Bank or their respective Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to such Bank's independent auditors and other
professional advisors; (G)
98
to any Participant or Assignee, actual or potential, provided that such Person
agrees in writing to keep such information confidential to the same extent
required of the Banks hereunder; (H) as to any Bank or its Affiliate, as
expressly permitted under the terms of any other document or agreement regarding
confidentiality to which the Borrower or any of its Subsidiaries is party or is
deemed party with such Bank or such Affiliate; and (I) to any Affiliate.
99
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
SYNBIOTICS CORPORATION, as the Borrower
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
Title: VP Finance
Notice Address:
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
100
BANQUE PARIBAS, as Agent and as a Bank
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Title: Associate
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------
Title: Vice President
Notice Address:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, as a Bank
By: _________________________
Title:
Notice Address:
102
Schedule 1 to
Credit Agreement
----------------
Banks and Commitments
---------------------
Revolving Tranche A Tranche B
Name of Bank Commitment Commitment Commitment
------------ ---------- ---------- ----------
Banque Paribas $3,333,333.33 $3,333,333.33 $3,333,333.33
Sumitomo Bank
of California $1,666,666.67 $1,666,666.67 $1,666,666.67
103
SCHEDULE 4.4
LITIGATION
----------
See Item 3, "Legal Proceedings" of the 1996 Form 10-KSB for a
discussion of the threatened litigation with ▇▇▇▇▇▇-Jewish Hospital.
104
SCHEDULE 4.9
GOVERNMENT APPROVALS
--------------------
Post-closing notification to the French Ministry of Finance.
105
SCHEDULE 4.10
SECURITY INTERESTS AND LIENS
----------------------------
None.
106
Schedule 4.16
Corporate Structure; Capitalization
-----------------------------------
Authorized Issued
---------- ------
1. Pre-Acquisition 24,800,000 7,393,000
---------------
Synbiotics Corporation
Common Stock
2. Post-Acquisition 24,800,000 8,152,000
----------------
Synbiotics Corporation
Common Stock
Synbiotics Europe (R.M. - 47,500,000 47,500,000 FF
FF
Diagnostics S.A.S.)
Common Stock
107
SCHEDULE 4.19
OWNERSHIP OF PROPERTY
---------------------
Address Lessor
------- ------
1. ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2. ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
3. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇ 4444 North Belleview
Kansas City, MO 64116 ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
4. ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇.▇. ▇▇▇ ▇▇▇▇ - ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
108
SCHEDULE 4.23
BROKERS' FEES
-------------
Fees payable to ▇▇▇ ▇▇▇▇▇▇ and Company in connection with the acquisition
and the financing aggregating $510,000.
109
SCHEDULE 4.24
LABOR MATTERS
-------------
The Company's predecessor has had labor experiences typical of French
companies.
As to Synbiotics itself: None.
110
SCHEDULE 6.2
INDEBTEDNESS
------------
None.
111
SCHEDULE 6.3
LIENS
-----
Operating leases with Copelco Capital, Bankers Leasing Association and Canon
Financial Services.
112
SCHEDULE 6.6
CONTINGENT OBLIGATIONS
----------------------
None.
113
EXHIBIT A-1
FORM OF TRANCHE A NOTE
----------------------
$___________ Los Angeles, California
as of July 9, 1997
FOR VALUE RECEIVED, Synbiotics Corporation, a California corporation (the
"Obligor"), DOES HEREBY PROMISE TO PAY to the order of [insert name of lender]
(the "Lender") at the office of Banque Paribas at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, the principal sum of _____________________ DOLLARS
($____________) in lawful money of the United States of America in immediately
available funds, on such date or dates and in such amounts as are required by
the Credit Agreement referred to below and to pay interest on the unpaid
principal amount from time to time outstanding hereunder, in like money, at such
office, as set forth in Section 2.7 of said Credit Agreement.
Except to the extent otherwise expressly provided in the Credit Agreement,
Obligor and all other parties now or hereafter liable hereon severally waive
grace, demand, presentment for payment, protest, notice of any kind (including,
but not limited to, notice of dishonor, notice of protest, notice of intention
to accelerate or notice of acceleration) and diligence in collecting and
bringing suit against any party hereto and agree to the extent permitted by
applicable law (i) to all extensions and partial payments, with or without
notice, before or after maturity, (ii) to any substitution, exchange or release
of any security now or hereafter given for this Note, (iii) to the release of
any party primarily or secondarily liable hereon, and (iv) that it will not be
necessary for any holder of this Note, in order to enforce payment of this Note,
to first institute or exhaust such holder's remedies against Obligor or any
other party liable therefor or against any security for this Note. The
nonexercise by the holder of any of its rights hereunder in any particular
instance shall not constitute a waiver thereof in that or any subsequent
instance.
The Obligor promises to pay interest, on demand, on any overdue principal
and, to the extent permitted by law, overdue interest from
A-1-1
their due dates at a rate or rates determined as set forth in the Credit
Agreement.
This Note is one of the Tranche A Notes referred to in that certain Credit
Agreement dated as of July 9, 1997 (the "Credit Agreement"), among the Obligor,
the Banks named therein and Banque Paribas, acting in its capacity as agent for
the Banks, as the same may be amended from time to time, which among other
things contains provisions for the acceleration of the maturity hereof upon the
occurrence of certain events, for optional prepayment of the principal hereof
prior to the maturity hereof and for the amendment or waiver of certain
provisions of the Credit Agreement, all upon the conditions therein specified.
The obligations of the Obligor hereunder are secured as provided pursuant to the
Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF CALIFORNIA.
SYNBIOTICS
CORPORATION
By_____________________ Name:
Title:
A-1-2
Unpaid Name of
Principal Person
Payments Payments Balance Making
Date Amount of Loan Principal Interest of Note Notation
---- -------------- --------- -------- ------- --------
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇ NOTE
----------------------
$___________ Los Angeles, California
as of July 9, 1997
FOR VALUE RECEIVED, Synbiotics Corporation, a California corporation (the
"Obligor"), DOES HEREBY PROMISE TO PAY to the order of [insert name of lender]
(the "Lender") at the office of Banque Paribas at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, the principal sum of _____________________ DOLLARS
($____________) in lawful money of the United States of America in immediately
available funds, on such date or dates and in such amounts as are required by
the Credit Agreement referred to below and to pay interest on the unpaid
principal amount from time to time outstanding hereunder, in like money, at such
office, as set forth in Section 2.7 of said Credit Agreement.
Except to the extent otherwise expressly provided in the Credit Agreement,
Obligor and all other parties now or hereafter liable hereon severally waive
grace, demand, presentment for payment, protest, notice of any kind (including,
but not limited to, notice of dishonor, notice of protest, notice of intention
to accelerate or notice of acceleration) and diligence in collecting and
bringing suit against any party hereto and agree to the extent permitted by
applicable law (i) to all extensions and partial payments, with or without
notice, before or after maturity, (ii) to any substitution, exchange or release
of any security now or hereafter given for this Note, (iii) to the release of
any party primarily or secondarily liable hereon, and (iv) that it will not be
necessary for any holder of this Note, in order to enforce payment of this Note,
to first institute or exhaust such holder's remedies against Obligor or any
other party liable therefor or against any security for this Note. The
nonexercise by the holder of any of its rights hereunder in any particular
instance shall not constitute a waiver thereof in that or any subsequent
instance.
The Obligor promises to pay interest, on demand, on any overdue principal
and, to the extent permitted by law, overdue interest from
A-2-1
their due dates at a rate or rates determined as set forth in the Credit
Agreement.
This Note is one of the Tranche B Notes referred to in that certain Credit
Agreement, dated as of July 9, 1997 (the "Credit Agreement"), among the Obligor,
the Banks named therein, Holding, the Lenders named therein, Banque Paribas,
acting in its capacity as agent for the Banks, as the same may be amended from
time to time, which among other things contains provisions for the acceleration
of the maturity hereof upon the occurrence of certain events, for optional
prepayment of the principal hereof prior to the maturity hereof and for the
amendment or waiver of certain provisions of the Credit Agreement, all upon the
conditions therein specified. The obligations of the Obligor hereunder are
secured as provided pursuant to the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF CALIFORNIA.
SYNBIOTICS CORPORATION
By____________________________
Name:
Title:
A-2-2
Unpaid Name of
Principal Person
Payments Payments Balance Making
Date Amount of Loan Principal Interest of Note Notation
---- -------------- --------- -------- ------- --------
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF REVOLVING NOTE
----------------------
$_________ Los Angeles, California
as of July 9, 1997
FOR VALUE RECEIVED, Synbiotics Corporation, a California corporation
(the "Obligor"), DOES HEREBY PROMISE TO PAY to the order of [insert name of
Lender] (the "Lender") at the office of Banque Paribas at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ in lawful money of the United
States of America in immediately available funds, the principal amount of
_________ DOLLARS ($_______), or the aggregate unpaid principal amount of all
Revolving Loans (as defined in the Credit Agreement referred to below) made by
the Lender to the maker hereof pursuant to said Credit Agreement, whichever is
less, on such date or dates as is required by said Credit Agreement, and to pay
interest on the unpaid principal amount from time to time outstanding hereunder,
in like money, at such office, as set forth in Section 2.7 of said Credit
Agreement.
Except to the extent otherwise expressly provided in the Credit
Agreement, Obligor and all other parties now or hereafter liable hereon
severally waive grace, demand, presentment for payment, protest, notice of any
kind (including, but not limited to, notice of dishonor, notice of protest,
notice of intention to accelerate or notice of acceleration) and diligence in
collecting and bringing suit against any party hereto and agree to the extent
permitted by applicable law (i) to all extensions and partial payments, with or
without notice, before or after maturity, (ii) to any substitution, exchange or
release of any security now or hereafter given for this Note, (iii) to the
release of any party primarily or secondarily liable hereon, and (iv) that it
will not be necessary for any holder of this Note, in order to enforce payment
of this Note, to first institute or exhaust such holder's remedies against
Obligor or any other party liable therefor or against any security for this
Note. The nonexercise by the holder of any of its rights hereunder in any
particular instance shall not constitute a waiver thereof in that or any
subsequent instance.
The Obligor promises to pay interest, on demand, on any overdue principal
and, to the extent permitted by law, overdue interest from their due dates at a
rate or rates determined as set forth in the Credit Agreement.
A-3-1
This Note is one of the Revolving Notes referred to in that certain
Credit Agreement, dated as of July 9, 1997 (the "Credit Agreement"), among the
Obligor, the Banks named therein and Banque Paribas, acting in its capacity as
agent for the Banks, as the same may be amended from time to time, which among
other things contains provisions for the acceleration of the maturity hereof
upon the occurrence of certain events, for optional prepayment of the principal
hereof prior to the maturity hereof and for the amendment or waiver of certain
provisions of the Credit Agreement, all upon the conditions therein specified.
The obligations of the Obligor hereunder are secured as provided pursuant to the
Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF CALIFORNIA.
SYNBIOTICS CORPORATION
By ______________________________
Name:
Title:
A-3-2
Unpaid Name of
Principal Person
Payments Payments Balance Making
Date Amount of Loan Principal Interest of Note Notation
---- -------------- --------- -------- ------- --------
A-3-3
EXHIBIT B
FORM OF SECURITY AGREEMENT
--------------------------
SECURITY AGREEMENT, dated as of July 9, 1997 (as the same may from
time to time be amended, supplemented or otherwise modified, this "Security
Agreement"), between Banque Paribas ("Secured Party") and Synbiotics Corporation
("Debtor").
W I T N E S S E T H:
- - - - - - - - - -
9.20 Debtor, Secured Party (acting in its capacity as agent for the
banks (the "Banks") that are parties to the Credit Agreement as defined herein),
and the Banks have entered into a Credit Agreement dated as of July 9, 1997 (as
amended from time to time, the "Credit Agreement") and certain other documents
in connection therewith.
9.21 To provide assurance for the repayment of the Loans and all
other obligations of the Debtor under the Credit Agreement, the Debtor hereby
provides to the Secured Party, for the benefit of the Banks, a security interest
in the tangible and intangible property now owned or hereafter acquired by the
Debtor as more fully described herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, capitalized terms defined in the
-------------
Credit Agreement and not otherwise defined herein are used herein as so defined.
"Account Debtor" shall mean the person who is obligated on a
Receivable.
"Accounts" shall mean "accounts" as such term is defined in Section 9-
106 of the UCC.
"Chattel Paper" shall mean "chattel paper" as such term is defined in
Section 9-105(b) of the UCC.
"Collateral" shall have the meaning assigned to it in Article II
hereof.
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"Collateral Account" shall mean the account (which may be a securities
account) maintained pursuant to this Security Agreement by the Secured Party,
entitled "Synbiotics Corporation, Collateral Account, Banque Paribas, secured
party", and all funds and instruments or other items from time to time credited
to such account and all interest thereon.
"Collateral Records" shall mean books, records, computer software,
computer printouts, customer lists, blueprints, technical specifications,
manuals, and similar items which relate to any Collateral other than such items
obtained under license or franchise security agreements which prohibit
assignment or disclosure of such items.
"Contracts" shall mean all contracts between the Debtor and one or
more additional parties, in each case to the extent, but only to the extent,
that the grant by the Debtor of a security interest pursuant to this Security
Agreement in its right, title and interest in such contract is not prohibited by
such contract without the consent of any other party thereto, would not give any
other party to such contract the right to terminate its obligations thereunder,
or is permitted with consent if all necessary consents to such grant of a
security interest have been obtained from the other parties thereto (it being
understood that the foregoing shall not be deemed to obligate the Debtor to
obtain such consents); provided that the foregoing limitation shall not affect,
limit, restrict or impair the grant by the Debtor of a security interest
pursuant to this Security Agreement in any money or other amounts due or to
become due under any such contract.
"Copyrights" shall mean (a) any United States copyright which Debtor
now or hereafter has registered with the United States Copyright Office, as well
as any application for a United States Copyright registration now or hereafter
made with the United States Copyright Office by Debtor and (b) any copyright
which Debtor now or hereafter has registered in the copyright register of any
country other than the United States, as well as any application for such a
copyright registration now or hereafter made by Debtor in the copyright office
of any country other than the United States.
"Deposit Accounts" shall mean the Collateral Account and any deposit
account, including without limitation, "deposit accounts" as such term is
defined in Section 9-105(e) of the UCC and any other deposit or securities
account, together with any funds, instruments or other items credited to any
such account from time to time, and all interest thereon.
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"Documents" shall mean "documents" as such term is defined in Section
9-105(f) of the UCC.
"Equipment" shall mean "equipment" as such term is defined in Section
9-109(2) of the UCC, including, without limitation, machinery, manufacturing
equipment, data processing equipment, computers, office equipment, furniture,
appliances and tools.
"Event of Default" shall have the meaning provided in the Credit
Agreement.
"Fixtures" shall mean "fixtures" as such term is defined in Section 9-
313 of the UCC.
"General Intangibles" shall mean "general intangibles" as such term is
defined in Section 9-106 of the UCC, including, without limitation, rights to
the payment of money (other than Receivables), trademarks, copyrights, patents,
and contracts, licenses and franchises (except in the case of licenses and
franchises in respect of which the Debtor is the licensee or franchisee if the
agreement in respect of such license or franchise prohibits by its terms any
assignment or grant of a security interest), limited and general partnership
interests and joint venture interests, federal income tax refunds, trade names,
distributions on certificated securities (as defined in (S) 8-102(1)(a) of the
UCC) and uncertificated securities (as defined in (S) 8-102(1)(b) of the UCC),
computer programs and other computer software, inventions, designs, trade
secrets, goodwill, proprietary rights, customer lists, supplier contracts, sale
orders, correspondence, advertising materials, payments due in connection with
any requisition, confiscation, condemnation, seizure or forfeiture of any
property, reversionary interests in pension and profit-sharing plans and
reversionary, beneficial and residual interests in trusts, credits with and
other claims against any Person, together with any collateral for any of the
foregoing and the rights under any security agreement granting a security
interest in such collateral.
"Hedging Agreements" shall mean interest rate or currency protection
or hedging arrangements, including without limitation, caps, collars, floors,
forwards and any other similar or dissimilar interest rate or currency exchange
agreements or other interest rate or currency hedging arrangements.
"Instruments" shall mean "instruments" as such term is defined in
Section 9-105(1)(i) of the UCC.
"Insurance Policies" shall mean insurance policies.
B-3
"Inventory" shall mean "inventory" as such term is defined in (S) 9-
109(4) of the UCC, including without limitation, all goods (whether such goods
are in the possession of the Debtor or of a bailee or other Person for sale,
lease, storage, transit, processing, use or otherwise and whether consisting of
whole goods, spare parts, components, supplies, materials or consigned or
returned or repossessed goods), including without limitation, all such goods
which are held for sale or lease or are to be furnished (or which have been
furnished) under any contract of service or which are raw materials or work in
progress.
"Knowledge" shall mean, with respect to any Person, the current actual
knowledge of the officers of such Person.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement of any kind or nature whatsoever,
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same effect as any of
the foregoing and the filing of any financing statement or similar instrument
under the UCC or comparable law of any jurisdiction, domestic or foreign.
"Marks" shall mean (a) any trademarks and service marks which are
registered in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof or any political
subdivision thereof and any application for such trademarks or service marks,
(b) any trademarks and service marks which are registered in any jurisdiction
other than the United States, any State thereof or any political subdivision
thereof and any application for such trademarks or service marks and (c) any
unregistered marks used by Debtor and trade dress including, logos, designs,
trade names, company names, business names, fictitious business names and other
business identifiers in connection with which any of these registered or
unregistered marks are used.
"Money" shall mean "money" as such term is defined in (S) 1-201(24) of
the UCC.
"Patents" shall mean (a) any United States patent to which Debtor now
or hereafter has title or license to use, as well as any application for a
United States patent now or hereafter made by Debtor and (b) any foreign patent
which Debtor now or hereafter has title or license to use, as well as any
application for such a patent now or hereafter made by Debtor in any country
other than the United States.
B-4
"Permitted Lien" shall mean those liens permitted under Section 6.3 of
the Credit Agreement.
"Person" shall mean and include any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or agency, department or instrumentality
thereof.
"Proceeds" shall mean "proceeds" as such term is defined in (S) 9-306
(1) of the UCC.
"Proprietary Information" means all information and know-how
worldwide, including, without limitation, technical data, manufacturing data,
research and development data, data relating to compositions, processes and
formulations, manufacturing and production know-how and experience, management
know-how, training programs, manufacturing, engineering and other drawings,
specifications, performance criteria, operating instructions, maintenance
manuals, technology, technical information, software, engineering and computer
data and databases, design and engineering specifications, catalogs, promotional
literature and financial, business and marketing plans, inventions and invention
disclosures.
"Receivables" shall mean all rights to payment for goods sold or
leased or services rendered, whether or not earned by performance and all
rights in respect of the Account Debtor, including without limitation, all such
rights in which the Debtor has any right, title or interest by reason of the
purchase thereof by the Debtor, and including without limitation all such rights
constituting or evidenced by any Account, Chattel Paper, Instrument, General
Intangible, note, contract, invoice, purchase order, draft, acceptance,
intercompany account, security agreement, or other evidence of indebtedness or
security, together with (a) any collateral assigned, hypothecated or held to
secure any of the foregoing and the rights under any security agreement granting
a security interest in such collateral, (b) all goods, the sale of which gave
rise to any of the foregoing, including, without limitation, all rights in any
returned or repossessed goods and unpaid seller's rights, (c) all guarantees,
endorsements and indemnifications on, or of, any of the foregoing, and (d) all
powers of attorney for the execution of any evidence of indebtedness or security
or other writing in connection therewith.
"Receivables Records" shall mean (a) all original copies of all
documents, instruments or other writings evidencing the Receivables, (b) all
books, correspondence, credit or other files, records, ledger sheets or cards,
invoices, and other papers relating to Receivables, including without
limitation all tapes, cards, computer tapes,
B-5
computer discs, computer runs, record keeping systems and other papers and
documents relating to the Receivables, whether in the possession or under the
control of the Debtor or any computer bureau or agent from time to time acting
for the Debtor or otherwise, (c) all evidences of the filing of financing
statements and the registration of other instruments in connection therewith and
amendments, supplements or other modifications thereto, notices to other
creditors or secured parties, and certificates, acknowledgements, or other
writings, including without limitation lien search reports, from filing or other
registration officers, (d) all credit information, reports and memoranda
relating thereto, and (e) all other written or non-written forms of information
related in any way to the foregoing or any Receivable.
"Secured Obligations" shall mean all obligations, liabilities and
indebtedness of every nature of the Debtor from time to time owing to the
Secured Party or any Bank now existing or hereafter incurred, arising under or
in connection with the Credit Agreement or this Security Agreement.
"Trade Secrets" shall mean any secretly held existing engineering and
other data, information, production procedures and other know-how relating to
the design, manufacture, assembly, installation, use, operation, marketing, sale
and servicing of any products or business of the Debtor worldwide whether
written or not written.
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time in the State of California.
ARTICLE II
GRANT OF SECURITY INTERESTS
As security for the prompt and complete payment and performance in
full of all the Secured Obligations, the Debtor hereby grants to the Secured
Party, as agent for the Banks, a security interest in and continuing lien on all
of the Debtor's right, title and interest in, to and under the following, in
each case, whether now owned or existing or hereafter acquired or arising, and
wherever located (all of which being hereinafter collectively called the
"Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
B-6
(iii) the Collateral Account;
(iv) all Collateral Records;
(v) all Contracts;
(vi) all Deposit Accounts;
(vii) all Documents;
(viii) all Equipment;
(ix) all Fixtures;
(x) all General Intangibles;
(xi) all Hedging Agreements;
(xii) all Instruments;
(xiii) all Insurance Policies;
(xiv) all Inventory;
(xv) all Money;
(xvi) all Receivables;
(xvii) all Receivables Records;
(xviii) all Marks;
(xix) all Patents;
(xx) all Copyrights;
(xxi) all other tangible and intangible personal
property;
(xxii) all accessions and additions to any or all of
the foregoing, all substitutions and replacements for any or all of the
foregoing and all Proceeds or products of any or all of the foregoing.
B-7
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Debtor hereby represents and warrants to the Secured Party, which
representations and warranties shall survive execution and delivery of this
Security Agreement, as follows:
3.1 Validity, Perfection and Priority. Assuming the proper filing of
---------------------------------
one or more financing statements identifying the Collateral with the proper
local, state and/or federal authorities, the security interests in the
Collateral granted to the Secured Party hereunder constitute valid and
continuing first priority perfected security interests in the Collateral (except
to the extent that any Permitted Lien existing as of the date of this Security
Agreement is prior to the liens granted to the Secured Party hereunder).
3.2 No Liens; Other Financing Statements. 3.3 (a) Except for the
------------------------------------
Lien granted to the Secured Party hereunder, the Debtor owns and, as to all
Collateral whether now existing or hereafter acquired, will continue to own,
each item of the Collateral free and clear of any and all Liens, rights or
claims of all other Persons other than Permitted Liens, and the Debtor shall
defend the Collateral against all claims and demands of all Persons at any time
claiming the same or any interest therein adverse to the Secured Party other
than the holders of Permitted Liens.
(b) No financing statement or other evidence of Lien covering or
purporting to cover any of the Collateral is on file in any public office other
than (1) financing statements filed or to be filed in connection with the
security interests granted to the Secured Party hereunder, (ii) financing
statements for which proper termination statements have been delivered to the
Secured Party for filing, and (iii) financing statements filed in connection
with Permitted Liens.
3.4 Chief Executive Office. The chief executive office of the Debtor
----------------------
is located at the address referred to in Section 9.3 of the Credit Agreement.
3.5 Location of Inventory and Equipment. All Inventory and Equipment
-----------------------------------
now or from time to time included in the Collateral will be located at the
locations listed in Schedule II hereto.
B-8
3.6 Receivables.
-----------
(a) Each Receivable (i) is and will be the genuine, legal, valid
and binding obligation of the Account Debtor in respect thereof, representing an
unsatisfied obligation of such Account Debtor, (ii) is and will be enforceable
in accordance with its terms, (iii) is and will be in full force and effect and
is not and will not be subject to any setoffs, defenses, taxes, counterclaims
(except (x) with respect to refunds, returns and allowances in the ordinary
course of business with respect to damaged merchandise and (y) to the extent
that such Receivable may not yet have been earned by performance) and (iv) is
and will be in compliance in all material respects with all applicable laws,
whether federal, state, local or foreign.
(b) None of the Accounts included in the Receivables is subject
to the Federal Assignment of Claims Act, 41 U.S.C. Section 15.
(c) No Receivables which are evidenced by Chattel Paper require
the consent of the Account Debtor in respect thereof in connection with
assignment hereunder and no other receivable purports to prohibit assignment or
require the consent of the Account Debtor thereunder in connection with
assignment.
(d) No Receivables are evidenced by any Instrument which has not
been delivered to the Secured Party.
(e) The Debtor has delivered to the Secured Party a complete and
correct copy of each form of document under which a Receivable may arise,
including without limitation, a form of each invoice, security agreement,
contract, master contract, promissory note, order form or similar document used
by the Debtor in the ordinary course of business.
The representations and warranties contained in this Section shall be deemed to
be repeated by the Debtor as of the time when each Receivable arises.
3.7 Contracts. 3.8 (a) Each material Contract (i) is and will
---------
be the legal, valid, and binding obligation of each of the parties thereto, (ii)
is and will be enforceable against each party thereto in accordance with its
terms, (iii) is and will be in full force and effect and is not subject to any
setoffs, defenses, taxes, counterclaims or other claims, nor have any of the
foregoing been asserted or alleged as to any material Contract, and (iv) is and
will be in compliance in all material respects with all applicable laws, whether
federal, state, local or foreign.
B-9
(b) No consent or authorization or filing with or other act by
or in respect of any governmental authority is required in connection with the
execution, delivery, performance, validity or enforceability of any material
Contract by any party thereto other than those which have been duly obtained,
made or performed, are in full force and effect and do not subject the scope of
any material Contract to any material adverse limitation, either specific or
general in nature.
(c) Neither the Debtor nor, to the best of the Debtor's
knowledge, any other party to any material Contract is in default or likely to
become in default in the performance or observance of any of the terms thereof.
(d) The Debtor has fully performed all its obligations under
each material Contract required to be performed as of the date of this
Agreement.
(e) The Debtor has delivered to the Secured Party a complete and
correct copy of each material Contract, including all amendments, supplements
and other modifications thereto.
(f) No payments due the Debtor under any material Contract are
evidenced by any Instrument or Chattel Paper which has not been delivered to the
Secured Party.
(g) Except as otherwise disclosed in writing by the Debtor, no
material Contract prohibits assignment or requires or purports to require
consent of or notice to any Person in connection with assignment hereunder.
3.9 Fair Labor Standards Act. Any goods now or hereafter produced by
------------------------
the Debtor included in the Collateral have been and will be produced in
compliance with the requirements of the Fair Labor Standards Act, as amended.
ARTICLE IV
COVENANTS
The Debtor covenants and agrees with the Secured Party that from and
after the date of this Security Agreement:
4.1 Further Assurances. The Debtor will from time to time at the
------------------
expense of the Debtor, promptly execute, deliver, file and record all further
instruments, endorsements and other documents, and
B-10
take such further action as the Secured Party may reasonably request in
obtaining the full benefits of this Security Agreement and of the rights,
remedies and powers herein granted, including, without limitation, the
following:
(i) the filing of any financing statements, in form
acceptable to the Secured Party under the UCC in effect in any jurisdiction
with respect to the liens and security interests granted hereby. The Debtor
also hereby authorizes the Secured Party to file any such financing
statement without the signature of the Debtor to the extent permitted by
applicable law. A photocopy or other reproduction of this Security
Agreement shall be sufficient as a financing statement and may be filed in
lieu of the original to the extent permitted by applicable law. The Debtor
will pay or reimburse the Secured Party for all filing fees and related
expenses;
(ii) upon request of the Secured Party, cause the Secured
Party to be listed as the lienholder on the certificate of title or
ownership covering any Collateral covered by such a certificate of title or
ownership and to promptly deliver evidence thereof to the Secured Party;
(iii) with respect to any ▇▇▇▇, Patent or Copyright
constituting Collateral, the filing of any Assignment of Security Interest
in the relevant office in the form of Exhibit I, II or III hereto. The
Debtor shall also, at the request of the Secured Party, confirm the grant
of security in any ▇▇▇▇, Patent or Copyright, the form of such confirmation
to be in such form as may be reasonably satisfactory to the Secured Party;
(iv) (x) provide notification to each institution where
the Debtor maintains a Deposit Account as to the Secured Party's security
interest therein in the form of Exhibit IV hereto or (y) execute and
deliver a bank account agreement in form and substance satisfactory to the
Secured Party, as applicable; and
(v) furnish to the Secured Party from time to time
statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Secured
Party may reasonably request, all in reasonable detail and in form
satisfactory to the Secured Party.
B-11
4.2 Change of Name; Identity; Corporate Structure; Chief Executive
--------------------------------------------------------------
Office; Location of Eligible Inventory and Equipment. The Debtor will not
----------------------------------------------------
change its name, identity, corporate structure or the location of its chief
executive office or location of its Inventory or Equipment without (i) giving
the Secured Party at least thirty (30) days' prior written notice clearly
describing such new name, identity, corporate structure or new location and
providing such other information in connection therewith as the Secured Party
may reasonably request, and (ii) taking all action satisfactory to the Secured
Party as the Secured Party may reasonably request to maintain the security
interest of the Secured Party in the Collateral intended to be granted hereby at
all times fully perfected with the same or better priority and in full force and
effect.
4.3 Maintain Records. The Debtor will keep and maintain at its own
----------------
cost and expense satisfactory and complete records of the Collateral.
4.4 Payment of Obligations. The Debtor will pay promptly when due
----------------------
all taxes, assessments and governmental charges or levies imposed upon the
Collateral, as well as all claims of any kind (including, without limitation,
claims for labor, materials, supplies and services) against or with respect to
the Collateral, except that no such charge need be paid if (i) the validity
thereof is being contested in good faith by appropriate proceedings, (ii) such
proceedings do not involve, in the sole opinion of the Secured Party, any
material danger for the sale, forfeiture or loss of any of the Collateral or any
interest therein and (iii) such charge is adequately reserved against on the
Debtor's books in accordance with generally accepted accounting principles.
4.5 Performance by the Secured Party of the Debtor's Obligations;
-------------------------------------------------------------
Reimbursement. If the Debtor fails to perform or comply with any of its
-------------
undertakings contained herein, the Secured Party, upon prior written notice to
the Debtor, may but is not obligated to perform or comply or cause performance
or compliance therewith and the expenses of the Secured Party incurred in
connection with such performance or compliance, together with interest thereon
at a rate per annum equal to the Default Rate shall be payable by the Debtor to
the Secured Party on demand and such reimbursement obligation shall be secured
hereby.
4.6 Delivery of Instruments. If any Instrument shall at any time
-----------------------
comprise any portion of the Collateral, the Debtor shall within 10 days notify
the Secured Party thereof, and promptly deliver such Instrument to the Secured
Party appropriately indorsed or
B-12
assigned or to the order of the Secured Party or in such other manner as shall
be satisfactory to the Secured Party.
4.7 Delivery of Chattel Paper. If Chattel Paper shall at any time
-------------------------
comprise any portion of the Collateral, the Debtor shall within 10 days notify
the Secured Party thereof, and promptly deliver such Chattel Paper to the
Secured Party.
4.8 Receivables. 4.9 (a) The Debtor shall perform in all
-----------
material respects all of its obligations with respect to the Receivables.
(b) The Debtor shall not amend, modify, terminate or waive any
provision of any Receivable in any manner which could reasonably be expected to
materially adversely affect the aggregate value of such Receivable as
Collateral. Other than (i) in the ordinary course of business as generally
conducted by it over a period of time and (ii) while no Default or Event of
Default shall have occurred and be continuing, the Debtor shall not (w) grant
any extension or renewal of the time of payment of any Receivable, (x)
compromise or settle any dispute, claim or legal proceeding with respect to any
Receivable for less than the total unpaid balance thereof, (y) release, wholly
or partially, any Person liable for the payment thereof, or (z) allow any credit
or discount thereon.
(c) The Debtor shall use its reasonable efforts (including,
without limitation, prompt and diligent exercise of each material right it may
have under any Receivable (other than any right of termination)) to cause to be
collected from each Account Debtor, as and when due (including, without
limitation, amounts which are delinquent, such amounts to be collected in
accordance with the Debtor's past practice and ordinary course of business and
generally accepted lawful collection procedures) any and all amounts owing under
or on account of any Receivable, and apply all collected amounts to the
outstanding balance of such Receivable immediately upon receipt thereof. The
reasonable costs of collection, whether incurred by the Debtor or the Secured
Party shall be borne by the Debtor and if incurred by the Secured Party shall be
reimbursed, together with interest thereon at a rate equal to the Default Rate
to the Secured Party upon demand and such reimbursement obligation shall be
secured hereby.
(d) Upon the occurrence of an Event of Default, the Debtor shall
establish such lock-box arrangements for the collection of Receivables as the
Secured Party may require in its sole discretion.
B-13
4.10 Contracts.
---------
4.11 (a) The Debtor shall perform in all material respects all of its
material obligations under each Contract.
(b) The Debtor shall deliver promptly to the Secured Party a
copy of each material demand, notice or document received by it relating in any
way to any Contract.
(c) Without the prior written consent of the Secured Party, the
Debtor shall not amend, modify, terminate or supplement any provision of any
Contract or compromise or settle any dispute, claim or legal proceeding with
respect to any Contract, in any such case in any manner which could reasonably
be expected to materially adversely affect the value of such Contract as
Collateral and shall not terminate any Contract. Each such permitted amendment,
modification, termination, supplement, compromise, or settlement shall be in
writing, a copy of which shall be delivered promptly to the Secured Party.
(d) The Debtor shall promptly and diligently exercise each
material right it may have under any Contract (except the right of termination).
All costs and expenses in connection therewith, whether incurred by the Debtor
or the Secured Party shall be borne by the Debtor and if incurred by the Secured
Party shall be reimbursed, with interest thereon at the rate of equal interest
to the Default Rate, upon demand by the Secured Party and such obligation to
reimburse shall be secured hereby.
4.12 Warehouse Receipts Non-negotiable. The Debtor agrees that if
---------------------------------
any warehouse receipt or receipt in the nature of a warehouse receipt or other
Document is issued with respect to any of its Inventory, such warehouse receipt
or receipt in the nature thereof or other Document shall not be "negotiable" (as
such term is used in Section 7-104 of the UCC or under other relevant law).
ARTICLE V
POWER OF ATTORNEY
The Debtor hereby irrevocably constitutes and appoints the Secured
Party and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of the Debtor and in the name of the Debtor or in its own
name, from time to time in the Secured Party's discretion, for the purpose of
carrying out the
B-14
terms of this Security Agreement, to take any and all appropriate action by any
technologically available means, which may include, without limitation, any form
of electronic data transmission, and to execute in any appropriate manner, which
may include, without limitation, using any symbol that the Secured Party may
adopt to signify the Debtor's intent to authenticate, any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Security Agreement. Without in any way affecting the validity of any
action taken pursuant to the foregoing, the Secured Party hereby agrees to
provide the Debtor three (3) days' prior written notice prior to exercising any
powers pursuant to the foregoing power of attorney.
The Debtor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
ARTICLE VI
REMEDIES; RIGHTS UPON DEFAULT
6.1 Rights and Remedies Generally. If an Event of Default shall
-----------------------------
occur and be continuing, then and in every such case, the Secured Party shall
have all the rights of a secured party under the UCC, shall have all rights now
or hereafter existing under all other applicable laws, and, subject to any
mandatory requirements of applicable law then in effect, shall have all the
rights set forth in this Security Agreement and all the rights set forth with
respect to the Collateral or this Security Agreement in any other agreement
between the parties.
6.2 Assembly of Collateral. If an Event of Default shall occur and
----------------------
be continuing, upon five days notice to the Debtor, the Debtor shall, at its own
expense, assemble the Collateral (or from time to time any portion thereof) and
make it available to the Secured Party at any place or places designated by the
Secured Party which is reasonably convenient to both parties.
6.3 Disposition of Collateral. The Secured Party will give the
-------------------------
Debtor reasonable notice of the time and place of any public sale of the
Collateral or any part thereof or of the time after which any private sale or
any other intended disposition thereof is to be made. The Debtor agrees that the
requirements of reasonable notice to it shall be met if such notice is mailed,
postage prepaid to its address specified in Section 9.3 of the Credit Agreement
(or such other address that the Debtor may provide to the Secured Party in
writing)
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at least ten (10) days before the time of any public sale or after which any
private sale may be made.
6.4 Recourse. The Debtor shall remain liable for any deficiency if
--------
the proceeds of any sale or other disposition of the Collateral are insufficient
to satisfy the Secured Obligations. The Debtor shall also be liable for all
expenses of the Secured Party incurred in connection with collecting such
deficiency, including, without limitation, the reasonable fees and disbursements
of any attorneys employed by the Secured Party to collect such deficiency.
6.5 Expenses; Attorneys Fees. The Debtor shall reimburse the Secured
------------------------
Party for all its expenses in connection with the exercise of its rights
hereunder, including, without limitation, all reasonable attorneys' fees and
legal expenses incurred by the Secured Party. All such expenses shall be
secured hereby.
6.6 Limitation on Duties Regarding Preservation of Collateral.
----------------------------------------------------------
6.7 (a) The Secured Party's sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its possession, under Section 9-
207 of the UCC or otherwise, shall be to deal with it in the same manner as the
Secured Party deals with similar property for its own account.
(b) The Secured Party shall have no obligation to take any steps
to preserve rights against prior parties to any Collateral.
(c) Neither the Secured Party nor any of its directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon all or any part of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of the Debtor or otherwise.
ARTICLE VII
SPECIAL PROVISIONS REGARDING RECEIVABLES AND CONTRACTS
7.1 Debtor Remains Liable under Receivables and Contracts. Anything
-----------------------------------------------------
herein to the contrary notwithstanding (including without limitation the grant
of any rights to the Secured Party), the Debtor shall remain liable under each
of the Receivables and Contracts to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise to each such Receivable or Contract.
The Secured Party shall not have any obligation or liability under any
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Receivable (or any agreement giving rise thereto) or Contract by reason of or
arising out of this Security Agreement or the receipt by the Secured Party of
any payment relating to such Receivable or Contract pursuant hereto, nor shall
the Secured Party be obligated in any manner to perform any of the obligations
of the Debtor under or pursuant to any Receivable (or any agreement giving rise
thereto) or under or pursuant to any Contract, to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party under any Receivable (or any
agreement giving rise thereto) or under or pursuant to any Contract, to present
or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to it or to which it may
be entitled at any time or times.
7.2 Notice to Account Debtors and Contracting Parties. At any time
-------------------------------------------------
while an Event of Default shall have occurred and be continuing, the Secured
Party may, and upon request of the Secured Party the Debtor shall, notify
Account Debtors and parties to the Contracts that the Accounts and the Contracts
have been assigned to the Secured Party and that payments in respect thereof
shall be made directly to the Secured Party. The Secured Party may in its own
name or in the name of others communicate with Account Debtors and parties to
the Contracts to verify with them to its satisfaction the existence, amount and
terms of any Receivables or Contracts.
7.3 Collections on Receivables and Contracts. The Secured Party
----------------------------------------
hereby authorizes the Debtor to collect the Receivables and Contracts, subject
to the Secured Party's direction and control, and the Secured Party may curtail
or terminate said authority at any time and itself, or by its agents, collect
all Receivables and amounts owing under Contracts. If required by the Secured
Party at any time, any payments of Receivables and Contracts, when collected by
the Debtor, shall be forthwith (and, in any event, within two Business Days)
delivered by the Debtor to the Secured Party in the exact form received, duly
indorsed by the Debtor to the Secured Party if required, for deposit in the
Collateral Account, and, until so turned over, shall be held by the Debtor in
trust for the Secured Party, segregated from other funds of the Debtor. All
Proceeds, while held by the Secured Party (or by the Debtor in trust for the
Secured Party) shall continue to be Collateral securing for all of the Secured
Obligations and shall not constitute payment thereof until applied as
hereinafter provided.
B-17
ARTICLE VIII
SPECIAL PROVISIONS CONCERNING TRADEMARKS
8.1 Additional Representations and Warranties. Debtor represents and
-----------------------------------------
warrants that, as of the Closing Date, it is the true and lawful exclusive owner
of all right, title and interest in and to or otherwise has the right to use the
registered Marks listed in Schedule III hereto for Debtor and that said listed
Marks constitute all the marks and applications for marks registered in the
United States Patent and Trademark Office that Debtor presently owns or uses in
connection with its business. Debtor represents and warrants that it owns or is
licensed to use all of the Marks that it uses. Debtor further warrants that it
has no Knowledge of any third-party claim that any aspect of Debtor's present or
contemplated business operations infringes or will infringe any trademark,
service ▇▇▇▇ or trade name in any respect which could reasonably be expected to
lead to a Material Adverse Effect. Debtor represents and warrants that it is
the beneficial and record owner of all registrations and applications listed in
Schedule III hereto and that said registrations are valid, subsisting and have
not been cancelled, and that Debtor has no Knowledge of any third-party claim
that any of said registrations is invalid or unenforceable in any material
respect. Debtor represents and warrants that the recordation of the Assignment
of Security Interest in United States Trademarks and Patents in the form of
Exhibit I hereto in the United States Patent and Trademark Office, together with
filings on Form UCC-l pursuant to this Agreement will be effective, under
federal law, to perfect the security interest granted to the Secured Party in
the United States Marks covered by this Agreement. Debtor agrees to execute an
Assignment of Security Interest in United States Trademarks and Patents in the
form attached hereto as Exhibit I and hereby grants to the Secured Party an
absolute power of attorney to sign, upon the occurrence and during the
continuance of an Event of Default, any document which may be required
(including, without limitation, those required by the United States Patent and
Trademark Office) in order to effect (subject to Article VI) an absolute
assignment of all right, title and interest in each ▇▇▇▇, and record the same.
8.2 Licenses and Assignments. Other than the license agreements
------------------------
listed on Schedule VI hereto and any extensions or renewals thereof permitted by
the Credit Agreement, Debtor hereby agrees not to divest itself of any right
under any ▇▇▇▇ absent prior written approval of the Secured Party (other than as
may reasonably be necessary in the ordinary course of the Debtor's business, for
fair value to the Debtor).
B-18
8.3 Infringements. Debtor agrees, promptly upon acquiring Knowledge
-------------
thereof, to notify the Secured Party in writing of the name and address of, and
to furnish such pertinent information that may be available with respect to, any
party who, in any material respect, may be infringing or diluting or otherwise
violating any of Debtor's rights in and to any material ▇▇▇▇, or with respect to
any party claiming that Debtor's use of any material ▇▇▇▇ violates in any
material respect any property right of that party. Debtor further agrees,
unless otherwise agreed by the Secured Party, diligently to prosecute any Person
infringing any material ▇▇▇▇.
8.4 Preservation of Marks. Debtor agrees to use its material Marks
---------------------
in interstate or foreign commerce during the time in which this Agreement is in
effect, sufficiently to preserve such material Marks as trademarks or service
marks under the laws of the United States or the relevant foreign jurisdictions.
8.5 Maintenance of Registration. Unless Debtor determines, in its
---------------------------
reasonable business judgment, that the maintenance of such ▇▇▇▇ is no longer
necessary or desirable in the conduct of its business, Debtor shall, at its own
expense, diligently process all documents required by the Trademark Act of 1946,
15 U.S.C. (S)(S) 1051 et seq. to maintain trademark registrations, including but
------
not limited to affidavits of use and applications for renewals of registration
in the United States Patent and Trademark Office for all of its registered
material Marks pursuant to 15 U.S.C. (S)(S) 1058(a), 1059 and 1065 (or the
equivalent laws of Canada or any other relevant foreign jurisdictions), and
shall pay all fees and disbursements in connection therewith and shall not
abandon any such filing of affidavit of use or any such application of renewal
prior to the exhaustion of all administrative and judicial remedies without
prior written consent of the Secured Party. Debtor agrees to notify the Secured
Party six (6) months prior to the dates on which the affidavits of use or the
applications for renewal registration are due with respect to any material ▇▇▇▇
that the affidavits of use or the renewal is being processed or being abandoned,
as the case may be. Unless Debtor determines, in its reasonable business
judgment, that the maintenance of such material ▇▇▇▇ is no longer necessary or
desirable in the conduct of its business, Debtor shall, at its own expense,
diligently process all documents required under any foreign law to maintain
trademark registration of its material Marks under such foreign law and shall
pay all fees and disbursements in connection therewith and shall not abandon any
such documents prior to the exhaustion of all administrative and judicial
remedies without the prior written consent of the Secured Party. Debtor agrees
to notify the Secured Party six (6) months prior to the dates on which any
application for renewal registration is due with respect to any foreign ▇▇▇▇.
B-19
8.6 Future Registered Marks. If any ▇▇▇▇ registration issues
-----------------------
hereafter to Debtor as a result of any application now or hereafter pending
before the United States Patent and Trademark Office or any similar foreign
trademark office, within 30 days of receipt of such certificate, Debtor shall
deliver to the Secured Party (i) a copy of such certificate, (ii) a grant of
security in such ▇▇▇▇, to the Secured Party and at the expense of Debtor,
confirming the grant of security in such ▇▇▇▇ to the Secured Party hereunder,
the form of such confirmatory grant to be substantially the same as the form
hereof or in such other form as may be reasonably satisfactory to the Secured
Party and (iii) an executed Assignment of Security Interest in United States
Trademarks and Patents in the form of Exhibit I hereto.
8.7 Remedies. If an Event of Default shall occur and be continuing,
--------
the Secured Party may, after purchase pursuant to Article VI, take any or all of
the following actions: (i) declare the entire right, title and interest of
Debtor in and to each of the Marks, together with all trademark rights and
rights of protection to the same, vested in the Secured Party for the benefit of
the Banks, in which event such rights, title and interest shall immediately
vest, in the Secured Party for the benefit of the Banks, and the Secured Party
shall be entitled to exercise the power of attorney referred to in Section 8.1
hereof to execute, cause to be acknowledged and notarized and record said
absolute assignment with the applicable agency; (ii) take and use or sell the
Marks and the goodwill of Debtor's business symbolized by the Marks and the
right to carry on the business and use the assets of Debtor in connection with
which the Marks have been used; and (iii) direct Debtor to refrain, in which
event Debtor shall refrain, from using the Marks in any manner whatsoever,
directly or indirectly, and, if requested by the Secured Party, execute such
other and further documents that the Secured Party may request to further
confirm this and to transfer ownership of the Marks and registrations and any
pending trademark application in the United States Patent and Trademark Office
or any similar foreign trademark office to the Secured Party.
ARTICLE IX
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
9.1 Additional Representations and Warranties. Debtor represents and
-----------------------------------------
warrants that, as of the Closing Date, it is the true and lawful license holder
or owner of all rights in (i) all material Trade Secrets and Proprietary
Information necessary to operate the business of Debtor, (ii) the Patents listed
in Schedule IV hereto for
B-20
Debtor and that said Patents constitute all the patents and applications for
patents that Debtor owns on the date hereof and (iii) the Copyrights listed in
Schedule V hereto for Debtor and that said Copyrights constitute all
registrations of copyrights and applications for copyright registrations that
Debtor owns on the date hereof. Debtor further warrants that, except as
otherwise disclosed in writing by the Debtor under the Credit Agreement, it has
no Knowledge of any third-party claim that any aspect of Debtor's present or
contemplated business operations infringes or will infringe any patent or any
copyright or Debtor has misappropriated any Trade Secret or Proprietary
Information which claim could reasonably be expected to result in a Material
Adverse Effect. Debtor represents and warrants that the recordation of the
Assignment of Security Interest in United States Trademarks and Patents in the
form of Exhibit II hereto in the United States Patent and Trademark Office and
the filing of the Assignment of Security Interest in United States Copyrights in
the form attached hereto as Exhibit III in the United States Copyright Office,
together with filings on Form UCC-l pursuant to this Agreement will be
effective, under federal law, to perfect the security interest granted to the
Secured Party in the United States Patents and United States Copyrights covered
by this Agreement. Debtor agrees to execute an Assignment of Security Interest
in United States Copyrights in the form attached hereto as Exhibit III and
hereby grants to the Secured Party an absolute power of attorney to sign, upon
the occurrence and during the continuance of an Event of Default, any document
which may be required (including, without limitation, those required by the
United States Patent and Trademark Office or the United States Copyright Office)
in order to effect (subject to Article VI) an absolute assignment of all right,
title and interest in each Patent and Copyright, and to record the same.
9.2 Licenses and Assignments. Other than the license agreements
------------------------
listed on Schedule VI hereto and any extensions or renewals thereof or other
asset sales permitted by the Credit Agreement, Debtor hereby agrees not to
divest itself of any right under any Patent, Copyright, Trade Secret or
Proprietary Information absent prior written approval of the Secured Party
(other than as may reasonably be necessary in the ordinary course of the
Debtor's business, for fair value to the Debtor).
9.3 Infringements. Debtor agrees, promptly upon acquiring Knowledge
-------------
thereof, to furnish the Secured Party in writing with all pertinent information
available to Debtor with respect to any infringement, contributing infringement
or active inducement to infringe in any material respect any material Patent or
Copyright or to any claim that the practice of any material Patent or the use of
any material Copyright violates in any material respect any property
B-21
right of a third party, or with respect to any misappropriation of any material
Trade Secret or any claim that practice of any material Trade Secret violates in
any material respect any property right of a third party. Debtor further
agrees, absent direction of the Secured Party to the contrary, diligently to
prosecute any Person infringing any Patent or Copyright or any Person
misappropriating any Trade Secret.
9.4 Maintenance of Patents. At its own expense, Debtor shall make
----------------------
timely payment of all post-issuance fees required pursuant to 35 U.S.C. S 41 (or
the equivalent laws of a foreign jurisdiction) to maintain in force rights under
each material Patent.
9.5 Prosecution of Patent Application. At its own expense, Debtor
---------------------------------
shall diligently prosecute all applications for material Patents for Debtor and
shall not abandon any such application prior to exhaustion in good faith of all
reasonable administrative and judicial remedies, unless no Default or Event of
Default has occurred and is continuing and the Debtor determines, in good faith,
that abandoning or settling such claim is in the best interest of the Debtor.
9.6 Other Patents and Copyrights. Within 30 days of the acquisition
----------------------------
or issuance of a Patent, registration of a Copyright, or acquisition of a
registered Copyright, the Debtor shall deliver to the Secured Party (i) a copy
of said Copyright or certificate or registration of said Patents, as the case
may be, (ii) a grant of security as to such Patent or Copyright, as the case may
be, to the Secured Party and at the expense of Debtor, confirming the grant
thereof hereunder, the form of such confirmatory grant to be substantially the
same as the form hereof or in such other form as may be reasonably satisfactory
to the Secured Party and (iii) an executed Assignment of Security Interest in
United States Trademarks and Patents in the form of Exhibit II hereto or
Assignment of Security Interest in United States Copyrights in the form of
Exhibit III hereto, as applicable.
9.7 Remedies. If an Event of Default shall occur and be continuing,
--------
the Secured Party may, after purchase pursuant to Article VI, take any or all of
the following actions: (i) declare the entire right, title, and interest of
Debtor in each of the Patents and Copyrights vested in the Secured Party for
the benefit of the Banks, in which event such right, title, and interest shall
immediately vest in the Secured Party for the benefit of the Secured Banks, in
which case the Secured Party shall be entitled to exercise the power of attorney
referred to in Section 9.1 hereof to execute, cause to be acknowledged and
notarized and to record said absolute assignment with the applicable agency;
(ii) take and practice or sell the Patents and Copyrights; and (iii) direct
Debtor to refrain, in which event Debtor shall refrain, from practicing the
Patents and using the Copyrights
B-22
directly or indirectly, and Debtor shall execute such other and further
documents as the Secured Party may reasonably request further to confirm this
and to transfer ownership of the Patents and Copyrights to the Secured Party for
the benefit of the Banks.
ARTICLE X
COLLATERAL AND DEPOSIT ACCOUNTS
10.1 Collateral Account. There is hereby established with Secured
------------------
Party the Collateral Account. The Collateral Account shall be under the sole
and exclusive dominion and control of the Secured Party and the Debtor shall
have no rights with respect to the Collateral Account except as specifically set
forth below with regard to determination of the nature of investments to be made
with amounts credited to the Collateral Account. Without limiting the
generality of the foregoing, the Debtor shall have no right of withdrawal or
transfer from the Collateral Account.
10.2 Deposit of Proceeds. There shall be deposited in the Collateral
-------------------
Account from time to time the cash proceeds (as defined in Section 9-306(1) of
the UCC) of any of the Collateral (including insurance proceeds thereon)
required to be delivered to the Secured Party pursuant hereto. All amounts and
investments and other items credited to the Collateral Account from time to time
shall constitute Collateral hereunder and shall not constitute payment of the
Secured Obligations until applied as hereinafter provided. So long as no
Default or Event of Default has occurred and is continuing, the Secured Party
shall deposit the amounts credited to the Collateral Account to the account of
the Debtor. At any time following the occurrence and during the continuance of
an Event of Default, the Secured Party may in its discretion apply or cause to
be applied (subject to collection) the balance from time to time outstanding to
the credit of the Collateral Account to the payment of the Secured Obligations
in the manner specified herein.
10.3 Investment of Balance in Collateral Account. Amounts credited
-------------------------------------------
to the Collateral Account shall be invested from time to time in such Permitted
Investments as the Debtor (or, after the occurrence and during the continuance
of a Default or Event of Default, the Secured Party) shall determine, which
Permitted Investments shall be held in the name and be under the control of the
Secured Party.
B-23
10.4 Deposit Accounts.
----------------
(a) The Debtor shall not, nor shall it permit any Subsidiary to,
maintain any deposit, operating or other bank account except (a) for those
accounts identified in Schedule I to the Security Agreement (which Debtor
represents and warrants constitutes a true and correct list of all such
accounts currently maintained by the Debtor and each of its Subsidiaries),
and (b) additional accounts identified in writing to the Secured Party,
maintained with financial institutions reasonably acceptable to the Secured
Party and otherwise subject to the terms of this Security Agreement,
including (i) the execution and delivery of the Notice and Bank Agreement
for Deposit Accounts in the form of Exhibit IV hereto or (ii) the execution
and delivery of a bank account agreement in form and substance satisfactory
to the Secured Party, as applicable in the jurisdiction where such account
is maintained in order to perfect the Secured Party's security interest
therein.
(b) Debtor represents and warrants that the execution and delivery of
the Notice and Bank Agreement for Deposit Accounts in the form of Exhibit
IV hereto has been executed by and delivered to each relevant party with
respect to the accounts listed in Schedule I hereto and will be effective
to perfect the security interest granted to the Secured Party in the
Deposit Accounts covered by this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Indemnity. The Debtor agrees to indemnify, reimburse and hold
---------
the Secured Party and its officers, directors, employees, representatives and
agents ("Indemnitees") harmless from any and all liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, suits, costs or expenses
or disbursements (including reasonable attorneys' fees and expenses) for
whatsoever kind or nature (other than those relating to or arising out of
willful misconduct or grossly negligent acts or omissions of the Secured Party
or its agents or employees) which may be imposed on, asserted against or
incurred by any of the Indemnitees in any way relating to or arising out of this
Security Agreement or the transactions contemplated hereby. The obligations of
the Debtor under this Section shall be secured hereby and shall survive payment
and performance or discharge of the Secured Obligations and the termination of
this Security Agreement.
B-24
11.2 Governing Law. THIS SECURITY AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
11.3 Notices. Except as otherwise expressly provided herein, all
-------
notices, requests and demands to or upon the respective parties hereto to be
effective shall be governed by the provisions of Section 9.3 of the Credit
Agreement.
11.4 Successors and Assigns. This Security Agreement shall be
----------------------
binding upon and inure to the benefit of the Debtor, the Secured Party, all
future holders of the Secured Obligations and their respective successors and
assigns, except that the Debtor may not assign or transfer any of its rights or
obligations under this Security Agreement without the prior written consent of
the Secured Party (except as otherwise permitted under the Credit Agreement).
11.5 Waivers and Amendments. None of the terms or provisions of this
----------------------
Security Agreement may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by the party against whom enforcement is
sought. In the case of any waiver, the Debtor and the Secured Party shall be
restored to their former position and rights hereunder and under the outstanding
Secured Obligations, and any Default or Event of Default waived shall be deemed
to be cured and not continuing, but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereon.
11.6 No Waiver; Remedies Cumulative. No failure or delay on the part
------------------------------
of the Secured Party in exercising any right, power or privilege hereunder and
no course of dealing between the Debtor and the Secured Party shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Secured Party
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Secured Party would otherwise have on any
future occasion. The rights and remedies herein expressly provided are
cumulative and may be exercised singly or concurrently and as often and in such
order as the Secured Party deems expedient and are not exclusive of any rights
or remedies which the Secured Party would otherwise have whether by security
agreement or now or hereafter existing under applicable law. No notice to or
demand on the Debtor in any case shall entitle the Debtor to any other or
further notice or demand in similar or other circumstances or
B-25
constitute a waiver of the rights of the Secured Party to any other or future
action in any circumstances without notice or demand.
11.7 Termination; Release. When the Secured Obligations have been
--------------------
indefeasibly paid and performed in full this Security Agreement shall terminate,
and the Secured Party, at the request and sole expense of the Debtor, will
execute and deliver to the Debtor the proper instruments (including UCC
termination statements) acknowledging the termination of this Security
Agreement, and will duly assign, transfer and deliver to the Debtor, without
recourse, representation or warranty of any kind whatsoever, such of the
Collateral as may be in possession of the Secured Party and has not theretofore
been disposed of, applied or released.
11.8 Headings Descriptive. The headings of the several Sections and
--------------------
subsections of this Security Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Security Agreement.
11.9 Severability. In case any provision in or obligation under this
------------
Security Agreement or the Secured Obligations shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
11.10 Authority of Secured Party. By its execution of this Security
--------------------------
Agreement, the Secured Party acknowledges and agrees that any agreement,
instrument or document executed or action taken by it with respect to this
Security Agreement, including without limitation the execution of any financing
statement, discharge, partial release or amendment to the Security Agreement,
shall be conclusive evidence in favor of every person relying thereon or
claiming thereunder that at the time of the delivery thereof or the taking of
any such action, the Secured Party was authorized, empowered and directed to do
so by all the Lenders or the Required Lenders, as the case may be. Any person
may always rely without further inquiry on a certificate signed by the Secured
Party as to its authority to act on behalf of the Lenders and the Required
Lenders in connection with this Security Agreement.
B-26
IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this
Security Agreement to be duly executed and delivered as of the date first above
written.
SYNBIOTICS CORPORATION
BY:________________________
Name:
Title:
▇-▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
BY:________________________
Name:
Title
BY:________________________
Name:
Title:
B-28
SCHEDULE I
DEPOSIT ACCOUNTS
----------------
Account Number Account Name
-------------- ------------
1. 01692-02383 Bank of America
- checking account
2. ▇▇▇▇▇-▇▇▇▇▇ Bank of America
- corporate account
3. 01604-13638 Union Bank of California
- payroll account
4. ▇▇▇▇▇-▇▇▇▇▇ Bank of America
- flex spending account
5. 01604-13646 Union Bank of California
- money market account
B-29
SCHEDULE II
INVENTORY & EQUIPMENT
---------------------
1. ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2. ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
3. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
4. ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
B-30
SCHEDULE III
MARKS
-----
Pending
-------
ICT Gold FeLV
Classic Corona
Classic Feline
DNA Technologies
Leukassay/FeLV
Progestassay
Issued
------
Lab-Ez
ICT Gold HW
ICT Gold
Panavac
Sentryvac DHP
Sentryvac
Lymecheck
Assure/CH
Assure/FeLV
Assure
Koliimune
Virachek
Synbiotics
Dirochek
CRF
Sentrypar
Panacine-L
Ovassay
Leukassay-B
Fungassay
Panacine
MAB 231
B-31
SCHEDULE IV
PATENTS
-------
Patent Number
-------------
5470711
5460783
5246831
5155023
5079142
4923798
4859610
4853325
4828981
4789631
4703001
▇-▇▇
▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇
----------
▇▇▇▇
▇-▇▇
SCHEDULE VI
LICENSES AND AGREEMENTS
-----------------------
None
B-34
EXHIBIT I
to Security Agreement
TRADEMARK SECURITY AGREEMENT
----------------------------
This TRADEMARK SECURITY AGREEMENT (this "Agreement"), dated as of July 9,
1997, is made between SYNBIOTICS CORPORATION, a California corporation (the
"Grantor"), and BANQUE PARIBAS, as agent (together with any successor(s) thereto
in such capacity, the "Agent") for each of the Banks;
-----
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to a Credit Agreement, dated as of July 9, 1997 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Credit Agreement") among the Grantor, the various financial
----------------
institutions as are or may become parties thereto (each, individually, a "Bank",
----
and collectively, the "Banks") and the Agent, the Banks have extended
-----
Commitments to make Loans to the Grantor;
WHEREAS, in connection with the Credit Agreement, the Grantor has executed
and delivered a Security Agreement, dated as of July 9, 1997 (as amended,
supplemented, amended and restated or otherwise modified from time to time, the
"Security Agreement");
------------------
WHEREAS, as a condition precedent to the making of the Loans under the
Credit Agreement, the Grantor is required to execute and deliver this Agreement
and to grant to the Agent a continuing security interest in all of the Trademark
Collateral (as defined below) to secure all Obligations; and
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and in order to induce the Banks to make Loans to the
Grantor pursuant to the Credit Agreement, the Grantor agrees, for the benefit of
the Banks, as follows:
B-35
Section 1. Definitions. Unless otherwise defined herein or the
-----------
context otherwise requires, terms used in this Agreement, including its preamble
and recitals, have the meanings provided (or incorporated by reference) in the
Security Agreement.
Section 2. Grant of Security Interest. For good and valuable
--------------------------
consideration, the receipt and sufficiency of which are hereby acknowledged, in
order to secure all of the Obligations, the Grantor does hereby mortgage, pledge
and hypothecate to the Agent, and grant to the Agent on behalf of and for the
ratable benefit of each Bank a security interest in, all right, title and
interest of Grantor, to the extent assignable for security interest purposes, in
and to all of the following property (collectively the "Trademark Collateral"),
---------------------
whether now owned or hereafter acquired or existing by it:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, service marks,
certification marks, collective marks, logos, other source of business
identifiers, prints and labels on which any-of the foregoing have appeared or
appear, designs and general intangibles of a like nature (all of the foregoing
items in this clause (a) being collectively called a "Trademark"), now existing
----------
anywhere in the world or hereafter adopted or acquired, whether currently in use
or not, all registrations and recordings thereof and all applications in
connection therewith, whether pending or in preparation for filing, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any office or agency of the United States of America or
any State thereof or any foreign country, including without limitation those
referred to in Item A of Attachment l attached hereto and made a part hereof;
------ ------------
(b) all Trademark licenses, including each Trademark license
referred to in Item B of Attachment l attached hereto;
------ ------------
(c) all reissues, extensions or renewals of any of the items
described in clauses (a) and (b);
----------- ---
(d) all of the goodwill of the business connected with the use
of, and symbolized by the items described in, clauses (a) and (b); and
----------- ---
B-36
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by the Grantor against third parties for past, present or
future infringement or dilution of any Trademark, Trademark registration or
Trademark license, including any Trademark, Trademark registration or Trademark
license referred to in Item A and Item B of Attachment l attached hereto, or for
------ ------ ------------
any injury to the goodwill associated with the use of any such Trademark or for
breach or enforcement of any Trademark license.
Section 3. Security Agreement. This Agreement has been executed and
------------------
delivered by the Grantor for the purpose of registering the security interest of
the Agent in the Trademark Collateral with the United States Patent and
Trademark Office and corresponding offices in other countries of the world. The
security interest granted hereby has been granted as a supplement to, and not in
limitation of, the security interest granted to the Agent for its benefit and
the benefit of each Bank under the Security Agreement. The Security Agreement
(and all rights and remedies of the Agent and each Bank thereunder) shall remain
in full force and effect in accordance with its terms.
Section 4. Release of Security Interest. Upon payment in full in
----------------------------
cash and full performance of all Obligations and the termination of all
Commitments, the Agent shall, at the Grantor's written request and at the
expense of the Grantor, execute and deliver to the Grantor all instruments and
other documents as may be necessary or proper to release the lien on and
security interest in the Trademark Collateral which has been granted hereunder
as fully as if such security interest had not been made, subject to any
disposition of all or any part thereof which may have been made by the Agent
pursuant to the Security Agreement.
Section 5. Acknowledgment. The Grantor does hereby further
--------------
acknowledge and affirm that the rights and remedies of the Agent with respect to
the security interest in the Trademark Collateral granted hereby are more fully
set forth in the Security Agreement, the terms and provisions of which
(including the remedies provided for therein) are incorporated by reference
herein as if fully set forth herein.
Section 6. Loan Document etc. This Agreement is a Loan Document
-----------------
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be con-
B-37
strued, administered and applied in accordance with the terms and provisions of
the Credit Agreement.
Section 7. Counterparts. This Agreement may be executed by the
------------
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
B-38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
SYNBIOTICS CORPORATION
By ________________________________________
Name:
Title:
BANQUE PARIBAS
as Agent
By ________________________________________
Name:
Title:
By ________________________________________
Name:
Title:
B-39
ATTACHMENT I
to Trademark
Security Agreement
Item A. Trademarks
----------
Registered Trademarks
---------------------
*Country Trademark Registration No. Registration Date
-------- --------- ---------------- -----------------
Pending Trademark Applications
------------------------------
*Country Trademark Serial No. Filing Date
-------- --------- ---------- -----------
Trademark Applications in Preparation
-------------------------------------
Expected Products/
*Country Trademark Docket No. Filing Date Services
-------- --------- ---------- ----------- --------
Item B. Trademark Licenses
------------------
*Country or Effective Expiration
Territory Trademark Licensor Licensee Date Date
--------- --------- -------- -------- ---- ----
_______________________
* List items related to the United States first for ease of recordation.
List items related to other countries next, grouped by country and in
alphabetical order by country name.
B-40
EXHIBIT II
to Security Agreement
PATENT SECURITY AGREEMENT
-------------------------
This PATENT SECURITY AGREEMENT (this "Agreement"), dated as of July 9,
---------
1997, is made between SYNBIOTICS CORPORATION, a California corporation (the
"Grantor"), and BANQUE PARIBAS, as agent (together with any successor(s) thereto
in such capacity, the "Agent") for each of the Banks;
-----
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to a Credit Agreement, dated as of July 9, 1997 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Credit Agreement"), among the Grantor, the various financial
----------------
institutions as are or may become parties thereto (each, individually, a "Bank",
----
and collectively, the "Banks") and the Agent, the Banks have extended
Commitments to make Loans to the Grantor;
WHEREAS, in connection with the Credit Agreement, the Grantor has executed
and delivered a Security Agreement, dated as of July 9, 1997 (as amended,
supplemented, amended and restated or otherwise modified from time to time, the
"Security Agreement");
------------------
WHEREAS, as a condition precedent to the making of the Loans under the
Credit Agreement, the Grantor is required to execute and deliver this Agreement
and to grant to the Agent a continuing security interest in all of the Patent
Collateral (as defined below) to secure all Obligations; and
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and in order to induce the Banks to make Loans to the
Grantor pursuant to the Credit Agreement, the Grantor agrees, for the benefit of
the Banks, as follows:
B-41
Section 1. Definitions. Unless otherwise defined herein or the
-----------
context otherwise requires, terms used in this Agreement, including its preamble
and recitals, have the meanings provided (or incorporated by reference) in the
Security Agreement.
Section 2. Grant of Security Interest. For good and valuable
--------------------------
consideration, the receipt and sufficiency of which are hereby acknowledged, in
order to secure all of the Obligations, the Grantor does hereby mortgage, pledge
and hypothecate to the Agent, and grant to the Agent on behalf of and for the
ratable benefit of each Bank a security interest in, all of the following
property (collectively the "Patent Collateral"), whether now owned or hereafter
-------------------
acquired or existing by it (to the extent assignable for security interest
purposes):
(a) all letters, patent registrations, patent and applications
for letters patent throughout the world, including all multinational statutory
invention registrations and patent applications in preparation for filing
anywhere in the world and including each patent and patent application referred
to in Item A of Attachment l attached hereto;
------ ------------
(b) all reissues, divisions, continuations, continuations-in-
part, extensions, renewals and reexaminations of any of the items described in
clause (a);
------ -
(c) all patent licenses, including each patent license referred
to in Item B of Attachment l attached hereto and made a part hereof; and
------ ------------
(d) all proceeds of, and rights associated with, the foregoing
(including license royalties and proceeds of infringement suits), the right to
▇▇▇ third parties for past, present or future infringements of any patent for
the full term of the patent referred to in Item A of Attachment l attached
------ ------------
hereto, and for breach or enforcement of any patent license, including any
patent license referred to in Item B of Attachment l attached hereto and made a
------ ------------
part hereof, and all rights corresponding thereto throughout the world.
Section 3. Security Agreement. This Agreement has been executed and
------------------
delivered by the Grantor for the purpose of registering the security interest of
the Agent in the Patent Collateral with the United States Patent and Trademark
Office and corresponding offices in other countries of the world. The
B-42
security interest granted hereby has been granted as a supplement to, and not in
limitation of, the security interest granted to the Agent for its benefit and
the benefit of each Bank under the Security Agreement. The Security Agreement
(and all rights and remedies of the Agent and each Bank thereunder) shall remain
in full force and effect in accordance with its terms.
Section 4. Release of Security Interest. Upon pay ment in full in
----------------------------
cash and full performance of all Obligations and the termination of all
Commitments, the Agent shall, at the Grantor's written request and at the
expense of the Grantor, execute and deliver to the Grantor all instruments and
other documents as may be necessary or proper to release the lien on and
security interest in the Patent Collateral which has been granted hereunder as
fully as if such security interest had not been made subject to any disposition
of all or any part thereof which may have been made by the Agent pursuant to the
Security Agreement.
Section 5. Acknowledgment. The Grantor does hereby further
--------------
acknowledge and affirm that the rights and remedies of the Agent with respect to
the security interest in the Patent Collateral granted hereby are more fully set
forth in the Security Agreement, the terms and provisions of which (including
the remedies provided for therein) are incorporated by reference herein as if
fully set forth herein.
Section 6. Loan Document, etc. This Agreement is a Loan Document
------------------
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be con strued, administered and applied in accordance with the
terms and provisions of the Credit Agreement.
Section 7. Counterparts. This Agreement may be executed by the
------------
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
B-43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
SYNBIOTICS CORPORATION
By________________________________
Name:
Title:
BANQUE PARIBAS,
as Agent
By________________________________
Name:
Title:
By________________________________
Name:
Title:
B-44
ATTACHMENT 1
to Patent
Security Agreement
Item A. Patents
-------
Issued Patents
--------------
*Country Patent No. Issue Date Inventor(s) Title
-------- ---------- ---------- ----------- -----
Pending Patent Applications
---------------------------
*Country Serial No. Filing Date Inventor(s) Title
-------- ---------- ----------- ----------- -----
Patent Applications in Preparation
----------------------------------
Expected
*Country Docket No. Filing Date Inventor(s) Title
-------- ---------- ----------- ----------- -----
Item B. Patent Licenses
---------------
*Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
--------- -------- -------- ---- ---- ------
______________________
* List items related to the United States first for ease of recordation.
List items related to other countries next, grouped by country and in
alphabetical order by country name.
B-45
EXHIBIT III
to Security Agreement
COPYRIGHT SECURITY AGREEMENT
----------------------------
This COPYRIGHT SECURITY AGREEMENT (this "Agreement"), dated as of July 9,
---------
1997, is made between SYNBIOTICS CORPORATION, a California corporation (the
"Grantor"), and BANQUE PARIBAS, as agent (together with any successor(s) thereto
in such capacity, the "Agent") for each of the Banks;
-----
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to a Credit Agreement, dated as of July 9, 1997 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Credit Agreement") among the Grantor, the various financial
----------------
institutions as are or may become parties thereto (each, individually, a "Bank",
----
and collectively, the "Banks") and the Agent, the Banks have extended
-----
Commitments to make Loans to the Grantor;
WHEREAS, in connection with the Credit Agreement, the Grantor has executed
and delivered a Security Agreement, dated as of July 9, 1997 (as amended,
supplemented, amended and restated or otherwise modified from time to time, the
"Security Agreement");
------------------
WHEREAS, as a condition precedent to the making of the Loans under the
Credit Agreement, the Grantor is required to execute and deliver this Agreement
and to grant to the Agent a continuing security interest in all of the Copyright
Collateral (as defined below) to secure all Obligations; and
WHEREAS, the Grantor has duly authorized the execution, delivery and
performance of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and in order to induce the Banks to make Loans to the
Grantor pursuant to the Credit Agreement, the Grantor agrees, for the benefit of
the Banks, as follows:
B-46
Section 1. Definitions. Unless otherwise defined herein or the
-----------
context otherwise requires, terms used in this Agreement, including its preamble
and recitals, have the meanings provided (or incorporated by reference) in the
Security Agreement.
Section 2. Grant of Security Interest. For good and valuable
--------------------------
consideration, the receipt and sufficiency of which are hereby acknowledged, in
order to secure all of the Obligations, the Grantor does hereby mortgage, pledge
and hypothecate to the Agent, and grant to the Agent on behalf of and for the
ratable benefit of each Bank a security interest in, to the extent assignable
for security interest purposes, all of the following property (collectively the
"Copyright Collateral"), whether now owned or hereafter acquired or existing by
--------------------
it, being all the Copyrights, including without limitation all reproduction and
allied rights necessary for the production, distribution and exploitation of the
copyrighted works throughout the world in perpetuity, and all renewals and
changes, translations, revisions, elaborations and adaptations or
transformations of the works now made or hereafter created (including all
copyrights for semiconductor chip product mask works) of the Grantor, whether
statutory or common law, registered or unregistered, now or hereafter in force
throughout the world including all of-the Grantor's right, title and interest in
and to all copyrights registered in the United States Copyright Office or
anywhere else in the world and also including the copyrights referred to in Item
----
A of Attachment l attached hereto, and all applications for registration
- ------------
thereof, whether pending or in preparation, all copyright licenses, including
each copyright license referred to in Item B of Attachment l attached hereto and
------ ------------
made a part hereof, the right to ▇▇▇ for past, present and future infringements
of any thereof, all rights corresponding thereto throughout the world, all
extensions and renewals of any thereof and all proceeds of the foregoing,
including licenses, royalties, income, payments, claims, damages and proceeds of
suit.
Section 3. Security Agreement. This Agreement has been executed and
------------------
delivered by the Grantor for the purpose of registering the security interest of
the Agent in the Copyright Collateral with the United States Copyright Office
and corresponding offices in other countries of the world. The security
interest granted hereby has been granted as a supplement to, and not in
limitation of, the security interest granted to the Agent for its benefit and
the benefit of each
B-47
Bank under the Security Agreement. The Security Agreement (and all rights and
remedies of the Agent and each Bank thereunder) shall remain in full force and
effect in accordance with its terms.
Section 4. Release of Security Interest. Upon payment in full in
----------------------------
cash and full performance of all Obligations and the termination of all
Commitments, the Agent shall, at the Grantor's written request and at the
expense of the Grantor, execute and deliver to the Grantor all instruments and
other documents as may be necessary or proper to release the lien on and
security interest in the Copyright Collateral which has been granted hereunder
as fully as if such security interest had not been made subject to any
disposition of all or any part thereof which may have been made by the Agent
pursuant to the Security Agreement.
Section 5. Acknowledgment. The Grantor does hereby further
--------------
acknowledge and affirm that the rights and remedies of the Agent with respect to
the security interest in the Copyright Collateral granted hereby are more fully
set forth in the Security Agreement, the terms and provisions of which
(including the remedies provided for therein) are incorporated by reference
herein as if fully set forth herein.
Section 6. Loan Document, etc. This Agreement is a Loan Document
------------------
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions of the Credit Agreement.
Section 7. Counterparts. This Agreement may be executed by the
------------
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement.
B-48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the day and year first above written.
SYNBIOTICS CORPORATION
By: _____________________________
Name:
Title:
BANQUE PARIBAS,
as Agent
By: _____________________________
Name:
Title:
By: _____________________________
Name:
Title:
B-49
ATTACHMENT 1
to Copyright
Security Agreement
Item A. Copyrights/Mask Works
---------------------
Registered Copyrights/Mask Works
--------------------------------
*Country Registration No. Registration Date Author(s) Title
------- ---------------- ----------------- --------- -----
None.
Copyright/Mask Work Pending Registration Applications
-----------------------------------------------------
*Country Serial No. Filing Date Author(s) Title
------- ---------- ----------- --------- -----
None.
Copyright/Mask Work Registration Applications in Preparation
------------------------------------------------------------
Expected
*Country Docket No. Filing Date Author(s) Title
------- ---------- ----------- --------- -----
None.
Item B. Copyright/Mask Work Licenses
----------------------------
*Country or Effective Expiration Subject
Territory Licensor Licensee Date Date Matter
--------- -------- -------- ---- ---- ------
None.
_____________________
* List items related to the United States first for ease of recordation.
List items related to other countries next, grouped by country and in
alphabetical order by country name.
B-50
EXHIBIT IV
to Security Agreement
NOTICE AND BANK AGREEMENT FOR DEPOSIT ACCOUNTS
PURSUANT TO (S) 9-302 OF THE CALIFORNIA UCC
--------------------------------------------
[Date]
[Name and Address of the Bank]
Attention:
Re: Synbiotics Corporation
Ladies & Gentlemen:
Synbiotics Corporation, a California corporation (the "Corporation"),
has entered into a Security Agreement with Banque Paribas (the "Secured Party")
dated as of July 9, 1997, a copy of which is attached hereto as Exhibit A. You
are hereby notified pursuant to Section 9-302 of the Uniform Commercial Code as
in effect in the States of California (California Commercial Code Section 9302)
that the Corporation granted to the Secured Party a continuing lien on and
security interest in all of the right, title and interest of the Corporation now
or hereafter existing in, to and under the accounts listed on Exhibit B hereto
(the "Accounts") and all monies and other funds, certificates, securities, other
instruments, general intangibles, and other items, property and assets now or
hereafter credited to or received or deposited in the Accounts from time to
time, to secure the Obligations (as defined in the Security Agreement).
With respect to the Accounts, you are hereby instructed and by your
signature below hereby agree as follows:
B-51
We hereby irrevocably instruct you, and you hereby agree, that upon
receiving notice from the Secured Party substantially in the form attached
hereto as Exhibit C: (i) the name of the holder of the each Account listed in
such notice will be changed to "Banque Paribas" (or to the name of any designee
of the Secured Party specified by the Secured Party), (ii) the Secured Party
and/or its designee will have exclusive of access to and control over such
Account, and neither we nor any of our affiliates will have any control of such
Account or any access thereto, (iii) you will transfer monies on deposit in the
Account, at any time, as directed by the Secured Party, and (iv) all services to
be performed by you under this agreement will be performed by you as agent for
and on behalf of the Secured Party. We hereby agree that the Secured Party may
deliver such notice at any time during the continuation of an Event of Default.
We agree, however, to continue to pay all fees and other assessments due to you
at any time until the each applicable Account is closed.
Copies of all correspondence, notices, account statements or other
information which you are otherwise obligated to send to us (by law, agreement
or otherwise) will be sent to the Secured Party at the following address:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
You hereby acknowledge that, except pursuant to court order, monies or
other property deposited in the Accounts will not be subject to deduction,
setoff, banker's lien or any other lien, claim, encumbrance or right you may
have against us or against the Corporation.
This letter agreement and the rights and obligations of the parties
hereunder will be governed by and construed and interpreted in accordance with
the internal laws of the State of California.
This letter agreement contains the entire agreement among the parties,
and may not be altered, modified, terminated or amended in any respect, nor may
any right, power or privilege of any party hereunder be waived or released or
discharged, except upon execution by all parties hereto of a written instrument
so providing. In the event that any provision in this
B-52
letter agreement is in conflict with, or inconsistent with, any provision of the
Security Agreement or any agreement among you and the Corporation to which the
Secured Party is not a party, this letter agreement will exclusively govern and
control. Each party agrees to take all actions reasonably requested by any
other party to carry out the purposes of this letter agreement or to preserve
and protect the rights of each party hereunder.
Please indicate your agreement to the terms of this letter agreement
by signing in the space provided below. This letter agreement may be executed
in any number of counterparts and all of such counterparts taken together will
be deemed to constitute one and the same instrument. This letter agreement will
become effective immediately upon execution of a counterpart of this letter
agreement by all parties hereto.
Very truly yours,
SYNBIOTICS CORPORATION
By ________________________
Name: _____________________
Title: ____________________
BANQUE PARIBAS
By ________________________
Name: _____________________
Title: ____________________
Acknowledged, consented and
agreed to this _____ day of ____ 199_
[the Bank]
By ___________________
Name: ________________
Title: _______________
B-53
Exhibit A
----------
The Accounts
Account Number Account Name
-------------- ------------
B-54
EXHIBIT B
Form of Notice of Control
______________________________________________, 19__
[Name and Address of Bank]
________________________________________________
________________________________________________
________________________________________________
Re: SYNBIOTICS CORPORATION
Ladies and Gentlemen:
We hereby notify you that we are exercising our rights pursuant to
that certain letter agreement among Synbiotics Corporation, you and us, dated
____ ____, 199_ (the "Agreement") a copy of which is attached, to have the
name of, and to have exclusive ownership and control of, account number ______
(the "Account") maintained with you, transferred to us. The Account will
henceforth be a zero-balance account, and funds deposited in the Account should
be sent at the end of each day to ___________. You are hereby instructed to
send a copy of this letter to Banque Paribas at the address and in the manner
provided in the Agreement.
We appreciate your cooperation in this matter.
Very truly yours,
BANQUE PARIBAS
By _____________________________
Name: _______________________
Title: ______________________
By _____________________________
Name: _______________________
Title: ______________________
cc: Synbiotics Corporation
B-55
EXHIBIT C
FORM OF PLEDGE AGREEMENT
------------------------
STOCK PLEDGE AGREEMENT, dated as of July 9, 1997 between Synbiotics
Corporation ("Pledgor") and Banque Paribas ("Pledgee").
W I T N E S S E T H :
WHEREAS, Pledgor, Pledgee (acting in its capacity as agent for the
banks (the "Banks") that are parties to the Credit Agreement defined herein),
and the Banks have entered into a Credit Agreement dated as of July 9, 1997 (the
"Credit Agreement"), pursuant to which Pledgee and the Banks have agreed to
make certain loans (the "Loans") to Pledgor; and
WHEREAS, as a partial inducement to Pledgee to extend the Loans,
Pledgor has agreed to provide security for the payment of the Loans and the
payment or performance of the other Obligations (as defined in the Credit
Agreement);
NOW, THEREFORE, in consideration of the premises and the covenants set
forth herein and in the Credit Agreement, the parties hereto agree as follows.
a. Definitions. Capitalized terms used but not defined herein and
-----------
defined in the Credit Agreement are used herein as therein defined. References
to this "Agreement" shall mean this Stock Pledge Agreement as the same may be in
effect at the time such reference becomes operative, including all amendments,
modifications and supplements hereto and any exhibits or schedules to any of the
foregoing.
b. Pledge. In order to secure the payment and performance in full
------
of all of the Obligations, Pledgor hereby pledges and grants a security interest
in and hypothecates unto Pledgee each of the following (the "Collateral"):
(1) all of Pledgor's right, title and interest in and to (i) all
capital shares and partnership or joint venture interests of each
Subsidiary of the Pledgor incorporated or formed in the United States of
America and (ii) 65% of the capital shares and partnership or joint venture
interests of each Subsidiary of the Pledgor incorporated or formed outside
of the United States of America, as more fully described in Schedule I
hereto (the "Pledged Shares") and the certificates, if any, representing
the Pledged Shares, and all dividends, cash, instruments and other
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property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares;
(2) (i) all additional capital shares and partnership or joint
venture interests of any issuer of Pledged Shares (or of any Person that,
after the date of this Agreement, becomes a Subsidiary of Pledgor)
incorporated or formed in the United States of America and (ii) 65% of the
capital shares and partnership or joint venture interests of any issuer of
Pledged Shares (or of any Person that, after the date of this Agreement,
becomes a Subsidiary of Pledgor) incorporated or formed outside of the
United States of America, in each case, from time to time acquired by
Pledgor in any manner (including, without limitation, any shares of
preferred stock issued by any such issuer) (the "Additional Shares") and
the certificates, if any, representing such Additional Shares), and all
dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of such shares;
(3) all other rights appurtenant to the property described in
clauses (a) and (b) above (including, without limitation, voting rights);
and
(4) all cash and noncash proceeds of any and all of the
foregoing.
The Pledged Shares of R.M. - Diagnostics S.A.S. ("RMD") (the "French Shares"),
will be acquired today by Pledgor. Prior to the acquisition of the French
Shares, there are no pledged shares set forth on Schedule I hereto. Promptly
upon Pledgor's acquisition of any Additional Shares, Pledgor will (i) deliver
proper instruments of assignment duly executed in blank by Pledgor together with
any certificates representing such Additional Shares, whereupon such Additional
Shares shall be Pledged Shares or take such other steps as shall be necessary to
create a valid, perfected security interest in such Additional Shares; and (ii)
amend Schedule I to include such Additional Shares.
c. Representations and Warranties. Pledgor hereby represents and
------------------------------
warrants to Pledgee that as of the date hereof, and agrees that each delivery of
Additional Shares shall constitute a representation and warranty that as of the
date thereof:
(1) Pledgor is the sole holder of record and beneficial owner of
the Pledged Shares set forth on Schedule I hereto, free and clear of any
pledge, hypothecation, assignment, lien, charge, claim, security interest,
option,
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preference, priority or other preferential arrangement of any kind or
nature whatsoever ("Lien") thereon or affecting the title thereto.
(2) The Pledged Shares have been duly authorized and validly
issued by each of the respective issuers set forth in Schedule I, and are
fully paid and non-assessable, and Pledgor has the right and all requisite
corporate authority to pledge, assign, grant a security interest in,
transfer and deliver the Collateral to Pledgee as provided herein.
(3) This Agreement has been duly authorized, executed and
delivered by Pledgor and constitutes the legal, valid and binding
obligation of Pledgor, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles
of equity.
(4) No consent, approval, authorization or other order of any
Person is required for (i) the execution and delivery of this Agreement by
Pledgor or the delivery by Pledgor of the Collateral to Pledgee as provided
herein, or (ii) for the exercise by Pledgee of the voting or other rights
provided for in this Agreement or the remedies in respect of the Collateral
pursuant to this Agreement, except as may be required in connection with
the disposition of the Collateral by laws affecting the offering and sale
of securities generally.
(5) The chief executive office of Pledgor is located at its
address set forth in Section 9.3 of the Credit Agreement. Pledgor has no
trade name.
(6) Upon the delivery to Pledgee of the certificates representing
the Pledged Shares, or in the case of the French Shares, upon due
registration of the pledge in the share transfer register of RMD and in the
Shareholders' accounts, and delivery of the Declaration ▇▇ ▇▇▇▇ attached
hereto as Exhibit A (the "Declaration"), Pledgee will have a valid and
perfected security interest therein subject to no prior Lien.
(7) The authorized, issued and outstanding capital shares and
partnership or joint venture interests of each of Pledgor's Subsidiaries is
set forth on Schedule I, and there are no existing options, warrants, calls
or commitments of any character whatsoever relating to any of the unissued
capital shares or partnership or joint venture
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interests of any of Pledgor's Subsidiaries, except as set forth on Schedule
I hereto.
The representations and warranties set forth in this Section 3 shall
survive the execution and delivery of this Agreement.
d. Rights of Pledgor. Unless an Event of Default shall have
-----------------
occurred and be continuing:
(1) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Shares or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or the Credit Agreement. Pledgor shall not exercise or refrain from
exercising such right in a manner which would authorize or effect (except
as and to the extent expressly permitted by the Credit Agreement) (i) the
dissolution or liquidation, in whole or in part, of any of Pledgor's
Subsidiaries, (ii) the consolidation or merger of any of Pledgor's
Subsidiaries with any corporation, (iii) the sale, disposition or
encumbrance of all or substantially all of the assets of any of Pledgor's
Subsidiaries, (iv) any change in the authorized number of shares, the
stated capital or the authorized share capital of any of Pledgor's
Subsidiaries, or the issuance of any additional capital shares of any of
Pledgor's Subsidiaries, or (v) the alteration of the voting rights with
respect to the shares of any of Pledgor's Subsidiaries.
(2) Pledgor shall be entitled, from time to time, to collect and
receive for its own use all cash dividends (except cash dividends paid or
payable in respect of the total or partial liquidation of an issuer) paid
on the Pledged Shares; provided, however, that until actually paid, all
-------- -------
rights to such dividends shall remain subject to the Lien of this
Agreement. All dividends (other than cash dividends governed by the
immediately preceding sentence) and all other distributions in respect of
any of the Collateral, whenever paid or made, shall be delivered to
Pledgee and held by it subject to the Lien created by this Agreement.
e. Covenants. Pledgor covenants and agrees that until the
---------
termination of this Agreement:
(1) Pledgor will not, without the prior written consent of
Pledgee, sell, assign, transfer, mortgage, pledge or otherwise encumber any
of its rights in or to the Collateral or any dividends or other
distributions or
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payments with respect thereto or ▇▇▇▇▇ ▇ ▇▇▇▇ on any thereof.
(2) Pledgor will, at its own expense, execute, acknowledge and
deliver all such instruments and take all such action as Pledgee from time
to time may reasonably request in order to ensure to Pledgee the benefits
of the first priority Lien on and to the Collateral intended to be created
by this Agreement.
(3) Pledgor will defend the title to the Collateral and the Lien
of Pledgee thereon against the claim of any Person claiming against or
through Pledgor and will maintain and preserve such Lien so long as this
Agreement shall remain in effect.
(4) Unless Pledgor shall have given Pledgee not less than 30
days' prior notice thereof, Pledgor will not change (i) its name, identity
or corporate structure in any manner or (ii) the location of its chief
executive office.
f. Remedies.
--------
(1) Upon the occurrence of an Event of Default, then or at any
time during the continuance of such occurrence, Pledgee is hereby
authorized and empowered, at its election, (i) upon purchase pursuant to
Section 6(b) to transfer and register in its or its nominee's name the
whole or any part of the Collateral, (ii) to exercise all voting rights
with respect thereto, (iii) to demand, ▇▇▇ for, collect, receive and give
acquittance for any and all cash dividends or other distributions or monies
due or to become due upon or by virtue thereof, and to settle prosecute or
defend any action or proceeding with respect thereto, (iv) in compliance
with Section 6(b) to sell in one or more sales the whole or any part of the
Collateral or otherwise to transfer or assign the same, applying the
proceeds therefrom to the payment of the Obligations in such order as
Pledgee shall determine, and (v) otherwise to act in compliance with
Section 6(b), with respect to the Collateral or the proceeds thereof as
though Pledgee were the outright owner thereof, Pledgor hereby irrevocably
constituting Pledgee as its proxy and attorney-in-fact, with full power of
substitution to do so.
(2) Pledgee shall give Pledgor not less than ten days' prior
written notice return receipt requested of the time and place of any sale
or other intended disposition of any of the Collateral except any
Collateral that is perishable or threatens to decline speedily in value or
is of a
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type customarily sold on a recognized market. Pledgor agrees that such
notice constitutes "reasonable notification" within the meaning of Section
9-504(3) of the Uniform Commercial Code. Any sale shall be made at a
public or private sale at Pledgee's place of business, or at any public
building in The City of Los Angeles to be named in the notice of sale,
either for cash or upon credit or for future delivery at such price as
Pledgee may deem fair, and, to the extent permitted by applicable law,
Pledgee may be the purchaser of the whole or any part of the Collateral so
sold and hold the same thereafter in its own right free from any claim of
Pledgor or any right or equity of redemption, which right or equity is
hereby waived and released. Each sale shall be made to the highest bidder,
but Pledgee reserves the right to reject any and all bids at such sale
which, in its sole discretion, it shall deem inadequate. Except as
otherwise herein specifically provided for, demands of performance, notices
of sale, advertisements and the presence of property at sale are hereby
waived and any sale hereunder may be conducted by an auctioneer or any
officer of agent of Pledgee.
(3) If, at the original time or times appointed for the sale of
the whole or any part of the Collateral, either (i) the highest bid, if
there be but one sale, shall be inadequate to discharge in full all the
Obligations, or (ii) if the Collateral be offered for sale in lots, if at
any of such sales the highest bid for the lot offered for sale would
indicate to Pledgee in its sole discretion the unlikelihood of the proceeds
of the sales of the whole of the Collateral being sufficient to discharge
all the Obligations, then in either such event Pledgee may, on one or more
occasions, postpone any of said sales by public announcement at the time of
sale. In the event of any such postponement, Pledgee shall give Pledgor
notice of such postponement.
(4) If, following an Event of Default, Pledgee, in its sole
discretion, determines that it is necessary or advisable to effect a public
registration of all or part of the Collateral pursuant to the Securities
Act of 1933, as amended (the "Act"), then Pledgor shall use its best
efforts to cause the issuer or issuers of the Pledged Shares contemplated
to be sold, to execute and deliver, and cause the directors and officers of
such issuer to execute and deliver, all at Pledgor's expense, all such
instruments and documents, and to do or cause to be done all such other
acts and things as may be necessary or, in the reasonable judgment of
Pledgee, advisable to register such shares under the provisions of the Act
and to cause the registration statement relating thereto to become
effective and to remain
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effective for a period of 9 months from the initial effective date
thereof, and to make all amendments thereto or to the related prospectus or
both that, in the reasonable judgment of Pledgee, are necessary or
advisable, all in conformity with the requirements of the Act and the rules
and regulations promulgated thereunder. Pledgor agrees to use its best
efforts to cause such issuer or issuers to (i) comply with the provisions
of the securities or "Blue Sky" laws of any jurisdiction reasonably
designated by Pledgee and (ii) make available to its security holders, as
soon as practicable, an earnings statement that will satisfy the provisions
of Section 11(a) of the Act.
(5) All expenses incurred in complying with Section 6(d),
including, without limitation, all registration and filing fees (including
all expenses incident to filing with the National Association of Securities
Dealers, Inc.), printing expenses, fees and disbursements of counsel for
Pledgor or for the issuers of the Pledged Shares, the reasonable fees and
expenses of counsel for Pledgee, expenses of any special audits incident to
or required by any such registration and expenses of complying with the
securities or blue sky laws of any jurisdictions, shall be paid by Pledgor.
(6) If, at any time when Pledgee shall determine to exercise its
right to sell the whole or any part of the Collateral hereunder, such
Collateral or the part thereof to be sold shall not, for any reason
whatsoever, be effectively registered under the Act, Pledgee may, in its
sole and absolute discretion (subject only to applicable requirements of
law), sell such Collateral or part thereof by private sale in such manner
and under such circumstances as Pledgee may deem necessary or advisable,
but subject to the other requirements of this Section 6, and shall not be
required to effect such registration or to cause the same to be effected.
Without limiting the generality of the foregoing, in any such event Pledgee
in its sole and absolute discretion may (a) proceed to make such private
sale notwithstanding that a registration statement for the purpose of
registering such Collateral or part thereof could be or shall have been
filed under the Act (or similar statute), (b) approach and negotiate with a
single possible purchaser to effect such sale, (c) restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing
for its own account, for investment and not with a view to the
distribution or sale of such Collateral or part thereof, and (d) require
that any sale hereunder (including a sale at auction) be conducted subject
to restrictions (i) as to the financial sophistication and ability of any
Person permitted
C-7
to bid or purchase at sale, (ii) as to the content of legends to be placed
upon any certificates representing the Collateral sold in such sale,
including restrictions on future transfer thereof, (iii) as to the
representations required to be made by each Person bidding or purchasing at
such sale relating to that Person's access to financial information about
Pledgor, any of the issuers of the Pledged Shares or Pledgee, such Person's
intentions as to the holding of the Collateral so sold for investment, for
its own account, and not with a view to the distribution thereof, and (iv)
as to such other matters as Pledgee may, in its sole discretion, deem
necessary or appropriate in order that such sale (notwithstanding any
failure so to register) may be effected in compliance with the Uniform
Commercial Code and other laws affecting the enforcement of creditors'
rights and the Act (or similar statute) and all applicable state securities
laws. Pledgor will execute and deliver such documents and take such other
action as Pledgee deems necessary or advisable in order that any such sale
may be made in compliance with law.
(7) Pledgor acknowledges that: (i) any sale under the
circumstances described in this Section 6 shall be deemed to have been held
in a manner which is commercially reasonable, and (ii) notwithstanding the
legal availability of a private sale or a sale subject to restrictions of
the character described above, Pledgee may, in its sole discretion, elect
to seek registration of the Collateral under the Act (or similar statute or
any applicable state securities laws) in accordance with its rights under
this Section 6. In the event of any such sale under the circumstances
described in this Section 6, Pledgee shall incur no responsibility or
liability for selling the whole or any part of the Collateral at a price
which Pledgee may deem reasonable under the circumstances, notwithstanding
the possibility that a substantially higher price might be realized if the
sales were deferred until after registration as aforesaid. Pledgor hereby
acknowledges that any sale of any of the Collateral which has not been
registered under the Act may be for a price less than that which might have
been obtained had the Collateral been registered under the Act.
(8) Pledgor agrees to indemnify and hold harmless, and to use
its best efforts to cause each Person that issued the securities sold
pursuant to this Agreement to agree to indemnify and hold harmless, Pledgee
and each Person who controls Pledgee within the meaning of either the Act
or the Securities Exchange Act of 1934 against any and all losses, claims,
damages or liabilities, joint or sever-
C-8
al, to which Pledgee or such Person may become subject under the Act, the
Securities Exchange Act of 1934 or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in the registration state ment for the registration of the
Collateral as originally filed or in any amendment thereof, or in any
preliminary prospectus or the prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
agrees to reimburse each such indemnified party for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
--------
however, that Pledgor will not be liable in any such case to the extent
-------
that any such loss, claim, damage or liability arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
written information furnished to Pledgor by or on behalf of Pledgee
specifically for use in connection with the preparation thereof.
g. Exoneration of Pledgee. Other than the exercise of reasonable
----------------------
care in the custody and preservation of the Collateral, Pledgee shall have no
duty with respect thereto. Pledgee shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which it accords
its own property, and shall not be liable or responsible for any loss or damage
to any of the Collateral, or for any diminution in the value thereof, by reason
of the act or omission of any agent or bailee selected by Pledgee in good faith.
h. Waiver. No delay on Pledgee's part in exercising any power of
------
sale or other right hereunder, and no notice or demand which may be given to or
made upon Pledgor by Pledgee with respect to any power of sale or other right
hereunder, shall constitute a waiver thereof, or limit or impair Pledgee's right
to take any action or to exercise any power of sale or any other right
hereunder, without notice or demand, or prejudice Pledgee's rights as against
Pledgor in any respect.
i. Assignment. Neither party may assign its rights under this
----------
agreement, except that in the event of assignment by Pledgee of its rights under
the Credit Agreement in accordance
C-9
therewith, the party to whom such assignment is made shall be entitled to
Pledgee's rights hereunder.
j. Termination. At such time as (a) all Obligations have been fully
-----------
satisfied and (b) the Credit Agreement shall have been terminated, Pledgee shall
take all steps reasonably necessary to ensure the return/release of the French
Shares and shall deliver to Pledgor the Collateral at the time subject to this
Agreement and all instruments of assignment executed in connection therewith,
free and clear of the Lien hereof and all of Pledgor's obligations hereunder
shall thereupon terminate. When so released, such Collateral shall be free and
clear of any lien or encumbrance hereunder.
k. Release. Pledgor consents and agrees that Pledgee may at any
-------
time, or from time to time, in Pledgee's sole discretion, exchange, release
and/or surrender all or any of the Collateral, or any part(s) thereof, by
whomever deposited, which is now or may hereafter be held by Pledgee in
connection with all or any of the Obligations; all in such manner and upon such
terms as Pledgee may deem proper, and without notice to or further assent from
Pledgor, it being hereby agreed that Pledgor shall be and remain bound by this
Agreement, irrespective of the existence, value or condition of any Collateral
and notwithstanding (i) any such exchange, release and/or surrender and/or (ii)
any settlement, compromise, surrender, release, renewal or extension of any or
all of the Obligations, and/or (iii) that the Obligations may at any time or
from time to time exceed the aggregate principal amount outstanding pursuant to
the Credit Agreement.
l. Expenses. Pledgor will reimburse Pledgee for all expenses
--------
(including reasonable expenses for legal services of every kind) of, or
incidental to the preparation or enforcement of any of the provisions of, this
Agreement or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement of any of the Collateral and for the care
of the Collateral and defending or asserting the rights and claims of Pledgee in
respect of the Collateral, by litigation or otherwise, including but not
limited to expenses of insurance and the reasonable fees and expenses of counsel
for Pledgee. All such expenses shall be deemed additional Obligations.
m. Miscellaneous.
-------------
(1) Pledgee may execute any of its duties hereunder by or
through agents or employees. Pledgee may consult with legal counsel and
any action taken or suffered in good faith in accordance with the advice of
such counsel shall be full justification and protection to it.
C-10
(2) Neither Pledgee nor any of its officers, directors,
employees, agents or counsel shall be liable for any action lawfully taken
or omitted to be taken by it or them hereunder or in connection herewith,
except for their own gross negligence or willful misconduct and Pledgee
shall not be liable for any error of judgment made by it in good faith.
(3) This Agreement shall be binding upon Pledgor and its
successors and assigns, and shall inure to the benefit of, and be
enforceable by, Pledgee and its successors, transferees and assigns. None
of the terms or provisions of this Agreement may be waived, altered,
modified or amended except in writing duly signed for and on behalf of
Pledgee and Pledgor.
(4) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE
TO CONTRACTS MADE AND PERFORMED IN SUCH STATE.
(5) Pledgor hereby consents to the jurisdiction of any state
court located within the State of California or of any federal court
located within the Central District of California, and waives personal
service or any and all process upon Pledgor, and consents that all such
service of process be made by registered mail directed to Pledgor at the
address stated in Section 9.3 of the Credit Agreement and service so made
shall be deemed to be completed five (5) business Days after the same shall
have been deposited in the United States mails, postage prepaid. To the
extent permitted by law, Pledgor waives trial by jury and waives any
objection to venue of any action instituted hereunder.
n. Further Assurances; Pledgee May Perform.
---------------------------------------
(1) At Pledgor's expense, Pledgor will do all such acts, and will
furnish to Pledgee all such financing statements, certificates and other
documents and will do or cause to be done all such other things as Pledgee
may reasonably request from time to time in order to give full effect to
this Agreement and to secure the rights intended to be granted to Pledgee
hereunder. To the extent permitted by applicable law, Pledgor hereby
authorizes Pledgee to execute and file, in the name of Pledgor or
otherwise, Uniform Commercial Code financing statements (which may be
photocopies of this Agreement) which Pledgee in its sole discretion may
deem necessary or appropriate.
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(2) If Pledgor fails to perform any act required by this
Agreement, Pledgee may perform, or cause performance of, such act, and the
expenses of Pledgee incurred in connection therewith shall be governed by
Section 12 hereof.
o. Notices. Except as otherwise provided herein, any notice
-------
required hereunder shall be governed by the provisions of Section 9.3 of the
Credit Agreement
p. Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
q. French Shares. Pledgee, Pledgor and RMD have entered or shall as
-------------
soon as possible hereafter enter into the Declaration substantially in the form
attached as Exhibit A (in both the English and the French languages). Pledgee
agrees to maintain the Declaration in full force and effect until the
termination of this Stock Pledge Agreement, and to take such steps as may be
reasonably necessary to maintain the security interest in the French Shares
created thereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Stock Pledge
Agreement to be duly executed as of the date first above written.
BANQUE PARIBAS
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
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SYNBIOTICS CORPORATION
By:____________________________
Name:
Title:
C-14
SCHEDULE I
PLEDGED SHARES
--------------
None.
C-15
DECLARATION OF PLEDGE
---------------------
Law No. 83-1 of January 3, 1983 modified by Law ▇▇.
▇▇-▇▇▇ ▇▇ ▇▇▇▇ ▇, ▇▇▇▇ - ▇▇▇▇▇▇▇ 29.
Decree No. 97-509 of May 21, 1997
Made in ________, on ________.
A. PLEDGOR
-------
Synbiotics Corporation
San Diego, California, U.S.A.
A California (U.S.A.) corporation duly incorporated and validly existing under
the laws of California, represented by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Financial
Officer, duly authorized for the purpose hereof,
Hereinafter designated as the "PLEDGOR".
B. ISSUING COMPANY
---------------
R.M. - Diagnostics S.A.S.
Registered Office [_].
A French Company incorporated with the Companies Register of [_] under n. [_],
represented by _________, [title], duly authorized for the purpose hereof,
Hereinafter designated as the "ISSUER".
C. BENEFICIARY OF THE PLEDGE
-------------------------
Banque Paribas
Los Angeles, California, U.S.A.
represented by ▇▇▇▇▇ ▇▇▇▇▇▇▇, Vice President, duly authorized for the purposes
hereof,
Hereinafter designated as the "BENEFICIARY".
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D. PLEDGE AGREEMENT
----------------
The parties declare that this Declaration of Pledge has been executed pursuant
to Section 17 of the Pledge Agreement dated July __, 1997, entered into between
the PLEDGOR and the BENEFICIARY (The "PLEDGE AGREEMENT"). The pledge created
under the terms and conditions of the PLEDGE AGREEMENT is hereinafter referred
to as the "PLEDGE".
E. PLEDGED ACCOUNT - PLEDGED SECURITIES
------------------------------------
5.1 The references of the pledged account are the following:
Account, No. __________ registered in the name of the PLEDGOR with the
ISSUER'S share transfer register. [Identify the ACCOUNT HOLDER (e.g. a
French Public Notary) to hold the ISSUER's share transfer register].
5.1.1 The pledged securities are:
(1) The ordinary shares of the ISSUER, with a nominal value of FF_____.
Number: __________
Form: ____________
These _____ shares are hereinafter referred to as the "PLEDGED
SHARES".
and
(2) all the following sums and titles: [_]
F. RIGHTS AND DIVIDENDS
--------------------
The rights and dividends relating the PLEDGE SHARES are exercised in accordance
with Section 4 of the PLEDGE AGREEMENT.
▇. ▇▇▇▇
----
The BENEFICIARY has a right to hold all the shares registered on the pledge
account.
H. SECURED OBLIGATIONS
-------------------
The payment of certain loans and the payment or performance of the other
obligations (the "Obligations") as set forth in the Credit Agreement, dated as
of July __, 1997, among the Pledgor,
C-17
the banks named therein and the Beneficiary (the "Credit Agreement").
I. EXECUTION
---------
If an Event of Default shall occur pursuant to and as defined in the Credit
Agreement, the Beneficiary shall have the rights and remedies set forth in
Section 6 of the PLEDGE AGREEMENT.
J. TERMINATION
-----------
At such time as (a) all Obligations have been fully satisfied and (b) the Credit
Agreement shall have been terminated, the Beneficiary shall cause the security
interest granted hereby and by the PLEDGE AGREEMENT to terminate, and the
Pledgor and the Beneficiary shall give joint and common instructions in writing
to the Account Holder to release the Pledged Shares.
_____________________________
The BENEFICIARY OF THE PLEDGE
_____________________________
The PLEDGOR/1/
____________________
/1/ Handwrite: "account No. __________ registered with the ISSUER and
comprising ________ actions is validly pledged in favour of the
Beneficiary".
C-18
EXHIBIT D
FORM OF LEASEHOLD DEED OF TRUST
-------------------------------
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
[Space above for Recorder's use ]
[San Diego County, California]
LEASEHOLD DEED OF TRUST, ASSIGNMENT
OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING
----------------------------
THIS LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY
AGREEMENT AND FIXTURE FILING, is made as of July __, 1997, (the "Deed of
-------
Trust"), by SYNBIOTICS CORPORATION, a California corporation, as trustor
("Trustor"), having its principal address at ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
---------
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ TITLE OF CALIFORNIA, INC., SAN DIEGO DIVISION, as
trustee ("Trustee"), whose address is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
-------
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, for the benefit of BANQUE PARIBAS, LOS ANGELES AGENCY, having
its principal address at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇, as Agent and secured party
("Beneficiary") for the benefit of the Banks under, and any other banks from
-------------
time to time party to, the Credit Agreement (as hereinafter defined)(such Banks,
the Beneficiary and other banks made a party to the Credit Agreement, if any,
are hereinafter collectively referred to as the "Bank Creditors"). Capitalized
--------------
terms used but not otherwise defined herein shall have the meanings provided for
such terms in that certain Credit Agreement, dated as of July __, 1997, by and
among the Trustor, the Banks and Beneficiary, as Agent (as amended, modified or
supplemented from time to time, the "Credit Agreement").
----------------
W I T N E S S E T H :
- - - - - - - - - -
THIS DEED OF TRUST is executed, acknowledged and delivered by Trustor
to secure and enforce the following obligations (herein called the
"Obligations"):
-----------
(A) the payment and/or performance when due of (i) principal of and
interest on the Notes issued, and Loans
D-1
made, under the Credit Agreement (ii) reimbursement obligations in respect
of any Letters of Credit, (iii) the Fees and (iv) all other obligations and
indebtedness (including, without limitation, indemnities, fees and interest
thereon) of the Trustor to the Bank Creditors now existing or hereafter
incurred under, arising out of, or in connection with the Credit Agreement
and the due performance and compliance by the Trustor with all of the
terms, conditions and agreements contained in the Credit Agreement (all
such principal, interest, obligations and liabilities being herein
collectively called the "Credit Agreement Obligations");
-----------------------------
(B) the payment when due of any and all sums advanced by the
Beneficiary in order to preserve the Property or preserve its security
interest in the Property;
(C) in the event of any proceeding for the collection or enforcement
of any indebtedness, obligations, or liabilities of the Trustor referred
to in clause (A), after an Event of Default shall have occurred and be
continuing, reimbursement of the reasonable expenses of foreclosing,
holding, preparing for sale or lease, selling or otherwise disposing of or
realizing on the Property, or of any exercise by the Beneficiary or any
Bank Creditor of its rights hereunder, together with reasonable attorneys'
fees, court costs and disbursements;
(D) all renewals, extensions, amendments and all amounts paid by any
Bank Creditor as to which such Bank Creditor has the right to reimbursement
under this Deed of Trust; and
(E) all renewals, extensions, amendments and changes of, or
substitutions or replacements for, all or any part of the items described
above.
NOW, THEREFORE, with reference to the foregoing recitals, in reliance
thereon and for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged:
GRANTING CLAUSES
----------------
TRUSTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY GRANTS, CONVEYS,
ASSIGNS AND TRANSFERS:
(A) To Trustee, IN TRUST, WITH POWER OF SALE AND RIGHT OF ENTRY
AND POSSESSION, all of its present and future right, title and interest in
and to that certain leasehold estate (the "Leasehold") created pursuant to
----------
that certain lease, dated as of [____________], by and between [_________],
as landlord, and the Trustor, as tenant (such
D-2
lease together with any amendments, modifications, extensions, renewals or
substitutions therefor is referred to herein as the "Lease", a true and
-----
correct copy of which is attached hereto as Exhibit "A" and made a part
-----------
hereof), and affecting that certain real property commonly known as
[___________________________] and more particularly described in Exhibit
-------
"B" attached hereto and made a part hereof (the "Land"), together with all
--- ----
right, title and interest that Trustor now has or may hereafter acquire in
(to the extent assignable for security interest purposes):
(1) all fixtures now or hereafter affixed to the Land, including
any and all buildings, constructions and improvements now or hereafter
erected upon the Land (the "Improvements", the Land and the
------------
Improvements being hereinafter collectively called the "Premises"),
--------
together with all machinery, apparatus, equipment, fittings, fixtures,
materials and supplies and all other property of every kind and nature
whatsoever owned by Trustor, or in which Trustor has or shall have an
interest, now or hereafter located, placed, attached, affixed or
installed upon or in the Premises, or appurtenances thereto, and used
or usable in connection with the present or future operation or
occupancy of the Premises (collectively, "Equipment");
---------
(2) all deposits made with or other security given to utility
companies by Trustor with respect to the Premises, and all advance
payments of insurance premiums made by Trustor with respect thereto
and all claims or demands relating to such deposits, other security
and/or such insurance;
(3) all present and future options of any kind (including,
without limitation, any rights or options to extend the term of the
Lease or expand the premises leased thereunder), rights of first
refusal, privileges and other benefits of Trustor under the Lease;
(4) all assignments, subleases and other agreements affecting the
use or occupancy of the Premises or any portion thereof now or
hereafter existing or entered into by Trustor (collectively, the
"Subleases"), and all rents, additional rents, issues, profits,
----------
royalties, revenue, income, proceeds and other benefits presently or
in the future derived therefrom or otherwise from the Premises
(collectively, the "Rents"); subject, however, to the right, power and
-----
authority hereinafter conferred upon Beneficiary or reserved to
Trustor to collect or apply such rents, additional rents, issues,
profits, royalties, revenue, income, proceeds and other benefits;
D-3
(5) all operating, management, franchise and use agreements,
licenses or contracts relating to the development, operation or use of
the Premises or any portion thereof, together with all permits,
authorizations or certificates required or used in connection with
the ownership of, or the operation or maintenance of the Premises to
the fullest extent Trustor can grant, convey, assign and transfer such
agreements, licenses or contracts;
(6) all easements, estates, rights, titles, interests,
privileges, liberties, tenements, hereditaments and appurtenances of
any nature whatsoever, in any way belonging, relating or pertaining
to the Premises or any portion thereof;
(7) all estate, interest, right, title, claim or demand,
including claims or demands with respect to the proceeds of and any
unearned premiums on any insurance policies covering the Premises or
the Equipment, which Trustor now has or may hereafter acquire to the
extent granted to Beneficiary in Section 1.10, and to the extent
granted in Section 1.16 herein, any and all awards made for the taking
by eminent domain or condemnation, or by any proceeding or purchase in
lieu thereof, of the whole or any part of the Property, including
without limitation, any awards resulting from a change of grade of
streets or for severance damages;
(8) all governmental permits relating to construction, all names
under or by which the Premises may at any time be operated or known
(registered or unregistered, and without representation or warranty)
for use, however, solely in connection with the Premises to the
fullest extent Trustor can grant, convey, assign and transfer the
same; and all rights to carry on business under any such names or any
variant thereof, and, all trademarks, names, patents pending and
goodwill to the fullest extent Trustor can grant, convey, assign and
transfer the same;
(9) all estate, right, title, claim or demand whatsoever of
Trustor, either in law or in equity, in possession, reversion,
remainder or expectancy, in and to the Premises or any other property
described in the other paragraphs of these Granting Clauses;
(10) all proceeds and avails of the conversion, voluntarily or
involuntarily, of any of the foregoing into cash or liquidated claims,
including, but not limited to, condemnation awards (subject to
provisions of Section 1.16 herein) and proceeds of insurance (subject
to the provisions of Section 1.10 herein), of
D-4
any causes of action (whether arising in tort, contract, fraud or
concealment of a material fact) for any damage or injury to any of the
foregoing, or of any conveyance of the Premises or any part thereof;
and
(11) the right, in the name and on behalf of Trustor to appear in
and defend any action or proceeding with respect to the Premises or
any other property described in the other paragraphs of these Granting
Clauses, and to commence any action or proceeding to protect the
interests of Beneficiary therein.
All of the property conveyed or intended to be conveyed to
Trustee in Paragraph (A), and (1) through (11) above, is hereinafter
referred to as the "Real Property."
-------------
(B) To Beneficiary, as secured party, to the extent of Trustor's
interest therein, a security interest in any portion of the Real Property
which may be construed to be personal property and, to the extent of
Trustor's right, title and interest therein, in all other personal property
of every kind and description, whether now existing or hereafter acquired,
now or at any time hereafter attached to, erected upon, situated in or
upon, forming a part of, appurtenant to, used or useful in the construction
or operation of or in connection with, or arising from the use or enjoyment
of all or any portion of, or from any lease or agreement pertaining to, the
Real Property, including Trustor's right, title and interest in and to the
following (to the extent assignable for security interest purposes):
(1) all equipment, machinery, fixtures, goods, inventory,
accounts (including, without limitation, accounts with financial
institutions and accounts receivable), general intangibles, documents,
instruments and chattel paper, and all other personal property of
every kind and description;
all substitutions and replacements of, and accessions and
additions to, any of the foregoing; and
all proceeds of any of the foregoing, including, without
limitation, proceeds of any voluntary or involuntary disposition or
claim respecting any part thereof (pursuant to judgment, condemnation
award or otherwise) and all goods, documents, general intangibles,
chattel paper and accounts, wherever located, acquired with cash
proceeds of any of the foregoing or proceeds thereof.
All of the property conveyed or intended to be conveyed to
Beneficiary in Paragraph (B), and (1) through
D-5
(3) above, is hereinafter referred to as the "Personal Property."
-----------------
All of the Real Property and the Personal Property is referred to
herein collectively as the "Property."
--------
AND TRUSTOR COVENANTS AND AGREES WITH BENEFICIARY AS FOLLOWS:
ARTICLE 1
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF THE TRUSTOR
1.01 Title to the Property. Trustor represents and warrants
---------------------
that it holds good and valid right, title and interest in and to the
Leasehold; (ii) that this Deed of Trust is a valid first Lien upon the
Property, and that Trustor has not created any other Lien upon the Property
which will remain undischarged after recording of this Deed of Trust, other
than those Liens permitted under Section 6.3 of the Credit Agreement; (iii)
that Trustor has full power and lawful authority to encumber the Property
in the manner set forth herein; and (iv) that, to the best of Trustor's
actual knowledge, there are no defenses or offsets to this Deed of Trust or
to the Obligations which it secures. Except for those Liens permitted
under Section 6.3 of the Credit Agreement, Trustor shall not, directly or
indirectly, create or suffer to be created any Lien upon any portion of the
Property. Trustor shall preserve such title and the validity and priority
of the Lien hereof and shall forever warrant and defend the same to
Beneficiary against the claims of all Persons and parties whatsoever.
1.02 Leasehold.
---------
(a) The provisions contained in this Deed of Trust shall be
deemed to be obligations of Trustor in addition to Trustor's obligations as
tenant with respect to similar matters under which Trustor is obligated
under the Lease and shall not restrict or limit Trustor's duties and
obligations to keep and perform promptly all of its covenants, agreements
and obligations as tenant under the Lease.
(b) Trustor shall at all times fully perform and comply with all
the agreements, covenants, terms and conditions imposed upon the tenant
under the Lease, and if Trustor shall fail so to do (beyond any applicable
notice and cure period), and if Beneficiary's Lien on Trustor's leasehold
interest under the Lease shall be materially adversely affected,
Beneficiary may (but shall not be obligated to), and is hereby appointed by
Trustor as
D-6
Trustor's true and lawful attorney in fact, which appointment is coupled
with an interest, to take any action Beneficiary reasonably deems necessary
or desirable to prevent or cure any default thereunder, including, without
limitation, performance of any of the tenant's covenants or obligations
under the Lease. Upon Beneficiary's request, Trustor will submit
satisfactory evidence of payment of all of its monetary obligations under
the Lease (including, without limitation, rents, taxes, assessments,
insurance premiums and operating expenses), and a statement of any such
payments which Trustor is contesting or arbitrating pursuant to the terms
of the Lease.
(c) Trustor shall promptly (i) notify Beneficiary in writing of
the receipt by it of any notice of default, including, without limitation,
any notice to quit or notice to pay, from the landlord or its agent under
the Lease; (ii) notify Beneficiary in writing of the receipt by it of any
notice under the Lease of the termination of the Lease; (iii) cause a copy
of each such notice received by Trustor from the landlord under the Lease
to be delivered to Beneficiary; and (iv) cause a copy of any notice of
election or the exercise of any rights of option, purchase or renewal under
the Lease sent by Trustor to the landlord under the Lease, to be delivered
to Beneficiary. Upon receipt by Beneficiary of any written notice of a
monetary default by Trustor under the Lease or any other party as tenant
thereunder, Beneficiary may rely thereon and immediately take such action
as aforesaid to cure such default. Ten (10) days after receipt by
Beneficiary of any written notice of a non-monetary default by Trustor
under the Lease or any other party as tenant thereunder, Beneficiary may
rely thereon and immediately take such action as aforesaid to cure such
default. Beneficiary may pay and expend such sums of money as Beneficiary
in its reasonable discretion deems necessary for such purpose, and Trustor
hereby agrees to pay to Beneficiary, on demand, all such sums so paid and
expended by Beneficiary, and any failure by Trustor to so reimburse
Beneficiary within ten (10) days after receipt of written demand shall
constitute an Event of Default hereunder. All sums so paid and expended
by Beneficiary, and the interest thereon, shall be added to and be secured
by the Lien of this Deed of Trust.
(d) Except as otherwise permitted under the Credit Agreement,
without obtaining the prior written consent of the Beneficiary (which
consent shall not be unreasonably withheld or delayed), Trustor shall not
surrender its leasehold estate and its interest created under the Lease,
nor modify, terminate or cancel the Lease. Any attempted surrender,
modification, termination or cancellation of the Lease by Trustor without
Beneficiary's prior written consent shall be null and void.
D-7
(e) If the Lease is cancelled or terminated, and Beneficiary or
its nominee shall acquire an interest in any new lease of the property
demised thereby, Trustor shall have no right, title or interest in or to
the new lease or to the leasehold estate created by such new lease.
(f) Except as otherwise permitted under the Credit Agreement,
without obtaining the prior written consent of the Beneficiary (which
consent shall not be unreasonably withheld or delayed), Trustor shall not
enter into any sublease under the Lease or assign, directly or indirectly,
any interest in the Lease.
(g) Except as required under the Lease and permitted under the
Credit Agreement, without obtaining the prior written consent of the
Beneficiary (which consent shall not be unreasonably withheld or delayed),
Trustor shall not consent to the subordination of the Lease to any lien on
the fee estate of the landlord under the Lease.
(h) No release or forbearance of any of Trustor's obligations
under the Lease, pursuant to such Lease or otherwise, including, without
limitation, Trustor's obligations with respect to the payment of rent as
provided for in the Lease and the performance of all the terms, provisions,
covenants, conditions and agreements contained in the Lease to be kept,
performed or complied with by tenant therein, shall release Trustor from
any of Trustor's obligations under this Deed of Trust. The Lien of this
Deed of Trust attaches to all of Trustor's rights and remedies at any time
arising under or pursuant to Subsection 365(h) of the Bankruptcy Code,
including, without limitation, all of Trustor's rights to remain in
possession of the Property.
(i) Trustor hereby unconditionally assigns, transfers and sets
over to Beneficiary all of Trustor's claims and rights to the payment of
damages arising from any rejection by the landlord of the Lease under the
Bankruptcy Code. Beneficiary shall have the right to proceed in its own
name or in the name of Trustor with respect to any claim, suit, action or
proceeding relating to the rejection of the Lease, including, without
limitation, the right to file and prosecute, any proofs of claim,
complaints, motions, applications, notices and other documents, in any case
in which landlord is debtor under the Bankruptcy Code. This assignment
constitutes a present, irrevocable and unconditional assignment of the
foregoing claims, rights and remedies, and shall continue in effect until
all of the Obligations shall have been satisfied and discharged in full.
Any amounts received by Beneficiary as damages arising out of the rejection
of the Lease as aforesaid shall be applied first to all reasonable costs
and expenses of Beneficiary (including, without limitation, reasonable
D-8
attorneys' fees, charges and disbursements) incurred in connection with the
exercise of any of its rights or remedies hereunder and then to reduce the
unpaid Obligations in such order as Beneficiary may determine in its sole
and absolute discretion.
(j) Without obtaining the prior written consent of the
Beneficiary, the Lease and the leasehold estate therein contained shall not
merge but shall always remain separate and distinct, notwithstanding the
union of the fee title and the leasehold estate by purchase or otherwise,
in landlord or tenant thereunder, or in any other party. In the event
Trustor acquires the fee title or any other estate, title or interest in
the Property, directly or indirectly, or any part thereof, the Lien of this
Deed of Trust, without further act, deed, conveyance or deed of trust on
behalf of Trustor shall attach to, cover and be a Lien upon such acquired
estate, title or interest and such interest shall thereupon be and become a
part of the security encumbered by this Deed of Trust with the same force
and effect as if specifically encumbered in this Deed of Trust and in the
event thereof, upon request of Beneficiary without cost or expense to
Beneficiary, Trustor will execute, acknowledge and deliver all such further
acts, conveyances, deeds, deeds of trust, and assurances as Beneficiary
shall reasonably require to ratify and confirm Beneficiary's Lien on the
acquired estate, title or interest.
(k) If there shall be filed by or against Trustor a petition
under the Bankruptcy Code, Trustor, as tenant under the Lease, or any
trustee appointed by the Bankruptcy Court in such proceedings, shall
immediately (but in no event later than three (3) weeks after the filing of
such petition) notify Beneficiary in writing of Trustor's or the trustee's
intent, as the case may be, to assume or reject the Lease pursuant to
Section 365(a) of the Bankruptcy Code. If the intent of Trustor or such
trustee is to reject the Lease or if such notice is for any reason not so
given to Beneficiary or if it reasonably appears to Beneficiary that
Trustor or the trustee does not intend to assume the Lease, then at any
time thereafter Beneficiary shall have the right, but not the obligation,
to serve upon Trustor or such trustee a notice stating that (i) Beneficiary
demands that Trustor or trustee assume and assign such Lease to Beneficiary
or Beneficiary's nominee pursuant to Section 365 of the Bankruptcy Code and
(ii) Beneficiary covenants to cure or provide adequate assurance of prompt
cure of all defaults and provide directly or through its nominee adequate
assurance of future performance under such Lease. If Beneficiary serves
upon Trustor or such trustee the notice described in the preceding
sentence, Trustor or such trustee shall not seek to reject such Lease but
shall
D-9
forthwith (and in all events before the expiration of all applicable time
periods for such assumption and assignment) seek authorization from the
Bankruptcy Court to assume and assign such Lease to Beneficiary (subject to
any higher or better offer therefor, as approved by the Bankruptcy Court)
subject to the performance by Beneficiary of the covenant provided for in
clause (ii) of the preceding sentence. Trustor agrees that Beneficiary may
at any time apply to the Bankruptcy Court for a reasonable extension of any
time period for the assumption of such Lease by Trustor and that the
protection of Beneficiary's Lien in such Lease shall be deemed sufficient
cause for such extension and Trustor shall not oppose any application by
Beneficiary for such reasonable extension. If any petition, action,
proceeding, motion or notice shall be commenced or filed in respect of the
landlord of the leasehold estate under the Lease in connection with any
case commenced or filed under the Bankruptcy Code, Beneficiary shall have
the option, exercisable upon notice from Beneficiary to Trustor, to
conduct with Trustor, and to control any such litigation with counsel of
Beneficiary's choice. Beneficiary may proceed in its own name or in the
name of Trustor in connection with any such litigation, and Trustor agrees
to execute any and all powers, authorizations, consents or other documents
reasonably required by Beneficiary in connection therewith. Trustor shall,
upon demand, pay to Beneficiary all reasonable costs and expenses
(including reasonable attorneys' fees) paid or incurred by Beneficiary in
connection with the prosecution or conduct of any such proceedings. Any
such reasonable costs or expenses not paid by Trustor as aforesaid shall be
secured by the lien of this Deed of Trust and shall be added to the
principal amount of the Obligations secured hereby. Trustor shall not
commence any action, suit, proceeding or case, or file any application or
make any motion, in respect of the Lease in any such case without the prior
written consent of Beneficiary.
(l) Trustor will use its best efforts to obtain and deliver to
Beneficiary within thirty (30) Business Days after written request by
Beneficiary, an estoppel certificate from any landlord under the Lease
setting forth (i) the name of the tenant thereunder, (ii) that such Lease
has not been modified or, if either has been modified, the date of each
modification (together with copies of each such modification), (iii) the
rent payable under the Lease, (iv) the date to which all rental charges
have been paid by tenant under the Lease, (v) whether there are any alleged
defaults by tenant under the Lease and, if so, setting forth the nature
thereof in reasonable detail, and (vi) as to such other matters as
Beneficiary may reasonably request. Trustor shall also use its best
efforts to obtain and deliver to Beneficiary a Non-Disturbance and
Attornment Agreement, in form and substance reasonably satisfactory to
D-10
Beneficiary, from each and every party holding a lien on the Property,
including, without limitation, any deed of trust secured by a fee interest
in the Land.
(m) Trustor shall obtain an American Land Title Association
lender's policy of title insurance in favor of Beneficiary, with those
endorsements reasonably requested by Beneficiary.
(n) Trustor represents and warrants to Beneficiary that as of the
date hereof, to the best of Trustor's actual knowledge, no default under
the Lease has occurred and is continuing, and such Lease is valid and
subsisting for the term set forth therein.
1.03 Deed of Trust Authorized. The execution and delivery of
------------------------
this Deed of Trust has been duly authorized by Trustor, and there is no
provision in the charter or bylaws of Trustor requiring further consent for
such action by any other Person. Trustor is duly organized and validly
existing under the laws of the State of California, and has all necessary
material licenses, authorizations, registrations, permits and/or approvals
and full power and authority to own its properties and carry on its
business as presently conducted, and the execution and delivery by it of,
and performance by it of its obligations under this Deed of Trust will not
result in Trustor being in default under any provision of its charter or
bylaws or of any other material agreement to which Trustor is a party or
which materially affects the Property or any material part thereof or any
other property of Trustor.
1.04 Operation of the Property. Trustor has, and with respect
-------------------------
to the construction of any new buildings or structures upon the Premises
during the term hereof will obtain, all necessary and material
certificates, licenses, authorizations, registrations, permits and/or
approvals necessary for the ownership, operation and management of the
Property, including, without limitation, all required environmental
permits, all of which, with respect to Improvements existing as of the date
hereof, are, to the best of Trustor's knowledge, in full force and effect
and not subject to any revocation, undisclosed amendment, release,
suspension, forfeiture or the like. The present and contemplated use and
occupancy of the Property does not conflict with or violate any such
material certificate, license, authorization, registration, permit or
approval. Trustor will promptly deliver to Beneficiary, at its reasonable
request, true copies of all such material certificates, licenses,
authorizations, registrations, permits and approvals.
D-11
1.05 Agreements. Except as permitted hereunder and under the
----------
Credit Agreement, and except for any prior encumbrance which has been or
will be discharged upon recordation of this Deed of Trust, Trustor has not
entered into any contract or other agreement providing for the transfer,
conveyance or encumbrance of the Property or any part thereof or interest
therein.
1.06 Payment and Performance of Obligations. Trustor shall pay
--------------------------------------
all of the Obligations when due and without offset or counterclaim.
Trustor shall observe and comply in all material respects with all of the
terms, provisions, conditions, covenants and agreements to be observed and
performed by it under this Deed of Trust.
1.07 Maintenance, Repair, Alterations, Etc. Trustor shall: (a)
-------------------------------------
to the extent the Trustor is obligated to do so under the Lease, keep and
maintain the Property in good condition and repair (subject to Trustor's
maintenance and repair obligations under the Lease); (b) not construct any
new Improvements or remove, demolish, change or alter any of the existing
Improvements if such construction, removal, demolition, change or
alteration would materially adversely affect Beneficiary's Lien or security
interest hereunder; (c) subject to Sections 1.10 and 1.16 below, to the
extent Trustor is obligated to do so under the Lease, promptly restore any
Improvement which may be materially damaged or destroyed so that the same
shall be at least equal to its value, condition, character, bulk, floor
area and height immediately prior to the damage or destruction, and
promptly pay when due all claims for labor performed and materials
furnished therefor; (d) to the extent the Trustor is obligated to do so
under the Lease, comply in all material respects with all laws, ordinances,
regulations, covenants, conditions and restrictions now or hereafter
affecting the Property or any part thereof or the use thereof or requiring
any alterations or improvements; (e) not commit or permit any waste or
deterioration (usual wear and tear excepted) of the Property; (f) to the
extent the Trustor is obligated to do so under the Lease, keep and maintain
the grounds, sidewalks, parking and landscape areas which are part of the
Premises in good and neat order and repair; (g) comply in all material
respects with the provisions of the Lease; and (h) not commit, suffer or
permit any act to be done in or upon the Property in material violation of
any law, ordinance, regulation, covenant, condition or restriction now or
hereafter affecting the Property or any parts thereof or the use thereof.
1.08 Required Insurance.
------------------
Trustor shall at its expense, at all times, maintain and keep in
full force and effect policies of
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insurance as required to be maintained by the tenant under the Lease, the
Credit Agreement or any documents delivered pursuant thereto.
1.09 Policy Provisions, Etc.
----------------------
(a) Each policy of insurance maintained by Trustor pursuant to
Section 1.08 shall (1) provide for the benefit of the Bank Creditors that
30 days' (10 days for non-payment) prior written notice of suspension,
cancellation, termination, modification, non-renewal or lapse or material
change of coverage shall be given to the Beneficiary; (2) name the
Beneficiary for the benefit of the Bank Creditors as the loss payee (except
for (i) instances where the landlord under the Lease has required that it
be named a loss payee and (ii) errors and omissions insurance and other
third party liability insurance); and (3) to the extent that neither the
Beneficiary nor the Bank Creditors shall be liable for premiums or calls,
name the Beneficiary for the benefit of the Banks as an additional insured.
(b) Trustor shall pay as and when the same become due and payable
the premiums for all insurance policies that Trustor is required to
maintain hereunder, and all such policies shall be non-assessable. Trustor
will deliver to Beneficiary concurrently herewith certificates setting
forth in reasonable detail the terms (including, without limitation, any
applicable notice requirements) of all insurance policies that Trustor is
required to maintain hereunder. Trustor shall also provide to Beneficiary,
upon Beneficiary's reasonable request, copies of such policies certified by
the insurance companies issuing them. Trustor will deliver to Beneficiary,
concurrently with each change in any such insurance policy relating to
Trustor, a certificate with respect to such changed insurance policy
certified by Trustor, in the same form and containing the same information
as the certificates required to be delivered by Trustor pursuant to the
first sentence of this subparagraph.
(c) Not later than thirty (30) days prior to the expiration,
termination or cancellation of any insurance policy which Trustor is
required to maintain hereunder, Trustor shall obtain a replacement policy
or policies (or a binding commitment for such replacement policy or
policies), which shall be effective no later than the date of the
expiration, termination or cancellation of the previous policy, and shall
deliver to Beneficiary a certificate and a true and complete copy of such
policy or policies which comply with the requirements of Sections 1.08 and
1.09(a), or a copy of the binding commitment for such policy or policies.
Upon Beneficiary's reasonable request, Trustor shall also provide to
Beneficiary originals of such policies
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or copies thereof certified by the insurance companies issuing them.
(d) Upon Beneficiary's reasonable request and within thirty (30)
days following the end of each policy period, and concurrently with the
delivery of each replacement policy pursuant to Section 1.09(c), Trustor
will deliver to Beneficiary a report or reports by Trustor setting forth
the particulars as to all insurance obtained by Trustor pursuant to Section
1.08 or Section 1.09 then in effect and stating that all premiums then due
thereon have been paid to the applicable insurers, and that the same are in
full force and effect.
(e) From time to time, upon the occurrence of any material change
in the use or operation of the Property, or in the availability of
insurance required hereunder in the area in which the Property is located,
Trustor will give Beneficiary prompt notice of such change. Trustor will
not take out separate or additional insurance concurrent in form or
contributing in the event of loss with that required to be maintained
pursuant to this Deed of Trust unless such insurance complies with this
Section 1.09.
1.10 Insurance Proceeds.
------------------
(a) Trustor shall give prompt written notice to Beneficiary of
the occurrence of any material damage to or destruction of the Property,
whether or not covered by insurance.
(b) In the event of any damage to or destruction of the Property
or any part thereof, all proceeds of insurance shall be payable to
Beneficiary (except that if the proceeds for the loss are less than
$50,000, such proceeds shall be payable directly to Trustor). Following
and during the continuation of an Event of Default hereunder, Trustor
hereby authorizes and empowers Beneficiary, at Beneficiary's option and in
Beneficiary's reasonable discretion as attorney-in-fact for Trustor, to
make proof of loss, adjust and compromise any claim in excess of $50,000
under any policy of insurance in effect with respect to the Property,
appear in and prosecute any action arising from such insurance policies,
collect and receive insurance proceeds and deduct therefrom Beneficiary's
reasonable expenses incurred in the collection of such proceeds.
(c) In the event of any damage to or destruction of the Premises
or any part thereof, Beneficiary shall hold the balance of all insurance
proceeds received (after deducting expenses) pursuant to Section 1.10(b)
above, to be used to pay or reimburse Trustor in accordance with normal
construction loan funding procedures for the costs of
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reconstructing of the Premises if the following conditions are satisfied
within ninety (90) days from the date of the damage or destruction:
(i) Trustor satisfies Beneficiary that after such
reconstruction is completed, the value of the Premises, as mutually
determined by Trustor and Beneficiary, will not be less than the appraised
value of the same immediately prior to the damage or destruction;
(ii) in Beneficiary's reasonable judgment, the amount of
such proceeds is sufficient to pay all costs of such reconstruction;
(iii) Trustor has delivered to Beneficiary (A) a
construction contract for the work of reconstruction in form and content
reasonably acceptable to Beneficiary with a contractor reasonably
acceptable to Beneficiary, (B) a copy of each permit and approval required
by law in connection with the reconstruction, and (C) a surety bond for or
guaranty to Beneficiary of payment for and completion of the
reconstruction, in form and substance reasonably satisfactory to
Beneficiary, in an amount no less than the estimated costs of the
reconstruction under the construction contract; and
(iv) no Default or Event of Default has occurred and is
continuing hereunder or under the Credit Agreement.
Except as otherwise provided in the Lease, if the insurance proceeds are held by
Beneficiary to be used to pay or reimburse Trustor for the cost of
reconstruction of the Premises, the Premises shall be promptly and diligently
restored by Trustor to the equivalent of their condition immediately prior to
the casualty in accordance with plans and specifications approved by Beneficiary
or to such other condition as Beneficiary may approve in writing, and
disbursements of such proceeds shall be in accordance with disbursement
procedures acceptable to Beneficiary.
(d) Any insurance proceeds not required to reconstruct the
Premises or to satisfy the conditions set forth in clauses (i) through (iv)
of Section 1.10(c) above shall be applied in the manner set forth in
Section 4.03 hereof as if the same were proceeds of sale; provided,
--------
however, that if after applying the insurance proceeds as set forth above
-------
Beneficiary determines that the remaining security is inadequate to secure
the remaining Obligations, Trustor shall, immediately upon demand from
Beneficiary, repay the principal of the Notes and Loans by an amount that
will reduce the Obligations to a balance for which the
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Beneficiary's Lien and the Security Documents as a whole are adequate.
(e) Provided that no Default or Event of Default has occurred and
is continuing, in the event that there is damage or destruction to the
Property, Trustor shall be entitled to receive all such proceeds and to
apply such proceeds to the payment of the costs and expenses of repairing,
restoring and operating the Property.
(f) In the event of the foreclosure of this Deed of Trust
pursuant to Section 4.01 or other transfer of the title to the Property in
extinguishment, in whole or in part, of the Obligations secured hereby, all
right, title and interest of Trustor in and to any insurance policy then in
force or any proceeds thereof or any rights thereunder, shall pass to the
purchaser or grantee at any foreclosure sale notwithstanding the amount of
any bid at such foreclosure sale.
1.11 Indemnification; Subrogation; Waivers.
-------------------------------------
(a) The Trustor agrees to indemnify, defend, reimburse and hold
the Beneficiary, and each of the Bank Creditors and their respective
successors, assigns, officers, employees, agents, attorneys and servants
(hereinafter in this Section 1.11 referred to individually as "Indemnitee"
----------
and collectively as "Indemnitees") harmless from any and all liabilities,
-----------
obligations, losses, damages, penalties, claims, actions, judgments, suits,
costs, expenses or disbursements (including reasonable attorneys' fees,
charges and disbursements) (for the purposes of this Section 1.11 the
foregoing are collectively called "expenses") of whatsoever kind or nature
--------
which may be imposed on, asserted against or incurred by any of the
Indemnitees in any way relating to or arising out of this Deed of Trust,
any other document or the documents executed in connection herewith and
therewith (other than the Environmental Indemnity Agreement) or in any
other way connected with the administration of the transactions
contemplated hereby and thereby or the enforcement of any of the terms of
or the preservation of any rights under any thereof, or in any way relating
to or arising out of the manufacture, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition or use of the Property
(including, without limitation, latent or other defects, whether or not
discoverable), the Trustor's violation of the laws of any country, state or
other governmental body or unit, any tort relating to or arising out of
Trustor's interest in the Property (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on
account of injury
D-16
to or the death of any Person (including any Indemnitee), or for property
damage) or any contract claim relating to or arising out of the Property.
The indemnification contained in this Section 1.11 shall not be applicable
to any liabilities, losses, damages, penalties, claims, actions, suits,
costs, expenses, or disbursements of any kind whatsoever, arising out of or
resulting from the gross negligence or willful misconduct of the
Indemnitees.
(b) Without limiting the application of Section 1.11(a), Trustor
agrees to pay, indemnify, defend and hold each Indemnitee harmless from and
against any expenses which such Indemnitee may suffer, reasonably expend or
reasonably incur in consequence of or growing out of any misrepresentation
by Trustor in this Deed of Trust, the Credit Agreement, or in any statement
or writing contemplated by or made or delivered by Trustor pursuant to or
in connection with this Deed of Trust or the Credit Agreement.
(c) Any amounts paid by any Indemnitee as to which such
Indemnitee has the right to reimbursement pursuant to this Deed of Trust or
the Credit Agreement (other than amounts as to which such Indemnitee has
the right to reimbursement pursuant to the Environmental Indemnity
Agreement) shall constitute Obligations secured under this Deed of Trust.
The indemnity obligations of Trustor contained in this Section 1.11 shall
continue in full force and effect notwithstanding the full payment of all
Obligations and notwithstanding the discharge thereof.
(d) Except for any loss or damages arising out of or resulting
from the gross negligence or willful misconduct of any Indemnitees, Trustor
waives any and all right to claim or recover against Indemnitees for loss
or damage to Trustor, the Property, Trustor's property or the property of
others under Trustor's control from any cause insured against or required
to be insured against by the provisions of this Deed of Trust.
(e) All sums payable by Trustor under this Deed of Trust shall be
paid without counterclaim, setoff, or deduction and without abatement,
suspension, deferment, diminution or reduction, and the obligations and
liabilities of Trustor hereunder shall in no way be released, discharged or
otherwise affected (except as expressly provided herein) by reason of: (i)
any damage to or destruction of or any condemnation or similar taking of
the Property or any part thereof (except that any award or settlement
applied by Beneficiary shall be credited against the Obligations); (ii) any
restriction or prevention of or interference with any use of the Property
or any part thereof; (iii) any title defect or encumbrance or any eviction
from the Property or any part thereof by title paramount or otherwise
(except
D-17
that the proceeds of any title insurance policy applied by Beneficiary
shall be credited against the Obligations); (iv) any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to Beneficiary, any of the
Bank Creditors or Trustor, or any action taken with respect to this Deed of
Trust by any trustee or receiver of Beneficiary, any of the Bank Creditors
or Trustor; or (v) any claim which Trustor has or might have against
Beneficiary, or any of the Bank Creditors. Trustor waives to the extent
permissible by law all rights now or hereafter conferred by statute or
otherwise to any abatement, suspension, deferment, diminution or reduction
of any of the Obligations.
1.12 Impositions.
-----------
(a) To the extent the Trustor is obligated to do so under the
Lease or as a matter of law, and subject to Trustor's rights to contest
payment of taxes and assessments, Trustor will pay when due all real
property taxes and assessments, general and special, and all other taxes
and assessments of any kind or nature whatsoever, including, without
limitation, public, governmental or non-governmental levies, assessments or
charges, such as assessments on appurtenant water stock, maintenance
charges, owner association dues or charges and fees, levies or charges
resulting from covenants, conditions and restrictions affecting the
Property, which are assessed or imposed upon any of the Property, or
arising in respect of the operation, occupancy, use or possession thereof
(all of which taxes, assessments and other public, governmental or
nongovernmental charges of like or different nature are hereinafter
referred to as "Impositions"); provided, however, that if, by law, any such
-----------
Imposition is payable, or may at the option of the payer be paid, in
installments, Trustor may pay the same together with any accrued interest
on the unpaid balance of such Imposition in installments as the same may
become due.
(b) If under the provisions of any law or ordinance now or
hereafter in effect there shall be assessed or imposed: (i) a tax or
assessment on the Property in lieu of or in addition to the Impositions
payable by Trustor pursuant to subparagraph (a) hereof, or (ii) a license
fee, tax or assessment imposed on Beneficiary and measured by or based in
whole or in part upon the amount of the outstanding Obligations, then all
such taxes, assessments or fees shall be deemed to be included within the
term "Impositions" as defined in subparagraph (a) hereof, and Trustor shall
pay and discharge or cause to be paid and discharged the same as herein
provided or shall reimburse or otherwise compensate Beneficiary for the
payment thereof; provided, however, that Trustor shall have no obligation
to pay or discharge taxes
D-18
which may be imposed on the Beneficiary's net income. In the event any
such law or ordinance specifically provides that Trustor may not pay,
reimburse or otherwise compensate Beneficiary for the payment of such tax,
assessment or fee, then, at the option of Beneficiary, Beneficiary may
declare all of the Obligations to be due and payable within sixty (60) days
and the failure of Trustor to pay the Obligations within such period shall
be an Event of Default entitling Beneficiary to exercise any of the
remedies set forth in this Deed of Trust.
(c) Subject to the provisions of subparagraph (d) hereof, Trustor
covenants to furnish to Beneficiary, at the request of Beneficiary and
within thirty (30) days after the date when any interest or penalty shall
accrue for nonpayment of Impositions, official receipts of the appropriate
taxing or other authority, or other proof reasonably satisfactory to
Beneficiary, evidencing the payment thereof.
(d) If an Event of Default shall occur and be continuing, at the
request of Beneficiary, Trustor shall pay to Beneficiary on the first
Business Day of each month an amount equal to one-twelfth of the annual
total of Impositions estimated by Beneficiary to be assessed against the
Property in order to pay the installment of Impositions next due on the
Property. In such event, Trustor further agrees to cause all bills,
statements or other documents relating to Impositions to be sent or mailed
directly to Beneficiary. Provided Trustor has deposited sufficient funds
with Beneficiary pursuant to this Section 1.12, Beneficiary shall pay on or
prior to the due date thereof, such amounts as may be due thereunder out of
the funds so deposited. Notwithstanding the foregoing, nothing contained
herein shall cause Beneficiary to be deemed a trustee of said funds or
obligate Beneficiary to pay any amount in excess of the amount deposited
pursuant to this Section 1.12. If at any time and for any reason the funds
deposited with Beneficiary are or will be insufficient to pay such amounts
as may then be due, Beneficiary shall notify Trustor and Trustor shall
immediately deposit an amount equal to such deficiency with Beneficiary.
Should Trustor fail to deposit with Beneficiary sums sufficient to fully
pay such Impositions when due, Beneficiary may, at Beneficiary's election,
but without any obligation to do so, advance any amounts required to make
up the deficiency. Trustor shall, on demand, reimburse Beneficiary for
said amount. Should an Event of Default occur and be continuing hereunder,
Beneficiary may, at any time at Beneficiary's option, apply any sums or
amounts then held by it pursuant hereto (including, without limitation, any
income earned thereon) to the payment or discharge of the Obligations in
the manner set forth in Section 4.03 hereof as if the same were
D-19
proceeds of sale. The receipt, use or application of any such sums paid by
Trustor to Beneficiary hereunder shall not be construed to affect the
maturity of any of the Obligations or to otherwise affect any of the rights
or powers of Beneficiary hereunder or any of the obligations of Trustor
hereunder.
(e) Trustor will pay all taxes, charges, filing, registration
and recording fees, excises and levies imposed in connection with the
recording of this Deed of Trust or imposed upon the Bank Creditors by
reason of their ownership of this Deed of Trust or any mortgage
supplemental hereto, and shall pay any and all stamp taxes and other taxes
required to be paid on any of the Obligations (other than taxes required to
be paid by the Banks Creditors pursuant to Section 2.20 of the Credit
Agreement); provided, however, that Trustor shall have no obligation to pay
or discharge taxes which may be imposed on the Beneficiary's net income.
In the event Trustor fails to make any such payment within five (5)
Business Days after written notice thereof from Beneficiary, then
Beneficiary shall have the right, but shall not be obligated to, pay the
amount due and Trustor shall, on demand, reimburse Beneficiary for said
amount.
1.13 Utilities. To the extent the Trustor is obligated to do so
---------
under the Lease, Trustor will pay when due all utility charges which are
incurred by Trustor for the benefit of the Property or which may become a
charge or Lien against the Property for gas, electricity, steam, water or
sewer services furnished to the Property and all other assessments or
charges of a similar nature, whether public or private, affecting the
Property whether or not such taxes, assessments or charges are Liens
thereon.
1.14 Actions Affecting Property. Trustor will appear in and
--------------------------
contest any action or proceeding purporting to materially affect the
security hereof or the rights or powers of Beneficiary hereunder; and
Trustor will pay all reasonable costs and expenses reasonably incurred by
Trustor, including cost of evidence of title and reasonable attorneys'
fees, charges and disbursements in any such action or proceeding.
1.15 Actions by Beneficiary to Preserve Property. Should
-------------------------------------------
Trustor fail to pay or perform any of the Obligations, after expiration of
any applicable notice and cure period, Beneficiary may pay or perform the
same in such manner and to such extent as it may reasonably deem necessary.
In connection therewith, without limiting its general powers, Beneficiary
shall have and is hereby given the right, but not the obligation: (a) to
enter upon and take possession of the Premises; (b) to the extent permitted
under the Lease, to make additions, alterations, repairs and
D-20
improvements to the Property which are reasonably necessary or proper to
keep the Property in good condition and repair; (c) to appear and
participate in any action or proceeding affecting or which may materially
and adversely affect the security hereof or the rights or powers of
Beneficiary; (d) except for those Liens permitted under the Credit
Agreement, to pay, purchase, contest or compromise any encumbrance, claim,
charge, Lien or debt which may affect the security of this Deed of Trust or
be prior or superior hereto; and (e) in exercising such powers, to pay all
necessary expenses, including, without limitation, the reasonable fees,
charges and disbursements and expenses of counsel or other necessary
consultants. Trustor shall, on demand therefor by Beneficiary, pay or
reimburse Beneficiary for all reasonable costs and expenses incurred by
Beneficiary in connection with the exercise by Beneficiary of the foregoing
rights, including, without limitation, cost of evidence of title, court
costs, appraisal costs, surveys and reasonable attorneys' fees. In the
event this Deed of Trust is placed in the hands of an attorney for the
collection of any sum secured hereby, Trustor agrees to pay on demand all
reasonable costs of collection, including reasonable attorneys' fees,
incurred by Beneficiary, either with or without the institution of any
action or proceeding, and in addition to all costs, disbursements and
allowances provided by law.
1.16 Eminent Domain.
--------------
(a) Should the Property or any part thereof or interest therein,
be taken or damaged by reason of any public improvements or condemnation
proceeding or in any other similar manner ("Condemnation"), or should
------------
Trustor receive any notice or other information thereof, Trustor shall give
prompt written notice thereof to Beneficiary.
(b) If the value of the Property will, in Beneficiary's
reasonable judgment, likely be materially impaired by any public
improvements or condemnation proceeding, then upon the written request of
Beneficiary, Trustor shall file or otherwise defend its rights under the
condemnation proceeding and prosecute the same with due diligence to its
final disposition and shall cause any awards or settlements to be paid over
to Beneficiary for disposition pursuant to the terms of this Deed of Trust.
Trustor may be the nominal party in such proceeding, but Beneficiary shall
be entitled to participate in and to control the same and to be represented
therein by counsel of its choice, and Trustor will deliver or cause to be
delivered to Beneficiary such instruments as may be requested by it from
time to time to permit such participation. If the Property or any part
thereof is taken or diminished in value, or if the consent settlement is
D-21
entered, by or under threat of such proceeding, the award or settlement
payable to Trustor by virtue of its interest in the Property shall be and
hereby is assigned, transferred and set over unto Beneficiary to be held by
it, in trust, subject to the Lien and security interest of this Deed of
Trust. Any such award or settlement in excess of $50,000 shall be first
applied to reimburse Trustor and Beneficiary for all costs and expenses,
including, without limitation, reasonable attorneys' fees, charges and
disbursements, incurred in connection with the collection of such award or
settlement. The balance of such award or settlement shall be, at
Beneficiary's sole discretion:
(i) applied in the manner set forth in Section 4.03 hereof
as if the same were proceeds of sale; or
(ii) held by Beneficiary to be used in accordance with the
provisions of Section 1.10(c) above to pay or reimburse Trustor for the
costs of rebuilding, reconstruction or repair of the Premises if the
conditions set forth in such section are satisfied within thirty (30) days
from the date of such award or settlement.
provided, however, that if after applying the award or settlement as set
-------- -------
forth above Beneficiary determines that the remaining security is
inadequate to secure the remaining Obligations, Trustor shall, immediately
upon demand from Beneficiary, repay the principal of the Notes and Loans by
an amount that will reduce the Obligations to a balance for which the
Beneficiary's Lien and security interest herein is adequate.
1.17 Successors and Assigns. This Deed of Trust applies to,
----------------------
inures to the benefit of and binds the parties hereto and their respective
successors and assigns.
1.18 Liens. Trustor will pay or procure the discharge of, at
-----
Trustor's cost and expense, all Liens (other than those Liens expressly
permitted under the Credit Agreement) upon the Property or any part thereof
or interest therein within ten (10) Business Days after Trustor learns of
the filing thereof. If Trustor shall fail to discharge any such Lien
within such ten (10) Business Day period, then, in addition to any other
right or remedy of Beneficiary, Beneficiary may, but shall not be
obligated to, discharge the same, either by paying the amount claimed to be
due, or by procuring the discharge of such Lien by depositing in court a
bond for the amount claimed or otherwise giving security for such claim, or
in such manner as is or may be prescribed by law; and all funds advanced by
Beneficiary to pay such obligations, liabilities, costs and expenses
(together with interest thereon at the Default Rate from the date of demand
until paid) shall be reimbursed by
D-22
Trustor upon demand by Beneficiary; and all such advances with interest
thereon as aforesaid shall be secured hereby.
1.19 Beneficiary's Powers. Without affecting the liability of
--------------------
any other Person liable for the payment of any obligation herein mentioned,
and without affecting the Lien or charge of this Deed of Trust upon any
portion of the Property not then or theretofore released as security for
the Obligations, Beneficiary may, from time to time and without notice: (a)
release any Person so liable; (b) extend the maturity or alter any of the
terms of any such obligation; (c) grant other indulgences; (d) release or
cause to be released at any time at Beneficiary's option any parcel,
portion or all of the Property; (e) take or release any other or additional
security for any obligation herein mentioned; (f) while an Event of Default
is continuing, make compositions or other arrangements with debtors or
other mortgagors in relation to this Deed of Trust; (g) advance additional
funds to protect the security hereof; (h) while an Event of Default is
continuing, pay or discharge any or all of the Obligations; (i) consent in
writing to the making of any map or plat thereof; (j) join in granting any
easement thereon; or (k) join in any extension agreement or any agreement
subordinating the Lien or charge hereof; and, in any case referred to in
clauses (g) or (h), all amounts so advanced, with interest thereon at the
Default Rate from the date of demand until paid, shall be secured hereby.
1.20 Permitted Contests. Notwithstanding anything to the
------------------
contrary contained in this Deed of Trust, Trustor at its expense may
contest (after prior written notice to Beneficiary), by appropriate legal,
administrative or other proceedings conducted in good faith and with due
diligence, the amount or validity or application, in whole or in part, of
any Imposition or Lien therefor or any law, ordinance, regulation,
covenant, condition or restriction or the application of any instrument of
record affecting the Property or any part thereof or any claims of
mechanics, materialmen, suppliers or vendors and Lien therefor; provided
that (a) in the case of any Impositions or Lien therefor or any claims of
mechanics, materialmen, suppliers or vendors and Lien therefor, such
proceedings shall suspend the collection thereof from Beneficiary and the
Property, (b) neither the Property nor any part thereof or interest therein
will be sold, forfeited or lost if Trustor pays the amount or satisfies the
condition being contested, and Trustor would have the opportunity to do so
in the event of Trustor's failure to prevail in the contest, (c)
Beneficiary and the Bank Creditors shall not, by virtue of such permitted
contest, be in any danger of any criminal liability, or any civil
liability, and neither the Property nor any interest therein would be
subject to the imposition of any Lien which would have priority over the
Lien of this
D-23
Deed of Trust, (d) Trustor shall have furnished to Beneficiary a good and
sufficient bond or surety as reasonably requested by and reasonably satisfactory
to Beneficiary if the contest of or failure to comply with such Imposition, law,
ordinance, regulation, covenant, condition or restriction could result in a Lien
or charge against the Property, and (e) Trustor has a reasonable basis for such
contest..
1.21 Continued Occupancy. If at any time the then existing use or
-------------------
occupancy of any part of the Property shall, pursuant to any zoning or other
law, ordinance or regulation, be permitted only so long as such use or occupancy
shall continue, Trustor shall not cause or permit such use or occupancy to be
discontinued without the prior written consent of Beneficiary.
1.22 Inspections. Subject to the provisions of the Lease or any
-----------
applicable law, Trustor hereby authorizes Beneficiary, its agents,
representatives or workmen, to enter at any reasonable time during normal
business hours after at least twenty-four (24) hours advance notice to Trustor
(except that with respect to any emergency, Beneficiary, its agents,
representatives or workers may enter at any time) upon or in the Premises for
the purpose of inspecting the same, and for the purpose of performing any of the
acts which Beneficiary is authorized to perform under the terms of this Deed of
Trust.
1.23 Actions by Trustee. At any time, or from time to time, without
------------------
liability therefor and without notice, upon written request of Beneficiary and
presentation of this Deed of Trust, and without affecting the personal liability
of any Person for payment of the Obligations secured hereby or the effect of
this Deed of Trust upon the remainder of the Property, Trustee may (i) reconvey
any part of the Property; (ii) consent in writing to the making of any map or
plat thereof; (iii) join in granting any easement thereon; or (iv) join in any
extension agreement or any agreement subordinating the Lien or charge hereof.
1.24 Hypothecation, Transfers. Trustor shall not, except as
------------------------
expressly permitted by the Credit Agreement, hypothecate, convey, sell, lease or
otherwise dispose of (or agree to do any of the foregoing at any future time)
all or any part of the Property.
ARTICLE 2
ASSIGNMENT OF LEASES AND RENTS
2.01 Assignment of Leases and Rents. Trustor hereby absolutely and
------------------------------
irrevocably assigns and transfers to Beneficiary any and all of the Subleases
and Rents now or
D-24
hereafter existing, and hereby gives to and confers upon Beneficiary the right,
power and authority to collect such Rents. Trustor hereby irrevocably appoints
Beneficiary its true and lawful attorney-in-fact, at the option of Beneficiary
at any time following and during the continuation of an Event of Default, to
demand, receive and enforce payment, to give receipts, releases and
satisfactions and to ▇▇▇, in the name of Trustor or Beneficiary, for all such
Rents, and to apply such Rents to the Obligations secured hereby in the manner
set forth in Section 2.05 hereof; provided, however, that absent the occurrence
and continuance of an Event of Default, Trustor shall have the right to collect,
use and enjoy such Rents, but not for more than the current month plus one (1)
month in advance unless otherwise approved by Beneficiary. The assignment of the
Subleases and Rents in this Article 2 is intended to be an absolute assignment
from Trustor to Beneficiary and not merely the passing of a security interest.
The Subleases and Rents are hereby assigned absolutely by Trustor to Beneficiary
contingent only upon the occurrence and continuance of an Event of Default. It
is understood and agreed that neither the foregoing assignment of Subleases and
Rents to Beneficiary nor Beneficiary's exercise of any of its rights and
remedies under this Article 2 or Article 4 hereof shall be deemed to make
Beneficiary a "mortgagee-in-possession" or otherwise responsible or liable in
any manner with respect to the Premises or the use, occupancy, enjoyment or
operation of any portion thereof, unless and until Beneficiary, in person or by
agent, assumes actual possession thereof, nor shall appointment of a receiver
for the Premises by any court at the request of Beneficiary or by agreement with
Trustor or the entering into possession of the Premises or any part thereof by
such receiver be deemed to make Beneficiary a "mortgagee-in-possession" or
otherwise responsible or liable in any manner with respect to the Premises or
the use, occupancy, enjoyment or operation of any portion thereof.
2.02 Collection Upon Default. If an Event of Default occurs and is
-----------------------
continuing, Beneficiary may, at any time-and from time to time without notice,
either by itself, by agent or by a receiver appointed by a court, and without
regard to the adequacy of any security for the Obligations hereby secured, enter
upon and take possession of the Premises or any part thereof in its own name and
▇▇▇ for or otherwise collect such Rents, including those past due and unpaid,
and apply the same, less reasonable costs and expenses of operation and
collection, including, without limitation, reasonable attorneys' fees, charges
and disbursements to the Obligations secured hereby in the manner set forth in
Section 2.05 hereof. The collection of such Rents or the entering upon and
taking possession of the Premises or the application thereof as aforesaid, shall
not,
D-25
by itself, cure or waive any default or notice of default hereunder or
invalidate any act done in response to such default or pursuant to such notice
of default.
2.03 Assignment of Future Leases. If requested by Beneficiary,
---------------------------
Trustor agrees to deliver an executed counter part or true and complete copy of
any sublease or assignment, approved by Beneficiary as provided herein, and to
execute and deliver all such further customary assurances and assignments of
leases as Beneficiary shall from time to time reasonably require.
2.04 Estoppel Certificates. Trustor will use its best efforts to
---------------------
obtain and deliver to Beneficiary, within ten (10) Business Days after written
request by Beneficiary, an estoppel certificate from the subtenant(s) or
assignee(s) under any Sublease setting forth (i) the name of the Trustor as
sublandlord or assignor, (ii) the rent payable under the Sublease, (iii) the
date to which all rental charges have been paid by the subtenant or assignee
under the Sublease, (iv) whether there are any alleged defaults under the
Sublease, and, if so, setting forth the nature thereof in reasonable detail, (v)
with respect to the Lease, that it has not been modified or, if it has been
modified, the date of each modification (together with copies of each such
modification), and (vi) such other matters as Beneficiary may reasonably
request.
2.05 Application of Income Received by Beneficiary. Beneficiary, in
---------------------------------------------
the exercise of the rights and powers herein conferred upon it by Section 2.01
and Section 4.05 hereof, shall have full power to use and apply the Rents in the
manner set forth in Section 4.03 hereof as if the same were proceeds of sale.
2.06 Notices to Tenants. Upon Beneficiary's reasonable request,
------------------
Trustor will promptly deliver to tenants of the Premises any notice required
pursuant to any of the Subleases with respect to this Deed of Trust.
ARTICLE 3
SECURITY AGREEMENT
3.01 Creation of Security Interest. This Deed of Trust creates a
-----------------------------
Lien on the Property, and to the extent the Property is not real property under
applicable law (such Property hereinafter referred to as the "Secured
-------
Property"), this Deed of Trust constitutes a security agreement under the
--------
California Uniform Commercial Code and any other applicable law.
The grant of a security interest to Beneficiary in the granting
clauses of this Deed of Trust shall not be
D-26
construed to derogate from or impair the Lien or provisions of or the rights of
Beneficiary under this Deed of Trust with respect to any property described
herein which is real property or which the parties have agreed to treat as real
property. If required by Beneficiary, at any time during the term of this Deed
of Trust, Trustor will execute and deliver to Beneficiary, in form satisfactory
to Beneficiary, additional security agreements, financing statements and/or
other instruments covering all Personal Property or fixtures of Trustor which
may at any time be furnished, placed on, or annexed or made appurtenant to the
Real Property or used, useful or held for use, in the operation of the
Improvements.
Trustor hereby irrevocably constitutes and appoints Beneficiary the
attorney-in-fact of Trustor, to execute, deliver and file with the appropriate
filing officer or office such security agreements, financing statements and/or
other instruments as Beneficiary may reasonably request or reasonably require in
order to impose and perfect the Lien and security interest hereof more
specifically on the Personal Property or any fixtures.
If Trustor enters into a separate security agreement with Beneficiary
relating to any of the Personal Property or fixtures, the terms of such security
agreement shall govern the rights and remedies of Beneficiary in the event of a
default thereunder.
It is understood and agreed that, in order to protect Beneficiary from
the effect of California Uniform Commercial Code Section 9313, as amended from
time to time, in the event that (i) Trustor intends to purchase any goods which
may become fixtures attached to the Premises, or any part thereof, and (ii) such
goods will be subject to a purchase money security interest held by a seller or
any other party:
(a) Except as provided in Section 6.3 of the Credit Agreement,
Trustor shall, before executing any security agreement or other document
evidencing purchase money security interest, obtain the prior written approval
of Beneficiary, and all requests for such written approval shall be in writing
and contain the following information:
(i) a description of the fixtures to be replaced, added to,
installed or substituted;
(ii) the address at which the fixtures will be replaced, added
to, installed or substituted: and
D-27
(iii) the name and address of the proposed holder and proposed
amount of the security interest.
Trustor's execution of any such security agreement or other document evidencing
such security interests in contravention of this subparagraph (a) shall be a
material breach of Trustor's covenants under this Deed of Trust, and shall, at
the option of Beneficiary, entitle Beneficiary to all rights and remedies
provided for herein upon the occurrence and continuance of an Event of Default.
No consent by Beneficiary pursuant to this subparagraph shall be deemed to
constitute an agreement to subordinate any right of Beneficiary in fixtures or
other property covered by this Deed of Trust.
(b) If at any time Trustor fails to make any payment when due and
payable on an obligation secured by a purchase money security interest in any
fixture, Beneficiary, at its option, may at any time pay the amount secured by
such security interest and the amount so paid shall be payable on demand by
Trustor to Beneficiary.
(c) Beneficiary shall have the right to acquire by assignment from
the holder of such security interest any and all contract rights, accounts
receivable, negotiable or nonnegotiable instruments, or other evidence of
Trustor's indebtedness for such Personal Property or fixtures, and, upon
acquiring such interest by assignment, shall have the right to enforce the
security interest as assignee thereof, in accordance with the terms and
provisions of the California Uniform Commercial Code then in effect, and in
accordance with any other provisions of law.
(d) Whether or not Beneficiary has paid the indebtedness secured by
or taken an assignment of such security interest, Trustor covenants to pay all
sums when due and payable and perform all obligations secured thereby, and if
Trustor at any time shall be in default under such security agreement after the
exhaustion of all applicable notice and cure periods provided for herein, it
shall be a material breach of Trustor's covenants under this Deed of Trust.
3.02 Representations, Warranties and Covenants of Trustor. Trustor
----------------------------------------------------
hereby represents, warrants and covenants as follows:
(a) Trustor is, and as to all Secured Property acquired after the
date hereof will be, the sole owner of the Secured Property, free from any Lien
(other than those Liens expressly permitted under the Credit Agreement),
security interest, encumbrance or claim thereon of any kind
D-28
whatsoever. Trustor will notify Beneficiary of, and will defend the Secured
Property against, all claims and demands of all Persons at any time claiming the
Secured Property or any interest therein other than such interests as are
permitted herein.
(b) Except as otherwise provided in clauses (a) or (d) of this
Section 3.02, or in Sections 6.3 and 6.5 of the Credit Agreement, or in
connection with conveyance of the Property, or a portion thereof permitted
elsewhere in this Deed of Trust, Trustor will not assign, pledge, encumber,
lease, sell, convey or in any manner transfer any item of the Secured Property,
without the prior written consent of Beneficiary.
(c) The Secured Property is not used or bought for personal, family
or household purposes.
(d) Except as otherwise provided in clauses (a) or (b) of this
Section 3.02, the Secured Property will be kept on or at the Premises or at such
other location as Beneficiary may approve, and Trustor will not remove any
portion or item of Secured Property affixed or attached to the Premises without
the prior written consent of Beneficiary which consent shall not be unreasonably
withheld, except such portions or items of Secured Property which are consumed
or worn out in ordinary usage or removed in the ordinary course of business and
promptly replaced by Trustor with new items of equal or greater quality or
utility.
(e) Trustor maintains its principal place of business at ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Trustor will immediately notify
Beneficiary in writing of any change in its principal place of business.
(f) Trustor shall cause all financing and continuation statements
and other instruments with respect to the Secured Property at all times to be
kept recorded, filed or registered in such manner and in such places as may be
required by law to fully evidence, perfect and secure the interests of
Beneficiary in the Secured Property, and shall pay all filing fees in connection
therewith. At the request of Beneficiary, Trustor will join Beneficiary in
executing one or more financing statements with respect to the Secured Property,
and renewals, continuation statements and amendments thereof, pursuant to the
Uniform Commercial Code of California in customary form, and will pay the cost
of filing the same in all public offices wherever filing is necessary to the
effectiveness thereof. Without limiting the foregoing, Trustor hereby
irrevocably appoints Beneficiary its attorney-in-fact to execute, deliver and
file such instruments for or on behalf of Trustor upon
D-29
Trustor's failure to do so within a reasonable time after demand, and Trustor
will pay the cost of any such filing.
3.03 Survival of Security Agreement. Notwithstanding any release of
------------------------------
any or all of the property included in the Property which is deemed "real
property", any proceedings to foreclose this Deed of Trust or its satisfaction
of record, the terms hereof shall survive as a security agreement with respect
to the security interest created hereby and referred to above until the
repayment or satisfaction in full of the Obligations.
ARTICLE 4
EVENTS OF DEFAULT AND REMEDIES
4.01 Events of Default.
-----------------
(a) The occurrence of any of the following events shall be deemed an
Event of Default hereunder (an "Event of Default"):
----------------
(i) the occurrence of an Event of Default under the Credit
Agreement after the expiration of any applicable cure period;
(ii) a default in the performance of any of Trustor's material
covenants, conditions or obligations under the Lease after the expiration of any
applicable cure period; or
(iii) a default in the performance of any other covenant herein
and not in the Credit Agreement after the expiration of any applicable cure
period.
(b) Upon the occurrence of an Event of Default, Beneficiary may in
accordance with Section 7.2 of the Credit Agreement declare all sums secured
hereby immediately due and payable, commence an action to foreclose this Deed of
Trust as a mortgage, and/or deliver to Trustee a written declaration of default
and demand for sale and of written notice of default and of election to cause to
be sold the Property, which notice Trustee shall cause to be duly filed for
record in case of foreclosure by exercise of the power of sale herein. Should
Beneficiary elect to foreclose by exercise of the power of sale herein,
Beneficiary shall also deposit with Trustee this Deed of Trust and such receipts
and evidence of expenditures made and secured hereby as Trustee may require, and
notice of sale having been given as then required by law and after lapse of such
time as may then be required by law after recordation of such notice of default,
Trustee, without demand on Trustor, shall sell the Property at the time and
place of sale fixed by it in such notice of sale as Beneficiary may direct,
either as a whole
D-30
or in separate parcels, as Beneficiary may determine, at public auction to the
highest bidder for cash (or by credit bid) in lawful money of the United States,
payable at time of sale. Beneficiary shall have the right to direct the order in
which separate parcels shall be sold and Trustor shall have no right to direct
the order in which separate parcels are sold. Trustee may postpone sale of all
or any portion of the Property by public announcement at such time and place of
sale, and from time to time thereafter may postpone such sale by public
announcement at the time fixed by the preceding postponement. Trustee shall
deliver to such purchaser its deed conveying the Property, or any portion
thereof, so sold but without any covenant or warranty, express or implied. The
recitals in such deed of any matters or facts shall be conclusive proof of the
truthfulness thereof. Any Person, including Trustor, Trustee or Beneficiary, may
purchase at such sale by credit bid or otherwise.
Beneficiary may proceed as to the Personal Property in accordance with
Beneficiary's rights and remedies with respect to the Property or sell the
Personal Property separately and without regard to the remainder of the Property
in accordance with Beneficiary's rights and remedies provided by the California
Uniform Commercial Code as well as other rights and remedies available at law or
in equity.
Trustor waives all rights, legal and equitable, it may now or
hereafter have to require marshalling of assets or to require upon foreclosure
sales of assets in a particular order, including without limitation the rights
provided by California Civil Code Sections 2899 and 3433, as such Sections may
be amended from time to time. Each successor and assign of Trustor, including,
without limitation, a holder of a Lien subordinate to the Lien-created hereby
(without implying that Trustor has, except as expressly provided herein, a right
to grant an interest in, or a subordinate Lien on, the Property), by acceptance
of its interest or Lien agrees that it shall be bound by the above waiver, as if
it gave the waiver itself.
4.02 Discontinuance of Proceedings. Beneficiary, from time to time
-----------------------------
before the Trustee's sale pursuant to Section 4.01, may rescind any notice of
breach or default and of election to cause to be sold the Property by executing
and delivering to Trustee a written notice of such rescission, which notice,
when recorded, shall also constitute a cancellation of any prior declaration of
default and demand for sale. The exercise by Beneficiary of such right of
rescission shall not constitute a waiver of any breach or default then existing
or subsequently occurring or impair the right of Beneficiary to execute and
D-31
deliver to Trustee, as above provided, other declarations of default and demand
for sale, and notices of breach or default, and of election to cause to be sold
the Property to satisfy the obligations hereof, nor otherwise affect any
provision, covenant or condition of this Deed of Trust or any of the rights,
obligations or remedies of the parties thereunder or hereunder.
4.03 Application of Proceeds of Sale.
-------------------------------
(a) Upon a sale of all or part of the Property pursuant to Section
4.01, after deducting all reasonable costs, fees and expenses of Trustee and of
this Deed of Trust, Trustee shall deliver the proceeds of sale to Beneficiary
for application, as follows:
(i) First, to (A) any and all sums advanced by the Beneficiary
to preserve the Property or preserve its Lien and security interest therein, and
(B) in the event of any proceeding for the collection or enforcement of any of
the Obligations, after an Event of Default shall have occurred and be
continuing, the reasonable expenses of retaking, holding, operating, managing,
preparing for sale or lease, selling or otherwise disposing of or realizing on
the Property, or of any exercise by the Beneficiary of its rights hereunder,
together with reasonable attorneys' fees and court costs;
(ii) Second, to the extent proceeds remain after the
application pursuant to the preceding clause (i), an amount equal to the
outstanding "Primary Obligations" (as hereinafter defined) shall be paid to the
-------------------
Bank Creditors, with each Bank Creditor receiving its Pro Rata Share of the
amount distributed;
(iii) Third, to the extent proceeds remain after the application
pursuant to the preceding clauses (i) and (ii), an amount equal to the
outstanding "Secondary Obligations" (as hereinafter defined) shall be paid to
---------------------
the Bank Creditors, with each Bank Creditor receiving an amount equal to its
outstanding Secondary Obligations or, if the proceeds are insufficient to pay in
full all such Secondary Obligations, its Pro Rata Share of the amount remaining
to be distributed; and
(iv) Fourth, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) through (iii), inclusive, and
following the reconveyance of this Deed of Trust, to the Trustor or to whomever
may be lawfully entitled to receive such surplus.
(b) For purposes of this Deed of Trust (i) "Pro Rata Share" shall
--------------
mean, when calculating a Bank Creditor's
D-32
portion of any distribution or amount, that amount (expressed as a percentage)
equal to a fraction the numerator of which is the then unpaid amount of such
Secured Creditor's Primary Obligations or Secondary Obligations, as the case may
be, and the denominator of which is the then outstanding amount of all Primary
Obligations or Secondary Obligations, as the case may be, (ii) "Primary
-------
Obligations" shall mean (A) in the case of the Credit Agreement Obligations,
-----------
all principal of, and interest on, all Loans, and all Commitment Fees and (iii)
"Secondary Obligations" shall mean all Obligations other than Primary
---------------------
Obligations.
(c) When payments to Bank Creditors are based upon their respective
Pro Rata Shares, the amounts received by such Bank Creditors hereunder shall be
applied (for purposes of making determinations under this Section 4.03 only) (i)
first, to their Primary Obligations and (ii) second, to their Secondary
Obligations. If any payment to any Bank Creditor of its Pro Rata Share of any
distribution would result in overpayment to such Bank Creditor, such excess
amount shall instead be distributed in respect of the unpaid Primary Obligations
or Secondary Obligations, as the case may be, of the other Bank Creditors, with
each Bank Creditor whose Primary Obligations or Secondary Obligations, as the
case may be, have not been paid in full to receive an amount equal to such
excess amount multiplied by a fraction the numerator of which is the unpaid
Primary Obligations or Secondary Obligations, as the case may be, of such Bank
Creditor and the denominator of which is the unpaid Primary Obligations or
Secondary Obligations, as the case may be, of all Secured Creditors entitled to
such distribution.
(d) All payments required to be made hereunder shall be made to the
Agent under the Credit Agreement for the account of the Bank Creditors.
4.04 Beneficiary Statement. Trustee, upon presentation to it of an
---------------------
affidavit signed by or on behalf of Beneficiary, setting forth any fact or facts
showing a default by Trustor under any of the terms or conditions of this Deed
of Trust, is authorized to accept as true and conclusive all facts and
statements in such affidavit and to act hereunder in complete reliance thereon.
4.05 Remedies Upon Default. Trustor covenants and agrees that should
---------------------
an Event of Default occur and be continuing, then Beneficiary, or Trustee upon
written instructions from Beneficiary, may, upon prior written notice to
Trustor, without releasing Trustor from any obligation here-under and without
waiving its right to declare an Event of Default or impairing any declaration of
default or election to cause the Property to be sold or any sale proceeding
predicated thereon:
D-33
(a) make or do the same in such manner and to such extent as either
Beneficiary or Trustee may deem reasonably necessary to protect the security
hereof, including, without limitation, curing and defaults or alleged defaults
under the Lease. Trustor authorizes Beneficiary and Trustee to enter upon and
take possession of the Premises for such purposes, and any sums reasonably
expended for such purposes shall become part of the Obligations secured hereby;
(b) commence, appear in and/or defend any action or proceedings
purporting to affect the security hereof, and/or any additional or other
security therefor, the interests, rights, powers and/or duties of Trustee and/or
Beneficiary hereunder, whether brought by or against Trustor, Trustee or
Beneficiary;
(c) pay, purchase, contest or compromise any claim, debt, Lien,
charge or encumbrance which in the judgment of either may affect or appear to
affect the security of this Deed of Trust, the interests of Beneficiary or the
rights, powers and/or duties of Trustee and/or Beneficiary hereunder and any
sums reasonably expended for such purposes shall become part of the Obligations
secured hereby; and
(d) Beneficiary is authorized either by itself or by its agent to be
appointed by it for that purpose or by a receiver appointed by a court of
competent jurisdiction, to enter into and upon and take and hold possession of
any portion or all of the Property, both real and personal, and exclude Trustor
and all other Persons therefrom; and to operate and manage the Property and rent
and lease the same, perform such reasonable acts of repair or protection as may
be reasonably necessary or proper to conserve the value thereof, and collect any
and all income, rents, issues, profits and proceeds therefrom, the same being
hereby assigned and transferred to Beneficiary, for the benefit and protection
of Beneficiary, and from time to time apply and/or accumulate such income,
rents, issues, profits and proceeds in the manner set forth in Section 4.03
hereof as if the same were proceeds of sale. The collection and/or receipt of
income, rents, issues, profits and/or proceeds from the Property by Beneficiary,
its agent or receiver, after declaration of default and election to cause the
Property to be sold under and pursuant to the terms of this Deed of Trust shall
not affect or impair such default or declaration of default or election to cause
the Property to be sold or any sale proceedings predicated thereon, but such
proceedings may be conducted and sale effected notwithstanding the receipt
and/or collection of any such income, rents, issues, profits and/or proceeds.
D-34
Neither Trustee nor Beneficiary shall be under any obligation to make
any of the payments or do any of the acts referred to in this Section 4.05 and
any of the actions referred to in this Section 4.05 may be taken by Beneficiary
without regard to the adequacy of the security for the Obligations.
ARTICLE 5
FIXTURE FILING
5.01 Fixture Filing. This Deed of Trust shall be effective as a
--------------
financing statement filed as a fixture filing with respect to all fixtures
included in the Property and is to be filed and recorded in, among other places,
the real estate records of the county where the Real Property is located.
ARTICLE 6
MISCELLANEOUS
6.01 Choice of Law. Beneficiary, Trustee and Trustor agree that the
-------------
rights and obligations under this Deed of Trust shall be governed by and
construed and interpreted in accordance with the laws of the State of
California.
6.02 Amendments. etc. This Deed of Trust cannot be waived, changed,
---------------
discharged or terminated orally, but only by an instrument in writing signed in
accordance with Section 9.5 of the Credit Agreement.
6.03 Limitation of Interest. It is the intent of Trustor and
----------------------
Beneficiary in the execution of this Deed of Trust and all other instruments
evidencing or securing the Obligations to contract in strict compliance with the
relevant usury laws. In furtherance thereof, Beneficiary and Trustor stipulate
and agree that none of the terms and provisions contained herein shall ever be
construed to create a contract for the use, forbearance or detention of money
requiring payment of interest at a rate in excess of the maximum interest rate
permitted to be charged by relevant law. Trustor or any guarantor, endorser or
other party now or hereafter becoming liable for the payment of any of the
Obligations shall never be required to pay interest at a rate in excess of the
maximum interest that may be lawfully charged under relevant law and the
provisions of this Section 6.03 shall control over all other provisions of any
instrument executed in connection herewith which may be in apparent conflict
herewith. In the event it is determined that any holder of any of the
Obligations has collected monies which are deemed to constitute interest and are
deemed to increase the effective interest rate on the Obligations to a rate in
excess of that permitted to be
D-35
charged by relevant law, all such sums deemed to constitute interest in excess
of such legal rate shall be applied by such holder to payment of such
Obligations, as such Obligations mature, or refunded to Trustor.
6.04 Notices. Except as otherwise expressly provided herein, all
-------
notices and communications shall be telecopied or delivered by messenger or
national overnight courier service and all such notices and communications
shall, when mailed, telecopied, or sent by overnight courier, be effective when
delivered to the overnight courier, or sent by telex or telecopier and when
mailed shall be effective three (3) Business Days following deposit in the mail
with proper postage, except that notices and communications to the Beneficiary
shall not be effective until received by the Beneficiary. All notices, requests,
demands or other communications shall be in writing and addressed as follows:
(a) if to the Trustor, at:
Synbiotics Corporation
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ "▇" ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b) if to the Trustee, at:
▇▇▇▇▇▇▇ Title of California, Inc.
Sand Diego Division
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(c) if to the Beneficiary:
Banque Paribas
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
D-36
(d) if to any Bank Creditor, either (i) to the Agent, at the address
of the Agent specified in the Credit Agreement or (ii) at such address as such
Bank Creditor shall have specified in the Credit Agreement;
6.05 Captions. The captions or headings at the beginning of each
--------
Article and Section hereof are for the convenience of the parties and are not a
part of this Deed of Trust.
6.06 Subrogation. To the extent that the proceeds of the Loans are
-----------
used, or Beneficiary advances any funds under this Deed of Trust (which advances
are hereby deemed to have been advanced by Trustor's request), to pay any
outstanding Lien, charge or encumbrance against the Property, Beneficiary shall
be subrogated to any and all rights and Liens held by any owner or holder of
such outstanding Liens, charges and encumbrances, irrespective of whether said
Liens, charges or encumbrances are released.
6.07 Non-Waiver. Except as expressly provided to the contrary
----------
herein, acceptance by Beneficiary of any sum after the same is due shall not
constitute a waiver of the right either to require prompt payment, when due, of
all other sums hereby secured or to declare an Event of Default. The acceptance
by Beneficiary of any sum in an amount less than the sum then due shall be
deemed an acceptance on account only and upon condition that it shall not
constitute a waiver of the obligation of Trustor to pay the entire sum then due,
and Trustor's failure to pay said entire sum then due shall be and continue to
be in default notwithstanding such acceptance of such amount on account, as
aforesaid, and Beneficiary shall be at all times thereafter and until the entire
sum then due shall have been paid, and notwithstanding the acceptance by
Beneficiary thereafter of further sums on account, or otherwise, entitled to
exercise all rights in this Deed of Trust conferred upon it, upon the occurrence
of an Event of Default. Consent by Beneficiary to any transaction or action of
Trustor which is subject to consent or approval of Beneficiary hereunder shall
not be deemed a waiver of the right to require such consent or approval to
future or successive transactions or actions. No failure by Beneficiary to
insist upon the strict performance of any term hereof or to exercise any right,
power or remedy consequent upon a breach thereof shall constitute a waiver of
any such term or of any such breach. No waiver of any breach shall affect or
alter this Deed of Trust, which shall continue in full force and effect, or the
rights of Beneficiary with respect to any other then existing or subsequent
breach.
6.08 Further Assurances. Trustor at its own expense, will execute,
------------------
acknowledge and deliver all such
D-37
instruments and take all such action as may be reasonably necessary to assure to
Beneficiary the Lien hereof against the Property herein described and the rights
intended to be provided to Beneficiary herein.
6.09 Additional Security. Without notice to or consent of Trustor
-------------------
and without impairment of the Lien and rights created by this Deed of Trust,
Beneficiary may accept from Trustor or from any other Person, additional
security for the Obligations. Neither the giving of this Deed of Trust nor the
acceptance of any such additional security shall prevent Beneficiary from
resorting, first, to such additional security, and, second, to the security
created by this Deed of Trust without affecting Beneficiary's Lien and rights
under this Deed of Trust.
6.10 Books and Records. Trustor shall make avail able to Beneficiary
-----------------
for copying and inspection at all reasonable times during normal business hours
and during the term of this Deed of Trust at Trustor's principal place of
business upon receipt of five (5) Business Days' prior written notice from
Beneficiary, all books and records relating to the business and operation of the
Property.
6.11 Waiver of Statute of Limitations. The right to plead any and
--------------------------------
all statutes of limitation as a defense to any demand secured by or made
pursuant to this Deed of Trust is hereby waived to the full extent permitted by
law.
6.12 Remedies Cumulative. No remedy herein con ferred upon or
-------------------
reserved to Trustee or Beneficiary is intended to be exclusive of-any other
remedy herein or by law provided or permitted, but each shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute. Every power or remedy given by this
instrument to Trustee or Beneficiary or to which either of them may be otherwise
entitled may be exercised, concurrently or independently, from time to time and
as often as may be deemed expedient by Trustee or Beneficiary, and either of
them may pursue inconsistent remedies.
6.13 Recordation. Trustee accepts this Deed of Trust when this Deed
-----------
of Trust, duly executed and acknowledged, is made a public record as provided by
law.
6.14 Substitution of Trustee. Beneficiary may, from time to time, by
-----------------------
a written instrument executed and acknowledged by Beneficiary and recorded in
the county or counties where the Property is located, and by otherwise complying
with applicable statutory provisions, substitute a successor or successors for
the Trustee named herein or acting hereunder.
D-38
6.15 Reconveyance; Releases.
----------------------
(a) After the Termination Date, Beneficiary, at the expense of the
Trustor, shall promptly request Trustee in writing to reconvey the Property, or
any remaining portion thereof, and shall surrender to Trustee this Deed of Trust
for cancellation and retention. Upon its receipt of the written request of
Beneficiary, the surrender of this Deed of Trust, and the payment of its fees,
Trustee shall promptly reconvey, without warranty, the Property then held
hereunder. The recitals in such reconveyance of any matters or facts shall be
conclusive proof of the truthfulness thereof. The grantee in such reconveyance
may be described as "the person or persons legally entitled thereto." Neither
Beneficiary nor Trustee shall have any obligation or duty to determine the
rights of Persons claiming to be rightful grantees of any reconveyance. As used
in this Deed of Trust, "Termination Date" shall mean the date upon which the
-----------------
Total Commitments and all Interest Rate Protection Agreements have been
terminated, no Note under the Credit Agreement is outstanding (and all Loans
have been repaid in full), and all Obligations then owing have been paid in
full.
(b) In the event that any part of the Property is sold in connection
with a sale permitted by Section 6.5 of the Credit Agreement or otherwise
released at the direction of the Required Banks and the proceeds of such sale or
sales or from such release are applied in accordance with the provisions of the
Credit Agreement, to the extent required to be so applied, such Property will be
sold free and clear of the Liens created by this Deed of Trust and the
Beneficiary, at the request and expense of the Trustor, will duly assign,
transfer and deliver to the Trustor (without recourse and without any
representation or warranty) such of the Property as is then being (or has been)
so sold or released and has not theretofore been released pursuant to this Deed
of Trust.
(c) At any time that the Trustor desires that the Beneficiary take
any action to acknowledge or give effect to any release of Property pursuant to
clause (a) above, it shall deliver to the Beneficiary a certificate signed by an
authorized officer stating that the release of the respective Property is
permitted pursuant to clauses (a) or (b) above.
(d) The Beneficiary and the Trustee shall have no liability
whatsoever to any Secured Creditor as a result of any release of Property by it
in accordance with this Section 6.16.
D-39
6.16 Time of the Essence. Time is of the essence of this Deed of
-------------------
Trust, and the performance of all provisions hereof.
6.17 Partial Invalidity. If any of the provisions of this Deed of
------------------
Trust or the application thereof to any Person, party or circumstances shall to
any extent be invalid or unenforceable, the remainder of this Deed of Trust, or
the application of such provision or provisions to Persons, parties or
circumstances other than those as to whom or which it is held invalid or
unenforceable, shall not be affected thereby, and every provision of this Deed
of Trust shall be valid and enforceable to the fullest extent permitted by law.
6.18 Request For Notice. Trustor requests that a copy of any notice
------------------
of default and a copy of any notice of sale hereunder be mailed to Trustor at
the address of Trustor given above.
6.19 Irrevocable Trust. The trust created hereby is irrevocable by
-----------------
Trustor unless and until the Property is reconveyed to Trustor as provided in
Section 6.16 hereof.
D-40
IN WITNESS WHEREOF, Trustor has caused this instrument to be duly
executed as of the day and year first above written.
TRUSTOR:
SYNBIOTICS CORPORATION,
a California corporation
By: ___________________________
Name:
Title:
D-41
EXHIBIT "A"
-----------
LEASE
-----
D-42
EXHIBIT "B"
-----------
DESCRIPTION OF LAND
-------------------
D-43
EXHIBIT E-1
FORM OF OPINION OF COUNSEL TO THE BORROWER
July 9, 1997
Banque Paribas, as Agent, and each
of the Banks party
to the Credit Agreement
referred to below
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
We have acted as counsel for Synbiotics Corporation, a California
corporation (the "Borrower"), in connection with the execution and delivery of
the Credit Agreement, dated as of July 9, 1997 (the "Credit Agreement"), among
the Borrower, the several financial institutions party to the Credit Agreement
(the "Banks") and Banque Paribas, as Agent for the Banks.
This opinion is provided to the Agent and the Banks as required
pursuant to Section 3.1(b)(i) of the Credit Agreement. Capitalized terms not
otherwise defined herein have the respective meanings set forth in the Credit
Agreement.
In connection with this opinion letter, we have examined executed
copies of the Credit Agreement and the following documents:
(a) the Notes of the Borrower, dated as of the date hereof and
delivered to each of the Banks pursuant to the Credit Agreement;
(b) the Warrant, dated as of July 9, 1997, issued by the Borrower to
the Agent;
(c) the Pledge Agreement, dated as of July 9, 1997, between the
Borrower and Agent (the "Pledge Agreement");
E-1-1
(d) the Security Agreement, dated as of July 9, 1997, between the
Borrower and Agent (the "Security Agreement"), and the various UCC-1 financing
statements executed in connection therewith (the "Financing Statements");
(e) the Environmental Indemnity Agreement, dated as of July 9, 1997,
by the Borrower for the benefit of the Agent;
(f) the Patent Security Agreement, dated as of July 9, 1997, by
Borrower for the benefit of Agent (the "Patent Agreement");
(g) the Trademark Security Agreement, dated as of July 9, 1997, by
Borrower for the benefit of Agent (the "Trademark Agreement");
(h) the Copyright Security Agreement, dated as of July 9, 1997, by
Borrower for the benefit of Agent (the "Copyright Agreement");
(i) each Notice and Bank Agreement, dated as of July 9, 1997 by the
Borrower for the benefit of the Agent (the "Bank Notices");
(j) certificates of public officials from the State of California;
the articles of incorporation and by-laws of the Borrower, as amended to date;
records of proceedings of the Board of Directors of the Borrower during or by
which resolutions were adopted relating to matters covered by this opinion; and
certificates of officers of the Borrower as to certain factual matters; and.
(k) such other documents as we have deemed necessary or appropriate
as a basis for the opinions hereinafter expressed.
The Credit Agreement and each of the documents referred to in (a)
through (i) above are hereinafter referred to as the Transaction Documents.
In connection with the opinions expressed herein, we have made such
examination of matters of law and of fact as we considered appropriate or
advisable for purposes hereof. As to matters of fact material to the opinions
expressed herein, we have relied upon the representations and warranties as to
factual matters contained in and made by the Borrower pursuant to the
Transaction Documents and upon certificates and statements of government
officials and of officers of the Borrower. We have also examined originals or
copies of such corporate documents or records of the Borrower as we have
considered appropriate for the opinions expressed herein. We have assumed for
the purposes of this opinion that the signatures on documents and instruments
examined by us are authentic, that each document is what it purports to be, and
that all documents submitted to us as copies conform with the originals, which
facts we have not independently verified.
We have also examined photostatic or facsimile copies of the
agreements (the "Material Agreements") identified in Schedule A attached hereto,
and any consents in connection with the Material Agreements. In our examination
and review we have assumed the genuineness of all signatures, the legal capacity
of natural persons, the authenticity of the
E-1-2
Banque Paribas, as Agent July 9, 1997
and each of the Banks party Page 3.
to the Credit Agreement
documents submitted to us as originals, the conformity to the original documents
of all documents submitted to us as certified, facsimile or photostatic copies,
and the authenticity of the originals of such copies. As to any facts material
to the opinions hereinafter expressed which we did not independently establish
or verify, we have relied without investigation upon certificates, statements
and representations of representatives of the Borrower. We have also assumed
that the Lender has filed any required California state franchise, income or
similar tax returns and has paid any such required state franchise, income or
similar taxes. Regarding documents executed by parties other than the Borrower,
we have assumed (i) that each such other party had the power to enter into and
perform all its obligations thereunder, (ii) the due authorization, execution
and delivery of such documents by each such party, and (iii) that such documents
constitute the legal, valid and binding obligations of each such party.
With respect to our opinion in paragraph 1 below, we are relying
solely on our review and examination of the certificates received from the
Secretary of State of the State of California, without further investigation of
the corporate records of the Borrower.
Based upon the foregoing, and further subject to the assumptions,
qualifications and exceptions set forth below, and except as set forth in the
Transaction Documents, we hereby advise you that in our opinion:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of California with the
corporate power and authority to own and operate (or lease, as the case may be)
its properties and to carry on its business as it is now conducted.
2. The Borrower has the corporate power and authority to enter into
and perform the Transaction Documents to which it is a party, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Transaction Documents to which it is a party.
3. No authorization, consent, approval, license, exemption of, or
filing or registration with, any Governmental Authority is required for the due
execution, delivery or performance by, or enforcement against, the Borrower of
the Transaction Documents to which it is a party.
4. The Transaction Documents to which the Borrower is a party have
been duly executed and delivered by the Borrower and constitute the legal, valid
and binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms.
5. The execution, delivery and performance by the Borrower of the
Transaction Documents to which it is a party will not (i) violate or be in
conflict with any provision of the articles of incorporation or by-laws of the
Borrower, (ii) violate or be in
E-1-3
Banque Paribas, as Agent July 9, 1997
and each of the Banks party Page 4.
to the Credit Agreement
conflict with any Federal or California law or regulation having applicability
to the Borrower, (iii) to our knowledge, violate or contravene any judgment,
decree, injunction, writ or order of any court, or any arbitrator or other
Governmental Authority, having jurisdiction over the Borrower or the Borrower's
properties or by which the Borrower may be bound, (iv) violate or conflict with,
or constitute a default under or result in the termination of, or accelerate the
performance required by, any Material Agreement of Borrower, or result in the
creation of any Lien upon any of the assets or properties of the Borrower except
as contemplated under the Transaction Documents, or (v) require any filing or
the approval or consent of any other party, except for (a) such filings as are
necessary in connection with the security interests in the Collateral granted by
the Borrower to the Lender, and (b) such landlord consents as may be required in
connection with any leasehold deed of trust to be executed by Borrower for the
benefit of Agent under the Credit Agreement. For purposes of this opinion the
term "Material Agreement" shall mean each of the agreements identified on
Schedule A attached hereto.
6. Except for those matters disclosed in Schedule 4.4 to the Credit
Agreement, we have no knowledge of any litigation or other proceedings pending
or threatened against the Borrower or its properties before any court,
arbitrator or governmental agency or authority with respect to the Transaction
Documents or otherwise.
7. The provisions of the Security Agreement create in favor of the
Agent, as secured party, a security interest in the Collateral consisting of
accounts, inventory, equipment, fixtures, chattel paper, instruments and general
intangibles, and proceeds and products thereof (the "Article 9 Collateral").
The Financing Statements adequately describe the Article 9 Collateral. The
security interest in the Article 9 Collateral located in the State of California
will be perfected upon the proper filing of the Financing Statements with the
California Secretary of State, and, as to fixtures, in the county recorder's
office for the property on which the fixtures are located. Upon proper filing
of the Financing Statements pursuant to the filing system established under
applicable California law, no other action is necessary under the California
Uniform Commercial Code ("CUCC") to perfect a security interest in the Article 9
Collateral located in the State of California.
8. The provisions of the Security Agreement create in favor of the
Agent, as secured party, a security interest in the Collateral consisting of any
deposit accounts of the Borrower referred to in the Security Agreement that are
located in the State of California (the "Deposit Accounts"), and such security
interest will be perfected (i) upon execution of the Security Agreement with
respect to Deposit Accounts maintained with the Agent, and (ii) to the extent
any Deposit Accounts are not maintained with the Agent, upon delivery of the
Bank Notices to the organizations with whom such Deposit Accounts are
maintained.
9. To the extent that the Copyright Act, 17 U.S.C. (S) 101 et seq.,
-- ---
is interpreted to require filing with the United States Copyright Office (the
"Copyright Office") in order to perfect the security interest of the Agent in
Collateral consisting of federally registered copyrights appropriately described
in the schedules to the Security Agreement (the
E-1-4
Banque Paribas, as Agent July 9, 1997
and each of the Banks party Page 5.
to the Credit Agreement
"Copyright Collateral"), and the Borrower has duly registered such Copyright
Collateral with the Copyright Office, then the filing of the Copyright Agreement
in the form presented to us in accordance with filing requirements of the
Copyright Office is sufficient for such purpose of perfection with respect to
such Copyright Collateral. To the extent that the ▇▇▇▇▇▇ Act, 15 U.S.C. (S)
1051 et seq., is interpreted to require recordation with the United States
-- ---
Patent and Trademark Office (the "PTO") in order to perfect the security
interest of the Agent in Collateral consisting of federally registered patents
and trademarks appropriately described in the schedules to the Patent Agreement
and the Trademark Agreement (the "Trademark Collateral"), and the Borrower has
duly registered such Trademark Collateral with the PTO, then the recordation of
the Patent Agreement and the Trademark Agreement in the form presented to us in
accordance with recording requirements of the PTO is sufficient for such purpose
of perfection with respect to such Trademark Collateral. To the extent that
Title 35 of the United States Code is interpreted to require recordation with
the PTO in order to perfect the security interest of the Agent in Collateral
consisting of patents issued by the PTO appropriately described in the schedules
to the Patent Agreement (the "Patent Collateral"), and the Borrower has been
duly issued such Patent Collateral, then the recordation of the Patent Agreement
in the form presented to us in accordance with recording requirements of the PTO
is sufficient for such purpose of perfection with respect to such Patent
Collateral.
10. The extension of credit under the Credit Agreement does not
violate the provisions of Regulations G, T, U or X of the Board of Governors of
the Federal Reserve System.
11. The Borrower is not an "investment company," or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
Whenever a statement herein is qualified by the expressions "known to
us," "to our knowledge," "we are not aware" or a similar phrase or expression
with respect to our knowledge of matters of fact, it is intended to mean that
our knowledge is based upon the records, documents, instruments and certificates
described above and the current actual knowledge of the attorneys in this Firm
who have devoted substantive attention to the transactions contemplated by the
Loan Documents (but not including any constructive or imputed notice of any
information) and that we have not otherwise undertaken any inde pendent
investigations for the purpose of rendering this opinion.
This opinion relates solely to the laws of the State of California and
the federal laws of the United States, and we express no opinion with respect to
the effect or application of any other laws. Special rulings of authorities
administering such laws or opinions of other counsel have not been sought or
obtained.
Our opinions in paragraph 3 above and in clause (ii) of paragraph 5
above are limited to laws and regulations normally applicable to transactions of
the type contemplated in
E-1-5
Banque Paribas, as Agent July 9, 1997
and each of the Banks party Page 6.
to the Credit Agreement
the Loan Documents and do not extend to licenses, permits and approvals
necessary for the conduct of the Borrower's business. In addition and without
limiting the previous sentence, we express no opinion herein with respect to the
effect of any land use, environmental or similar law, any state or federal
antitrust law, state or federal securities antifraud laws, or any local law
(i.e., below the state level). Further, we express no opinion as to compliance
---
or noncompliance by any Lender with any federal, state or other law (i)
requiring the Lender to be licensed as a bank, (ii) pertaining to matters
regulating the assets held by the Lender on the basis of portfolio requirements
or the Lender's capitalization, such as loan limits and capital adequacy
requirements, or (iii) otherwise applicable to the Lender and relating to its
legal or regulatory status or the nature of its business.
Our opinions expressed above are specifically subject to the following
limitations, exceptions, qualifications and assumptions:
(a) The validity, binding nature and enforceability of the Borrower's
obligations under the Transaction Documents may be subject to or limited by (i)
bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
transfer and other similar laws affecting the rights of creditors generally;
(ii) general principles of equity (whether relief is sought in a proceeding at
law or in equity), including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and the discretion of any court of
competent jurisdiction in awarding specific performance or injunctive relief and
other equitable remedies; and (iii), without limiting the generality of the
foregoing, the effect of California court decisions and statutes which indicate
that provisions of the Transaction Documents which permit the Agent or any other
Person to take action or make determinations may be subject to a requirement
that such action be taken or such determinations be made on a reasonable basis
in good faith or that it be shown that such action is reasonably necessary for
the protection of the Agent or such other Person.
(b) We wish to advise you that the effectiveness of the Financing
Statements will lapse five years from the date they are filed unless a
continuation statement is filed within six months prior to the expiration of
that five year period.
(c) To the extent provided by Division 9 of the CUCC, additional
filings with respect to the Collateral may also be necessary to continue
perfection of all or certain of the Collateral if the Borrower changes its name
(or the Financing Statements otherwise become seriously misleading), if any item
of Collateral located in California is removed from that State or if the
Borrower changes the jurisdiction in which its chief executive office is located
to a jurisdiction other than California.
(d) To the extent that any of the Collateral consists of or
constitutes "proceeds" (as such term is defined in (S) 9306 of the CUCC), the
security interest therein is limited and conditioned as set forth in such (S)
9306.
E-1-6
Banque Paribas, as Agent July 9, 1997
and each of the Banks party Page 7.
to the Credit Agreement
(e) The opinions expressed in paragraphs 7 through 8 above are
limited to the Collateral specifically described therein which is governed by
relevant provisions as currently in effect of Division 9 of the CUCC. Further,
except to the extent expressly stated in paragraphs 8 and 9 of this opinion
letter, the opinions given above as to the perfection of the security interests
do not apply to Collateral subject to perfection procedures other than the
filing of a financing statement in the office of the California Secretary of
State or the county recorder's office. Our opinion in paragraph 7, to the extent
it covers goods, is limited to goods located in the State of California. Our
opinion in paragraph 8 above is limited to California deposit accounts within
the meaning of CUCC (S) 9105 subject to California law. We also express no
opinion as to the title of the Borrower to any Collateral, the classification of
the Collateral as equipment or fixtures or, except as expressly stated in this
opinion letter, regarding the creation, attachment, perfection or priority of
any security interests in any Collateral. We have assumed for purposes of the
opinions in paragraphs 7 through 9 above that the Borrower has rights in the
Collateral within the meaning of the CUCC, that all required consents of third
parties to the grant of security interests in the Collateral have been obtained,
that the Borrower is located in California for purposes of (S) 9-103(3)(b) of
the CUCC, and that the Agent has given "value" within the meaning of the CUCC.
Our opinion in paragraph 9 is limited to the Collateral specifically identified
in Attachment 1 to the Copyright Agreement as federally registered copyrights,
and in Attachment 1 to the Patent Agreement as federally registered patents, and
in Attachment 1 to the Trademark Agreement as federally registered trademarks,
and in connection with such opinion we assume that the Agent will comply with
all applicable recording requirements of the Copyright Office and the PTO,
respectively, and the statutes and regulations related thereto.
(f) Our opinions are subject to the effect of the limitations imposed
by the CUCC relating to or affecting the rights and remedies available to
secured creditors.
(g) Our opinions are subject to the effect of judicial decisions
which may permit the introduction of extrinsic evidence to interpret the terms
of written contracts.
(h) The Agent should be aware of statutory or other legal
requirements of California law governing the foreclosure or sale of any real or
personal property security for the Loan and otherwise relating to or affecting
the enforcement of obligations secured by real property or personal property,
including, without limitation, the following:
(1) Section 726 of the California Code of Civil Procedure
("CCP") provides that any action to recover on a debt or other right secured by
a mortgage or a deed of trust on real property must comply with the requirements
of that section, which requirements relate to and specify the procedures for the
sale of encumbered property, the application of proceeds, the rendition in
certain cases of a deficiency judgment and other related matters. In such an
action or proceeding, the debtor may require the creditor to exhaust all of its
security before a personal judgment may be obtained against the debtor for a
deficiency, and failure to comply with the provisions of Section 726 (including
an attempt to
E-1-7
Banque Paribas, as Agent July 9, 1997
and each of the Banks party Page 8.
to the Credit Agreement
exercise a right to set off with respect to any funds of the debtor that may be
deposited with the creditor from time to time) may result in the creditor's loss
of its lien on real property collateral;
(2) Section 580b of the CCP provides that no deficiency judgment
shall be rendered upon a purchase money obligation in favor of the vendor
arising from the sale of real property where such purchase money obligation is
secured by a lien on the real property purchased from the vendor or in favor of
a lender where the proceeds of the loan are used to purchase a one-to-four
family dwelling occupied entirely or in part by the borrower and where such loan
is secured by a lien on such dwelling;
(3) Sections 580a and 580d of the CCP, respectively, which (i)
limit any deficiency after judicial foreclosure to the excess of the debt over
the fair market value of the foreclosed property at the time of sale, and (ii)
prevent a deficiency judgment after a nonjudicial or trustee's foreclosure sale
pursuant to a power of sale;
(4) Section 2924c of the CC provides for certain default cure
rights following acceleration of the maturity of an obligation secured by a deed
of trust or mortgage on real property, which may be exercised at any time within
the reinstatement period described in such Section;
(5) Section 726.5 of the CCP authorizes, under certain
circumstances, a real estate-secured commercial lender to waive its lien against
a parcel of "environmentally impaired" security (as therein defined) and ▇▇▇ the
borrower without foreclosing on the real property collateral for the loan;
(6) CUCC Section 9501 prescribes the rights and remedies of
secured creditors with both real and personal property security;
(7) CCP Sections 729.010 through 729.090 provide for certain
redemption and other rights following any judicial foreclosure sale;
(8) Section 736 of the CCP permits a lender, under certain
circumstances, to ▇▇▇ for breach of contract relating to any "environmental
provisions" (as therein defined) concerning real property security without
foreclosing on the real property security or in an action brought following
foreclosure, whether judicial or non-judicial; and
(9) CC Sections 2924, 2924b and 2924c require that certain
procedures be followed by the holder of a deed of trust or mortgage with power
of sale before exercising any power of sale thereunder.
(i) The enforceability of any "environmental provision" of the Loan
Documents is also limited by, and also subject to compliance by the
beneficiaries thereunder
E-1-8
Banque Paribas, as Agent July 9, 1997
and each of the Banks party Page 9.
to the Credit Agreement
with, statutory or other legal requirements, including, without limitation, CCP
(S)(S) 564, 726.5 and 736 and CC (S) 2929.5. As used above, the term
"environmental provision" has the meaning set forth in CCP (S) 736(f)(2).
(j) We express no opinion as to:
(1) the circumstances under which rights of setoff may be
exercised;
(2) provisions purporting to require the award or payment of
attorneys' fees, expenses or costs in any action where the Agent is not the
prevailing party, or the impact of CC (S) 1717 et seq. on any such provisions;
-- ----
(3) under certain circumstances, provisions to the effect that
rights or remedies are not exclusive, that every right or remedy is cumulative
and may be exercised in addition to or with any other right or remedy, that the
election of some particular remedy or remedies does not preclude recourse to one
or another remedy or that failure to exercise or delay in exercising rights or
remedies will not operate as a waiver of any such right or remedy;
(4) provisions prohibiting waivers of any terms or provisions of
any of the Transaction Documents other than in writing, or prohibiting oral
modifications thereof or modification by course of dealing to the extent such
provisions are inconsistent with applicable law;
(5) the enforceability under certain circumstances of provisions
indemnifying a party against, or requiring contributions toward, that party's
liability for its own wrongful or negligent acts or where such indemnification
or contribution is contrary to public policy or prohibited by law;
(6) any provision providing for the exclusive jurisdiction of a
particular court or purporting to waive rights to trial by jury, service of
process or objections to the laying of venue or to forum on the basis of forum
non conveniens, in connection with any litigation arising out of or pertaining
--- ----------
to the Loan Documents;
(7) provisions providing for an increase in the rate of interest
in the event of delinquency or default;
(8) provisions imposing a prepayment charge, fee or penalty
based upon a percentage or fraction of the amount prepaid or the amount
outstanding under the Credit Agreement, except in the case of a voluntary
prepayment by the Borrower;
(9) provisions purporting to waive statutory or common law
rights, including the right to receive notice or to be allowed to cure,
reinstate or redeem in the event
E-1-9
Banque Paribas, as Agent July 9, 1997
and each of the Banks party Page 10.
to the Credit Agreement
of default, and provisions expressly or by implication waiving broadly or
vaguely stated rights, unknown future rights and defenses to obligations, in
each case to the extent such rights or defenses are not waivable under
applicable law;
(10) provisions purporting to designate the Agent as the
Borrower's agent or attorney in fact;
(11) provisions purporting to waive any applicable statutes of
limitation to the extent not waivable under applicable law; and
(12) the enforceability of the second sentence of Section 7.1 of
the Security Agreement insofar as it pertains to Contracts.
This opinion is rendered as of the date first written above solely for
your benefit in connection with the Transaction Documents and may not be
delivered to, quoted or relied upon by any person other than you (and any
regulator, successor or assign), or for any other purpose, without our prior
written consent. Our opinion is expressly limited to the matters set forth
above and we render no opinion, whether by implication or otherwise, as to any
other matters relating to the Borrower. We assume no obligation to advise you
of facts, circumstances, events or developments, which hereafter may be brought
to our attention and which may alter, affect or modify the opinions expressed
herein.
Very truly yours,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
E-1-10
Schedule A
----------
1) License Agreement between Synbiotics and Engene
2) Distributor Agreement between Synbiotics and Daiichi Pharmaceutical
3) Contract Manufacturing Agreement between Synbiotics and Diamond Animal
Health
4) License, Development, Marketing and Manufacturing Agreement between
Synbiotics and Binax
5) Purchase Agreement between SmithKline ▇▇▇▇▇▇▇ and Synbiotics
6) Distribution Agreement between Synbiotics and Bio-Trends International
7) Distribution Agreement between Synbiotics and Rhone Merieux, Inc.
8) Purchase Agreement between Synbiotics and International Canine Genetics,
Inc. and S.R. One
9) Collaboration Agreement between Synbiotics and AGEN
E-1-11
EXHIBIT E-2
July 9, 1997
Banque Paribas, as Agent and as a Bank
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Credit Agreement dated as of July 9 (the "Credit Agreement") among
Synbiotics Corporation (the "Borrower"), the banks party thereto (the
"Banks") and Banque Paribas (the "Agent")
----------------------------
Ladies and Gentlemen:
We have acted as counsel to the Agent, in connection with the
preparation, execution and delivery of the Credit Agreement and the Notes and
certain other related documents. This opinion is being delivered to you
pursuant to Section 3.1(b)(iii) of the Credit Agreement. Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings
ascribed to them in the Credit Agreement.
We have participated in various conferences with representatives of
the Borrower and the Agent and conferences and telephone calls with ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), the Borrower's counsel, and with your
representatives, during which the Credit Agreement and related matters have been
discussed, and we have also participated in the meeting held on the date hereof
(the "Closing") incident to the making of the initial Loans under the Credit
Agreement. We have reviewed the forms of the Credit Agreement and the exhibits
thereto, including the forms of Notes and the opinion of ▇▇▇▇▇▇▇ (the "Opinion")
and officer's certificates and other documents delivered at the Closing. We
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals or copies, the due authority of all
persons executing the same, and we have relied as to factual matters on the
documents which we have reviewed.
Although we have not independently considered all of the matters
covered by the Opinion to the extent necessary to enable us to express the
conclusions therein stated, the Opinion and the certificates and other documents
delivered in connection with the execution and delivery of, and as conditions to
the making of the initial loans under, the Credit Agreement and the Notes are
substantially responsive to the requirements of the Credit Agreement, except to
the extent provided in the Waiver and Undertaking Agreement, dated the date
hereof, among the Borrower, Sumitomo Bank of California and the Agent.
Very truly yours,
E-2-1
EXHIBIT F
FORM OF BORROWING BASE CERTIFICATE
----------------------------------
BANQUE PARIBAS,
as Agent for the Banks parties to the
Credit Agreement referred to below
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of July 9, 1997,
among Synbiotics Corporation (the "Borrower"), the banks named therein and
Banque Paribas, as agent (such Credit Agreement, as in effect on the date hereof
and as it may be modified, supplemented or amended from time to time, the
"Credit Agreement"). Unless otherwise defined herein, capitalized terms used
herein and defined in the Credit Agreement are used herein as so defined.
This Borrowing Base Certificate is provided to you pursuant to Section
5.1(e) of the Credit Agreement.
The undersigned, chief financial officer of the Borrower, hereby
certifies as follows:
A. Total Borrowing Base Amount. As of the last day of the preceding
---------------------------
month, the Borrowing Base is $________, computed as follows:
1. Eligible Accounts Receivable:
(a) Gross dollar amount of the Borrower's Accounts which arose
in the ordinary course of business and which conform to the warranties contained
in the Credit Agreement and in the Security Documents and which have not become
unacceptable to the Required Banks in their reasonable judgment.
$_________________
F-1
(b) Exclusions:
Reserves for any other matter
affecting the creditworthiness
of Account Debtors:
$_________________
(c) Deductions:
(1) Accounts with respect to goods
not yet delivered or accepted
or services not yet performed;
$_________________
(2) Delinquent Accounts;
$_________________
(3) Accounts owed by Overdue
Account Parties or Parties
which are not Solvent;
$_________________
(4) cooperative advertising
Accounts;
$_________________
(5) Accounts subject to any
dispute, offset, counterclaim
or defense whatsoever;
$_________________
(6) subject to the Federal Assign-
ment of Claims Act;
$_________________
(7) Accounts with respect to
which the Account Debtor is a
non-U.S. Person (other than RM
and its successors);
F-2
$_________________
(8) Accounts that are denominated
in a currency other than Dollars;
$_________________
(9) ▇▇▇▇ and hold Accounts (or
deferred shipment transactions);
$_________________
(10) consigned sale Accounts;
$_________________
(11) Accounts with non-standard
sale terms;
$_________________
(12) Amount of Accounts due from
any Account Debtor in excess of 10% of
the then-existing value the
then-existing total Accounts of the
Borrower, less any reserves; except
that with respect to RM, Vedco
and ▇▇▇▇▇ ▇▇▇▇▇▇, only amounts (i) in
excess of 25% of the then-existing
value of the total Accounts due to
the Borrower (unless no satisfactory
financial statement for Vedco
or ▇▇▇▇▇ ▇▇▇▇▇▇ Accounts);
$_________________
(13) Accounts that have been
pledged to secure any Indebtedness
other than Indebtedness created
pursuant to the Loan Documents;
$_________________
(14) Accounts not reflected in the
general ledger of the Borrower;
$_________________
F-3
(15) credits in past due Accounts;
and
$_________________
(16) Accounts from Affiliates of
the Borrower.
Total Deductions $_________________
(d) Eligible Accounts
Receivable Available for
Borrowing Base Computation
((a) minus (b) minus (c)).
$_________________
(e) Portion of Eligible
Accounts Receivable included
in the Borrowing Base (80% of
the amount in 1(d)).
$_________________
2. Eligible Inventory
(a) The dollar value shown on the consolidated financial statements
of the Borrower of all tangible personal property wheresoever located which is
owned by the Borrower and held for sale or to be furnished under contracts of
sale.
$_________________
(b) Exclusions:
(1) inventory not lawfully owned
by the Borrower (including consigned
inventory from vendors);
$_________________
(2) inventory subject to any lien,
claim, security interest or prior
assignment (other than those liens
contemplated in Sections 6.3(a), (b)
(c) and (f) of the Credit Agreement;
$_________________
F-4
(3) inventory which, in the case of
finished goods, has at least six
months remaining until its expiry,
except that finished goods with
initial have to expiry of twelve
months or less may be included until
such time as such goods have for
months remaining until their expiry;
$_________________
(4) inventory for which the Borrower
has no right of assignment or power
to grant liens or security interests;
$_________________
(5) inventory not acquired in the
ordinary course of the Borrower's
business;
$_________________
(6) inventory for which no Account
or document of title has been
created or issued;
$_________________
(7) inventory which is not readily
marketable for sale by the Borrower;
$_________________
(8) inventory which is required to
be excluded by the Required Banks, in
their reasonable judgment;
$_________________
Total Exclusions $_________________
(c) Deductions:
(1) the cost of inventory not
located in the United States or at
places of business of the Borrower;
F-5
$_________________
(2) purchase discount reserve;
$_________________
(3) obsolescence reserve;
$_________________
(4) damaged inventory;
$_________________
(5) unprocessed invoices;
$_________________
(6) customer return reserve;
$_________________
(7) work in process;
$_________________
(8) packaging and labels;
$_________________
(9) that amount prepaid for
inventory; and
$_________________
(10) goods to be discontinued.
$_________________
(d) Eligible Inventory Available
for Borrowing Base Computation ((a)
minus (b) minus (c)):.
$_________________
F-6
(e) Portion of Eligible Inventory
included in the Borrowing Base (50%
of the amount in 2(d)):.
$_________________
3. Total Borrowing Base (1(e)
plus 2(e)).
$_________________
F-7
4. Sum of Loans
outstanding $_________________
5. Amount (if any) by which
the amount in 4 exceeds the
amount in 3./2/
B. No Default. As of the date hereof, there is no Default or Event
----------
of Default under the Credit Agreement.
C. Borrowing Base Deficiency. After giving effect to any prepayment
-------------------------
required by the Credit Agreement, as of the date hereof, the total amount of
Loans outstanding does not exceed the Borrowing Base.
_______________
/2/ If the amount in 4 exceeds the amount in 3, the Borrower must prepay in
accordance with the Credit Agreement.
F-8
D. Certification. The information and statements contained herein
-------------
are true and correct as of the date hereof.
Dated: ________________
SYNBIOTICS CORPORATION
By:____________________
Name:
Title:
F-9
EXHIBIT G
FORM OF
ASSIGNMENT AND ACCEPTANCE
-------------------------
___________, 199_
Reference is made to the Credit Agreement, dated as of July 9, 1997
(as amended from time to time, the "Credit Agreement"), among SYNBIOTICS
----------------
CORPORATION, (the "Borrower"), the financial institutions party thereto and
--------
Banque Paribas, as Agent. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings set forth in the Credit Agreement.
________________________ /1/ (the "Assignor") and
--------
_______________________ /2/ (the "Assignee") hereby agree as follows:
--------
1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes, without recourse, from
the Assignor, a ___% interest in and to all the Assignor's rights and
obligations under the Credit Agreement as of the Effective Date (as defined
below) (including, without limitation, such percentage interest in the
Commitment of the Assignor on the Effective Date, such percentage interest in
each Loan owing to the Assignor and each participation of the Assignor in each
Letter of Credit outstanding on the Effective Date together with such percentage
interest in all Fees, whether paid or unpaid, and unpaid interest, each as
accrued to the Effective Date).
2. The Assignor (a) represents and warrants that this assignment is
being made in conformity with the Credit Agreement and as of the date hereof its
Commitment (without giving effect to assignments thereof which have not yet
become effective) is $_________, the outstanding aggregate principal balance of
its Loans (without giving effect to assignments thereof which have not yet
become effective) is $_________ and the outstanding aggregate principal amount
of its participation interests in Letters of Credit (without giving effect to
assignments thereof which have not yet become effective) is $_________, and (b)
makes no representation or warranty and assumes no responsibility (i) with
respect to any statements, warranties or representations made in or in
connection with the Credit Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, the
Note or any other instrument or document furnished thereunder or pursuant
thereto, except that it represents and warrants that it is the legal and
beneficial owner of the interests being assigned by it hereunder and that such
interests are free and clear of adverse claims, and (ii) with respect to the
financial position of the Borrower or its Subsidiaries or the performance or
observance by the Borrower or any of its Subsidiaries of
_____________________
/1/ Insert legal name of assigning Lender.
/2/ Insert legal name of financial institution to which the Assignor is
assigning its rights and obligations.
G-1
any of their respective obligations under the Credit Agreement or the Note or
any other instrument or document furnished thereunder or pursuant thereto.
3. The Assignee (a) represents and warrants that (i) this assignment
conforms to the provisions of the Credit Agreement and (ii) it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit Agreement, together with copies of the most
recent financial statements delivered pursuant to Section 5.1 of the Credit
Agreement and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Assignment and
Acceptance; (c) agrees that it will, independently and without reliance upon the
Agent, the Assignor or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement; (d)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under the Credit Agreement as are delegated to the Agent
by the terms thereof, together with such powers as are reasonably incidental
thereto; and (e) agrees that it will perform in accordance with its terms all
the obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank.
4. From and after the Effective Date (a) the Assignee shall be party
to and be bound by the provisions of the Credit Agreement and, to the extent of
the interests assigned by this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder and (b) the Assignor shall, to the extent of
the interests assigned by this Assignment and Acceptance, relinquish its rights
and be released from its obligations under the Loan Documents.
5. This Assignment and Acceptance will be delivered to the
Administrative Agent together with a processing and recordation fee of $3,000.
6. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
7. The effective date of this Assignment and Acceptance shall be
_________________ (the "Effective Date").
--------------
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed and delivered by their respective duly authorized
officers as of the date first written above.
[NAME OF ASSIGNOR]
By:__________________________
Title:_______________________
G-2
[NAME OF ASSIGNEE]
By:__________________________
Title:_______________________
Agreed to and Accepted:
SYNBIOTICS CORPORATION
By:_____________________________
Name:________________________
Title:_______________________
G-3
EXHIBIT H
ENVIRONMENTAL INDEMNITY AGREEMENT
---------------------------------
THIS ENVIRONMENTAL INDEMNITY AGREEMENT, dated as of July 9, 1997 (this
"Agreement"), by Synbiotics Corporation, a corporation organized under the laws
of California (together with its permitted successors and assigns) (the
"Borrower" and "Indemnitor"), for the benefit of Banque Paribas, as Agent for
the benefit of the Banks and their respective directors, officers, employees,
attorneys and agents (to the full extent permitted by law) referred to in the
Credit Agreement (the "Indemnified Parties").
Capitalized terms used in this Agreement shall have the respective
meanings ascribed to them in Section 1.1 hereof and in the Credit Agreement
described below.
WITNESSETH:
WHEREAS, the Indemnitor, the Agent and the other Banks have entered
into a Credit Agreement, dated as of July 9, 1997, providing for the making of
Loans to Borrower as contemplated therein (as amended, modified or supplemented
from time to time, the "Credit Agreement");
WHEREAS, the Borrower is the tenant under each of the two leasehold
estates described on Exhibit A hereto and, after the date hereof, the Borrower
---------
or any of its Subsidiaries may become the tenant under a leasehold estate or the
fee owner of property, in each case subject to the terms of Section 5.10 of the
Credit Agreement (each leasehold and fee interest of the Borrower and its
Subsidiaries, a "Property," and collectively, the "Proper ties");
WHEREAS, as a result of the exercise of the rights and remedies of the
Indemnified Parties, the Indemnified Parties may hereafter become the tenant or
holder of a Property, or portions thereof, pursuant to a judicial or nonjudicial
foreclosure or by deed in lieu of foreclosure;
WHEREAS, it is a condition precedent to the extensions of credit under
the Credit Agreement that the Indemnitor shall have executed and delivered to
the Indemnified Parties this Agreement;
WHEREAS, the Indemnitor desires to execute this Agreement to satisfy
the condition described in the preceding paragraph;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Indemnitor hereby agrees as follows:
H-1
SECTION 1. DEFINITIONS
-----------
Section 1.1 Definitions. The following terms shall have the meanings
-----------
herein specified unless the context otherwise requires.
"Agreement" means this Environmental Indemnity Agreement, as modified,
---------
supplemented or amended from time to time.
"Credit Agreement" shall mean the Credit Agreement, dated as of July
----------------
9, 1997.
"Environmental Claim" and "Environmental Claims" mean any and all
------------------- --------------------
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, judgments, damages (including, without limitation, punitive damages),
losses, penalties, fines, liabilities (including strict liability),
encumbrances, liens, notices of noncompliance or violation, investigations or
proceedings, costs and expenses of investigation and defense of any claim,
whether or not such is ultimately defeated, and of any settlement or judgment,
of whatever kind or nature, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable, including, without limitation, reasonable
attorneys' fees and disbursements and consultants' fees, relating in any way to
Environmental Laws or any permit issued under Environmental Laws or which are
incurred at any time as a result of the actual or alleged presence or Release of
Hazardous Materials upon, about, beneath or above any of the Properties or
migrating from any of the Properties or arising from alleged injury or threat of
injury to health, safety or the environment, including, without limitation:
(a) damages for or injunctive relief from Hazardous Materials,
personal injury, or injury to property, natural resources or the environment
occurring on or off of the Properties, whether foreseeable or unforeseeable,
including, without limitation, the cost of demolition of any improvements on any
of the Properties, interest, penalties and damages arising from claims brought
by or on behalf of employees of the Indemnitor or any other third party or
governmental or regulatory agency or authority (with respect to which the
Indemnitor waives, for the benefit of the Indemnified Parties only, any immunity
to which it may be entitled under any industrial or workers' compensation laws);
(b) reasonable fees incurred for the services of attorneys,
consultants, contractors, experts, laboratories and all other reasonable costs
incurred in connection with the investigation, cleanup or remediation of such
Hazardous Materials or violation of the Environmental Laws including, but not
limited to, the preparation of any Phase I Environmental Site Assessment,
environmental site characterization, remedial investigation, feasibility study
or report or the performance of any cleanup, remedial, removal, abatement,
containment, closure, restoration or monitoring work required by any federal,
state or local governmental or regulatory agency or political subdivision, or
reasonably necessary to become in compliance with all applicable Environmental
Laws or otherwise expended in connection with such conditions, and including,
without limitation, any reasonable attorneys' fees, costs and expenses incurred
in enforcing this Agreement or collecting any sums due hereunder;
H-2
(c) liability to any person or entity to indemnify such person or
entity for costs, contribution or indemnification reasonably expended in
connection with the items referenced in subparagraph (b) hereof;
(d) administrative, regulatory or judicial actions, suits, demands,
demand letters, directives, claims, liens, notices of noncompliance or
violation, investigations or proceedings relating in any way to any
Environmental Laws or any permit issued under any such Environmental Laws by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages, fines or penalties pursuant to
any applicable Environmental Laws; and
(e) liability resulting from conditions existing as of the Closing
Date upon, about, beneath or above any of the Properties, whether known or
unknown by the Indemnitor or Indemnified Party as of the date hereof.
"Hazardous Materials" shall mean collectively, (a) any petroleum or
-------------------
petroleum products, flammable explosives, radioactive materials, radon gas,
asbestos in any form that is friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCBs), (b) any hazardous waste, hazardous material,
hazardous substance, toxic substance, contaminant or pollutant, as defined or
regulated as such under any Environmental Law including, without limitation, the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et
--
seq., the Comprehensive Environmental Response, Compensation, and Liability Act
----
of 1980, as amended, 42 U.S.C. Section 9601 et seq., or any similar state or
-- ----
local statute, and (c) any other chemical or other material, substance or waste,
exposure to which is now or hereafter prohibited, limited or regulated under any
Environmental Law.
"Indemnified Costs" means all liabilities, obligations, losses,
-----------------
damages, penalties, fines, actions, judgments, suits, claims, reasonable costs,
reasonable expenses and disbursements arising out of or related to Environmental
Laws or Environmental Claims.
"Indemnified Obligations" has the meaning set forth in Section 4.3(a).
-----------------------
"Indemnified Parties" has the meaning set forth in the introductory
-------------------
paragraph of this Agreement.
"Indemnitor" has the meaning set forth in the introductory paragraph
----------
of this Agreement.
"Other Parties" has the meaning set forth in Section 4.3(b).
-------------
"Phase I Environmental Site Assessment" means, with respect to any
-------------------------------------
Property, a Phase One environmental site assessment (the scope and performance
of which meets or exceeds the then most current ASTM Standard Practice E1527 for
Environmental Site Assessments: Phase One Environmental Site Assessment
Process) of such Property.
"Property" has the meaning set forth in the second WHEREAS clause
--------
herein.
H-3
"Release" or "Released" means disposing, discharging, injecting,
------- --------
spilling, leaking, leaching, dumping, emitting, escaping, emptying, seeping,
placing and the like, including continuing migration, into or upon any land or
water or air, or otherwise entering into the environment.
"Use" means use, ownership, any development and construction of
---
improve ments, maintenance, management, operation and occupancy of the
Properties.
Section 1.2 Interpretation. Unless the context otherwise clearly
--------------
requires, references in this Agreement to the plural include the singular and
the singular the plural, and "or" has the inclusive meaning represented by the
phrase "and/or." The words "hereof," "herein," "hereunder" and similar terms in
this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES
------------------------------
The Indemnitor hereby represents and warrants that, as of the date of
this Agreement and as of the date on which any deed of trust is executed in
connection with the Credit Agreement (and except as otherwise disclosed by the
Indemnitor pursuant to the Credit Agreement):
Section 2.1 Hazardous Materials. (a) To the best of Indemnitor's
-------------------
actual knowledge after due inquiry, Hazardous Materials have not, at any time,
been generated, used, stored on, transported to or from or Released on or from
any Property or generated, used, treated or stored on, transported to or from or
Released or disposed of on any property adjoining or in the vicinity of such
Property except for limited quantities generated, used, treated, or stored on,
or transported to or from such Property in compliance with all applicable
Environmental Laws.
(b) To the best of Indemnitor's actual knowledge after due inquiry,
Hazardous Materials have not at any time been treated or disposed of (including,
without limitation, by incineration) on or under any Property.
Section 2.2 Compliance with Environmental Laws; Environmental Claims.
--------------------------------------------------------
To the best of Indemnitor's actual knowledge after due inquiry, (a) the
Indemnitor and its Subsid iaries are in compliance with all applicable
Environmental Laws with respect to the Properties and the requirements of any
permits issued under such laws with respect to the Properties.
(b) There is no condition, fact, circumstance or occurrence on any
Property or any property adjoining or in the vicinity of such Property or
concerning the operations of the Indemnitor or any of its Subsidiaries that
could reasonably be anticipated (i) to form the basis of any Environmental Claim
against the Indemnitor, any of its Subsidiaries or such Property, or (ii) to
cause such Property to be subject to any restrictions on the ownership,
occupancy, use or transferability thereof under any Environmental Laws.
H-4
(c) Except as otherwise disclosed in writing by the Indemnitor, there
are no past, pending or threatened Environmental Claims against the Indemnitor,
any of its Subsidiaries or any Property.
Section 2.3 Storage Tanks. There are not now and never have been
-------------
underground or above ground storage tanks on or under any Property, except for
one above-ground liquid nitrogen storage tank.
SECTION 3. COVENANTS
---------
The Indemnitor hereby covenants and agrees that, until this Agreement
is terminated, it shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 3:
Section 3.1 Compliance With Environmental Laws. The Indemnitor
----------------------------------
shall, and shall cause each of its Subsidiaries to:
(a) comply in all material respects in a timely manner and remain in
compliance in all material respects with all Environmental Laws applicable to
the ownership or use of the Properties;
(b) cause each of its contractors (and their subcontractors and
materials suppliers), tenants and other persons or entities occupying the
Properties to comply and remain in compliance with all such Environmental Laws;
(c) pay, or cause to be paid, immediately all costs and expenses
incurred in connection with such compliance; and
(d) keep or cause the Properties to be kept free and clear of any
Liens imposed pursuant to such Environmental Laws.
Section 3.2 Presence of Hazardous Materials. The Indemnitor shall
-------------------------------
not, and shall not permit any of its Subsidiaries to:
(a) generate, use, store, transport to or from, or Release or permit
the generation, use, storage, transportation to or from, or Release of Hazardous
Materials upon, about, beneath or above the Properties; or
(b) permit any of its contractors (or their subcontractors and
materials suppliers), tenants or other persons or entities occupying the
Properties to generate, use, store, transport to or from, or Release or permit
the generation, use, storage, transportation to or from, or Release of Hazardous
Materials upon, about, beneath or above the Properties;
except, in each case, limited quantities generated, used, treated or stored at
the Properties, or transported to or from the Properties, in compliance with all
applicable Environmental Laws and necessary for the normal operation of the
business of the Indemnitor or any of Sub sidiaries.
H-5
Section 3.3 Treatment and Disposal. The Indemnitor shall not, and
----------------------
shall not permit any of its Subsidiaries to:
(a) treat or dispose of (including, without limitation, by
incineration) Hazardous Materials on or under the Properties; or
(b) permit any of its tenants or other persons or entities occupying
the Properties to treat or dispose of (including, without limitation, by
incineration) Hazardous Materials on or under the Properties.
Section 3.4 Inspection of the Properties. The Agent shall have the
----------------------------
right, at any time and from time to time, to request in writing that a Phase I
Environmental Site Assessment be prepared at the cost and expense of the
Indemnitor with respect to any Property for which the Indemnified Parties
reasonably believe that a past or present Release of Hazardous Materials upon,
about, beneath, above or migrating from such Property has occurred or is
threatened; provided, however, that so long as a Default or Event of Default
-----------------
shall not have occurred (whether or not such Default or Event of Default is
continuing) the Indemnified Parties shall only be entitled make such request
once during any twelve (12) month period. Such assessment shall be prepared by
an environmental consultant selected by the Indemnified Parties and indicate the
presence or absence of Hazardous Materials and the potential cost of any removal
or remedial action in connection with any Hazardous Materials on such Property.
If the Indemnitor fails to provide the same within thirty (30) days after
written request of the Indemnified Parties, the Indemnified Parties may order
such Phase I Environmental Site Assessment and the Indemnitor shall grant and
hereby grants to the Indemnified Parties and their agents access to the
Properties and specifically grants to the Indemnified Parties and their agents
an irrevocable non-exclusive license to undertake or have undertaken such an
assessment. The cost of any such assessment shall be payable by Indemnitor
within fifteen (15) days of receipt of the invoice from such environmental
consultant (whether or not the Indemnitor agrees with the result of the
assessment or the cost thereof). If the cost of any such assessment is not
promptly paid by the Indemnitor, interest shall accrue on such amount at the
Default Rate (as applied to payment of the Notes). Notwithstanding the
foregoing, the Indemnified Parties are under no obligation to visit or observe
the Properties or to conduct tests, and any such acts by the Indemnified Parties
shall be solely for the purpose of protecting the rights of the Indemnified
Parties under this Agreement. In no event shall any site visit, observation, or
testing by the Indemnified Parties be deemed a representation that Hazardous
Materials are not present in, on or under the Properties. Neither the
Indemnitor nor any other person or entity is entitled to rely on any site visit,
observation or testing by the Indemnified Parties. The Indemnified Parties owe
no duty of care to protect the Indemnitor or any other person or entity against,
or to inform the Indemnitor or any other person or entity of, any Hazardous
Materials. The Indemnified Parties shall not be obligated to disclose to the
Indemnitor or any other person or entity any report or findings made as a result
of, or in connection with, any site visit, observation or testing by such party.
The Agent shall give the Indemnitor forty-eight (48) hours notice before
entering any Property, except in emergency cases, cases in which Indemnitor or
their tenants have abandoned such Property or in cases where it is impracticable
to give such notice.
H-6
Section 3.5 Notice of Environmental Matters. The Indemnitor shall,
-------------------------------
and shall cause each of its Subsidiaries to, promptly after obtaining knowledge
thereof, advise the Agent in writing of any of the following:
(a) any pending or threatened Environmental Claim against the
Indemnitor, any of its Subsidiaries or any Property;
(b) any condition or occurrence upon, about, beneath or above any
Property that (i) results in material noncompliance by the Indemnitor with any
applicable Environmental Laws, or (ii) could reasonably be expected to form the
basis of an Environmental Claim against the Indemnitor, any of its Subsidiaries,
such Property, or the Indemnified Parties;
(c) any condition or occurrence upon, about, beneath or above any
Property or any property adjoining or in the vicinity of such Property that
could be anticipated to cause such Property to be subject to any restrictions on
the ownership, occupancy, use or transferability thereof under any Environmental
Laws; or
(d) the taking of any removal or remedial action in response to the
actual or alleged presence of any Hazardous Materials upon, about, beneath or
above any Property.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action and
the response of the Indemnitor thereto. In addition, the Indemnitor shall, or
shall cause each of its Subsid iaries to, provide the Agent with copies of all
communications with any person, entity or governmental agency relating to actual
or alleged Environmental Claims affecting any Property, and such detailed
reports of any actual or alleged Environmental Claim affecting such Property as
may reasonably be requested by the Agent, no later than five (5) days after the
Indemnitor or any of its Subsidiaries has sent or received such communication or
report.
Section 3.6 Indemnitor's Remedial Action. The Indemnitor shall, and
----------------------------
shall cause each of its Subsidiaries to, conduct any investigation, study,
sampling and testing, and undertake any cleanup, removal, remedial or other
action necessary to remove and clean up, to the reasonable satisfaction of the
Required Lenders:
(a) all Hazardous Materials from the Properties in accordance with
the requirements of all applicable Environmental Laws and the orders or
directives of any gov ernmental authority; and
(b) all Hazardous Materials from the Properties that may materially
adversely affect the value of the Properties, whether or not such action is
required by any Environmental Laws.
In the event that any Property is now or at any time in the future
included on any list compiled by the United States or any state or political
subdivision thereof of properties affected by (i) Hazardous Materials or (ii)
other environmental hazards, the
H-7
Indemnitor shall, and shall cause each of its Subsidiaries to, use its
commercially reasonable efforts to remove such Property from such list.
Section 3.7 Use of the Properties. The Indemnitor shall not, and
---------------------
shall not permit any of its Subsidiaries to, change or permit to be changed the
Use of any Property unless (a) such change is permitted by the Loan Documents
and undertaken in accordance with such Loan Documents and (b) the Indemnitor
shall have notified the Agent in writing that such change will not result in the
presence of Hazardous Materials (other than as may be reasonably required in
connection with such use) at or on such Property, and (c) the Required Banks
shall have determined (and shall have communicated such determination in writing
to the Indemnitor) that such change will not result in the presence of Hazardous
Materials (other than as may be reasonably required in connection with such use)
at or on such Property. Notwithstanding any such determination by the Required
Banks and the communication thereof to the Indemnitor, in the event that such
determination shall subsequently be determined to have been incorrect or shall
have been rendered incorrect or should such change in Use of any Property result
in the presence of Hazardous Materials (other than as may be reasonably required
in connection with such use) upon, about, beneath or above such Property or any
Environmental Claim, the Indemnitor agrees that the Required Banks' approval
shall not release the Indemnitor from its obligation under this Agreement and
the provisions of this Agreement shall apply to any such Hazardous Materials or
Environmental Claim, as the case may be.
SECTION 4. MISCELLANEOUS
-------------
Section 4.1 Indemnification.
---------------
(a) The Indemnitor agrees to indemnify, reimburse, defend, exonerate,
pay and hold the Indemnified Parties harmless from and against any and all
Environmental Claims and Indemnified Costs of any kind or nature whatsoever
related to the Properties that may at any time be incurred by, imposed on or
asserted against the Indemnified Parties except to the extent that any such
Environmental Claims or Indemnified Costs result or arise, in whole or in part,
from the gross negligence or willful misconduct of any Indemnified Party.
(b) The obligations of the Indemnitor hereunder shall include, but
not be limited to: (i) the burden and expense of defending (or settling in good
faith) all claims, suits and administrative proceedings constituting
Environmental Claims (with counsel chosen by the Indemnitor in consultation with
the Indemnified Parties), even if such claims, suits or proceedings are
groundless, false or fraudulent; (ii) conducting all negotiations relating to
such Environmental Claims; and (iii) paying and discharging, when and as the
same become due, any and all judgments, penalties or other sums resulting from
claims, suits and administrative proceedings referred to in clause (i) due from
or rendered against such Indemnified Parties (except as otherwise provided in
Section 4.1(a) above). The Indemnitor shall not consent, settle nor compromise
any Environmental Claim without the written consent of the Agent (which consent
shall not be unreasonably withheld).
(c) The Indemnified Parties shall retain the right to monitor the
progress of any claims, suits and/or administrative proceedings defended by the
Indemnitor
H-8
hereunder with counsel of the Indemnified Parties own choice. The Indemnitor
shall be obligated to pay the reasonable fees and disbursements of counsel
appointed by the Indemnified Parties; provided, however, that: (i) the
-------- -------
Indemnified Parties determine in good faith that the conduct of their defense by
the Indemnitor could be prejudicial to their interests or that other reasonable
grounds exist which demonstrate a lack of effectiveness or quality in the
conduct of such defense by the Indemnitor, (ii) prior to retaining their own
counsel for such purpose, the Indemnified Parties shall consult for a period of
ten (10) Business Days with the Indemnitor and shall attempt in good faith to
agree upon counsel to conduct the defense on behalf of the Indemnitor and the
Indemnified Parties, and (iii) the Indemnitor shall not be required to pay for
more than one law firm at any one time acting on behalf of the Indemnified
Parties.
(d) If and to the extent that the obligations of the Indemnitor under
this Section 4.1 are unenforceable for any reason, the Indemnitor hereby agrees
to make the maximum contribution to the payment and satisfaction of such
obligations permissible under applicable law.
(e) The Indemnified Parties shall promptly notify the Indemnitor in
writing of any assertion of an Environmental Claim of which the Indemnified
Parties have knowledge, and shall include in such notice all facts and
circumstances which the Indemnified Parties reasonably believe give rise to an
obligation of the Indemnitor to the Indemnified Parties under this Section 4.1.
In the event the Indemnitor fails to defend the Indemnified Parties within a
reasonable time after the Indemnified Parties give the Indemnitor written notice
of the type described in the preceding sentence, the Indemnified Parties may
elect to undertake their own defense through counsel of their own choice and at
the expense of the Indemnitor and compromise and settle any claim against the
Indemnified Parties with notice to, but without the consent of, the Indemnitor.
(f) All Indemnified Costs incurred by the Indemnified Parties with
respect to any Environmental Claim shall be immediately due and payable on
receipt by the Indemnitor of a written request for payment, which request shall
be accompanied by reasonable documentation of such Indemnified Costs, and shall
bear interest at the Default Rate if not paid within thirty (30) days after any
such demand.
(g) In no event shall the provisions of this Agreement be deemed to
constitute a waiver of, or to be in lieu of, any right or claim, including,
without limitation, any right of contribution or other right of recovery that
the Indemnified Parties might otherwise have against the Indemnitor under any
Environmental Laws.
Section 4.2 Rights and Remedies. Nothing in this Agreement shall be
-------------------
construed to limit any claim or right which the Indemnified Parties may
otherwise have at any time against the Indemnitor or any other person or entity
arising from any source other than this Agreement, including any claim for
fraud, misrepresentation, waste, or breach of contract other than this
Agreement, and any rights of contribution or indemnity under any Environmental
Laws or other applicable law, regulation or ordinance. All remedies of the
Indemnified Parties against the Indemnitor are cumulative.
H-9
Section 4.3 Waivers and Subrogation. (a) The Indemnitor waives any
-----------------------
right (except as shall be required by applicable statute and cannot be waived)
to require the Indemnified Parties to (i) proceed against any other person or
entity, (ii) proceed against or exhaust any security or (iii) pursue any other
remedy in the Indemnified Parties' power whatsoever. The Indemnitor waives any
defense based on or arising out of any defense of any other person or entity
other than payment in full of the Indemnified Costs or obligations otherwise
arising hereunder (the "Indemnified Obligations"), including, without
-----------------------
limitation, any defense based on or arising out of the disability of any other
person, or the cessation from any cause of the liability of any other person or
entity other than full performance of the Indemnified Obligations. The Required
Banks may, at their election, foreclose on any security held by the Indemnified
Parties by one or more judicial or nonjudicial sales conducted in a commercially
reasonable manner, or exercise any other right or remedy it may have against any
other person or entity, or any security, without affecting or impairing in any
way the liability of the Indemnitor hereunder except to the extent the
Indemnified Obligations have been fully performed. The Indemnitor waives any
defense arising out of any such election by the Required Banks, even though such
election operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of the Indemnitor against any other person
or entity or any security.
(b) The Indemnitor hereby waives all rights of subrogation which it
may at any time otherwise have as a result of this Agreement (whether
contractual, under Section 509 of the Bankruptcy Code, or otherwise) to the
claims of any other party (collectively, the "Other Parties"), all contractual,
-------------
statutory or common law rights of reimbursement, contribution or indemnity from
any Other Parties which they may at any time otherwise have as a result of this
Agreement and all other rights the Indemnitor may have against any Other Parties
for Environmental Claims.
Section 4.4 Environmental Review Upon Event of Default. If any
------------------------------------------
default occurs under any of the Loan Documents which is not cured within the
appropriate time provided therefor, the Required Banks shall have the right, but
no obligation, at the expense of Indemnitor, at any time after the filing of a
Notice of Default under any deed of trust or after foreclosure to have a
comprehensive environmental assessment of any Property, in scope satisfactory to
the Required Banks (including soil and groundwater sampling) prepared by an
environmental consultant selected by the Required Banks in order to ascertain
whether any Hazardous Materials are present in, on or under such Property (or
any nearby real property which could migrate to such Property) or any violation
of any Environmental Laws exists at such Property. The Indemnitor shall, on
demand, pay to the Indemnified Parties all sums reasonably expended by the
Indemnified Parties in connection with any such comprehensive environmental
assessment (it being understood that if it is necessary for the Indemnified
Parties to enforce their rights under any deed of trust, the Required Banks may
order a comprehensive environmental report of such Property either before or
after completion of foreclosure), together with interest thereon after such
demand at the Default Rate.
Section 4.5 Survival of Representations Warranties, Covenants and
-----------------------------------------------------
Indemnities. The indemnities and covenants hereunder shall be continuing and
-----------
shall survive the expiration or termination of the Credit Agreement as unsecured
rights and obligations.
H-10
No assignment or transfer, in whole or in part, of any Property or
Indemnitor's benefits, rights, duties or obligations hereunder, shall operate to
release the liability of Indemnitor hereunder except with an express prior
written consent of the Required Banks. The Indemnitor's obligations under this
Agreement shall not be diminished or affected in any respect as a result of any
notice, disclosure or knowledge, if any, to or by any of the Indemnified Parties
of the Release, presence, existence or threatened Release of Hazardous Materials
at, in, on, around or affecting any Property. No Indemnified Party shall be
deemed to have permitted, caused, contributed to or acquiesced in any such
Release, presence, existence or threatened Release of Hazardous Materials at,
in, on, around or affecting any Property solely because such Indemnified Party
had notice or knowledge thereof or because such Indemnified Party failed to
exercise any right contained in this Agreement.
Section 4.6 Unsecured Recourse Obligations. All rights of the
------------------------------
Indemnified Parties and obligations of the Indemnitor hereunder are and shall
be, and shall be deemed to be for all purposes, unsecured and shall not
constitute obligations secured by any deed of trust. Any sums payable or
recovered hereunder by any person or entity are not intended to be, and shall
not be or be deemed to constitute, a deficiency after foreclosure or trustee's
sale under any deed of trust.
Section 4.7 Application of Payments. The Indemnitor hereby
-----------------------
acknowledges and agrees that any amounts realized by the Indemnified Parties by
reason of any payments made pursuant to any Loan Document, the foreclosure of
any deed of trust or other security for the Notes (including any amounts
realized by reason of any credit bid in connection with any such foreclosure),
any conveyance in lieu of foreclosure, any other realization upon any security
for the Notes, any recoveries against the Indemnitor personally (whether
pursuant to Section 726.5 of the California Code of Civil Procedure or
otherwise, except for recoveries against the Indemnitor under this Agreement),
and any recoveries against any person or entity other than the Indemnitor
(including any guarantor), shall, to the maximum extent permitted by applicable
law, be applied to pay the obligations under the other Loan Documents prior to
being applied to pay obligations of the Indemnitor arising under this Agreement.
Section 4.8 Modification and Waiver. This Agreement may not be
-----------------------
amended, revised, waived, discharged, released or terminated orally but only by
a written instrument or instruments executed by the party against which
enforcement of the amendment, revision, waiver, discharge, release or
termination is asserted. Any alleged amendment, revision, waiver, discharge,
release or termination which is not so documented shall not be effective as to
any party. No failure or delay on the part of the Indemnified Parties in
exercising any right, power or privilege hereunder and no course of dealing
between Indemnitor and the Indemnified Parties shall operate as a waiver
thereof; nor shall any single or partial exercise of right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
Section 4.9 Notices. All notices and other communications hereunder
-------
shall be made at the addresses, in the manner and with the effect provided in
Section 9.3 of the Credit Agreement.
H-11
Section 4.10 Severability. In case any provision in or obligation
------------
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
Section 4.11 Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided, however, that the Indemnitor may
-------- -------
not assign or transfer any of their rights or obligations hereunder without the
prior written consent of each of the Indemnified Parties. All agreements,
statements, representations and warranties made by the Indemnitor herein or in
any certificate or other instrument delivered by the Indemnitor or on its behalf
under this Agreement shall be considered to have been relied upon by the
Indemnified Parties and shall survive the execution and delivery of this
Agreement regardless of any investigation made by the Indemnified Parties or on
their behalf.
Section 4.12 Headings Descriptive, etc. The headings of the several
-------------------------
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
Section 4.13 Governing Law. This Agreement and the rights and
-------------
obligations of the parties hereunder shall be construed in accordance with and
governed by the laws of the State of California.
Section 4.14 Counterparts; Effectiveness. This Agreement may be
---------------------------
executed in any number of counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same instrument. This
Agreement shall first become effective when the Indemnitor shall have executed
and delivered to the Banks an executed counterpart hereof.
Section 4.15 Waiver of Right to Trial by Jury. To facilitate each
--------------------------------
party's desire to resolve disputes in an efficient and economical manner, each
party to this Agreement hereby expressly waives any right to trial by jury of
any claim, demand, action or cause of action (a) arising under this Agreement,
or (b) such any way connected with or related or incidental to the dealings of
the parties hereto or any of them with respect to this Agreement, or the
transactions related hereto or thereto, in each case whether now existing or
hereafter arising, and whether arising in contract or tort or otherwise. Each
party hereby agrees and consents that any such claim, demand, action or cause of
action shall be decided by court trial without a jury, and that any party to
this Agreement may file an original counterpart or a copy of this Section with
any court as written evidence of the consent of the parties hereto to the waiver
of their right to trial by jury.
Section 4.16 Successive Actions. Separate and successive actions may
------------------
be brought hereunder to enforce the provisions hereof at any time and from time
to time. The Indemnitor hereby waives any defense they may have regarding the
splitting of a cause of action or based upon the defense of res judicata, and
the Indemnitor hereby covenants not to raise such defenses.
H-12
IN WITNESS WHEREOF, the Indemnitor has executed and delivered this
Agreement as of the date first written above.
SYNBIOTICS CORPORATION
By:____________________________
Name:________________________
Title:_______________________
Agreed to and
acknowledged by:
BANQUE PARIBAS, as
Agent for the Banks
By:____________________
Name:____________________
Title:_______________
By:____________________
Name:____________________
Title:_______________
H-13
EXHIBIT A
FACILITIES
----------
The Company leases two buildings (11011 Via Frontera, San Diego, California
and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇). The buildings contain
approximately 49,000 square feet of space, and house the Company's corporate and
sales headquarters, executive offices, research and development laboratories and
manufacturing facilities.
H-14
EXHIBIT I
---------
FORM OF COMPLIANCE CERTIFICATE
------------------------------
BANQUE PARIBAS,
as Agent for the Banks parties to the
Credit Agreement referred to below
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Ladies and Gentlemen:
Reference is made to the Credit Agreement, dated as of July 9, 1997, among
Synbiotics Corporation (the "Borrower"), the banks named therein and Banque
Paribas, as agent (such Credit Agreement, as in effect on the date hereof and as
it may be modified, supplemented or amended from time to time, the "Credit
Agreement"). Unless otherwise defined herein, capitalized terms used herein and
defined in the Credit Agreement are used herein as so defined.
This Compliance Certificate is provided to you pursuant to Section 5.1(d)
of the Credit Agreement.
The undersigned, chief financial officer of the Borrower, hereby certifies
that the information and statements contained in Schedule I hereto are true and
correct as of the date hereof.
SYNBIOTICS CORPORATION
By:____________________
Name:
Title:
I-1
SCHEDULE 1 TO COMPLIANCE CERTIFICATE -
FOR PERIOD ENDING
SEPTEMBER 30, 1997
I. LEVERAGE RATIO - SECTION 6.1(A) measured on September 30, 1997 on a rolling
four (4) fiscal quarter consolidated basis:
PROXY ACTUAL
OCTOBER 1, 1996 JULY 1, 1997 -
- JUNE 30, 1997 SEPTEMBER 30, 1997
(a) Consolidated Total
Indebtedness, including
outstanding L/Cs -----------
(b) Consolidated EBITDA $2,803,000 plus ---------- = -----------
(c) Leverage Ratio
Requirement -----------
-----------
II. INTEREST COVERAGE RATIO - SECTION 6.1(B) measured on September 30, 1997 on
a rolling four (4) fiscal quarter consolidated basis:
PROXY ACTUAL
OCTOBER 1, 1996 JULY 1, 1997 -
- JUNE 30, 1997 SEPTEMBER 30, 1997
(a) Consolidated EBITDA $2,803,000 plus ---------- = -----------
(b) Consolidated Cash
Interest Expense $ 725,000 plus ---------- = -----------
(c) Interest Coverage
Ratio Requirement -----------
-----------
I-2
III. FIXED CHARGE COVERAGE RATIO - SECTION 6.1(C) measured on September 30, 1997
on a rolling four (4) fiscal quarter consolidated basis:
PROXY ACTUAL
OCTOBER 1, 1996 JULY 1, 1997 -
- JUNE 30, 1997 SEPTEMBER 30, 1997
(a) Consolidated EBITDA $2,803,000 plus ---------- = -----------
(b) Consolidated Fixed
Charges $2,054,000 plus ---------- = -----------
(c) Fixed Charge Coverage
Ratio Requirement -----------
-----------
IV. CAPITAL EXPENDITURES - SECTION 6.1(D) measured on September 30, 1997:
(a) Capital Expenditures Year to Date _________________________
Requirement _________________________
V. CONSOLIDATED TANGIBLE NET WORTH - SECTION 6.1(E) measured on September 30,
1997:
Consolidated Tangible Net Worth at
September 30, 1997 _________________________
Requirement
(a) $9,006,000 _________________________
(b) 100% of the net proceeds received by the
Borrower or its Subsidiaries after the Closing Date
through the sale of equity of the Borrower and/or
its Subsidiaries (plus)
_________________________
Total Requirement _________________________
I-3
SCHEDULE 1 TO COMPLIANCE CERTIFICATE -
FOR PERIOD ENDING
DECEMBER 31,1997
I. LEVERAGE RATIO - SECTION 6.1(A) measured on December 31, 1997 on a rolling
four (4) fiscal quarter consolidated basis:
PROXY ACTUAL
JANUARY 1, 1997 JULY 1, 1997 -
- JUNE 30, 1997 DECEMBER 31, 1997
(a) Consolidated Total
Indebtedness, including
outstanding L/Cs -----------
(b) Consolidated EBITDA $2,986,000 plus ---------- = -----------
(c) Leverage Ratio
Requirement -----------
-----------
II. INTEREST COVERAGE RATIO - SECTION 6.1(B) measured on December 31, 1997 on a
rolling four (4) fiscal quarter consolidated basis:
PROXY ACTUAL
JANUARY 1, 1997 JULY 1, 1997 -
- JUNE 30, 1997 DECEMBER 31, 1997
(a) Consolidated EBITDA $2,986,000 plus ---------- = -----------
(b) Consolidated Cash
Interest Expense $ 478,000 plus ---------- = -----------
(c) Interest Coverage
Ratio Requirement -----------
-----------
I-4
III. FIXED CHARGE COVERAGE RATIO - SECTION 6.1(C) measured on December 31, 1997
on a rolling four (4) fiscal quarter consolidated basis:
PROXY ACTUAL
JANUARY 1, 1997 JULY 1, 1997 -
- JUNE 30, 1997 DECEMBER 31, 1997
(a) Consolidated EBITDA $2,986,000 plus ---------- = -----------
(b) Consolidated Fixed
Charges $1,364,000 plus ---------- = -----------
(c) Fixed Charge Coverage
Ratio Requirement -----------
-----------
IV. CAPITAL EXPENDITURES - SECTION 6.1(D) measured on December 31, 1997:
(a) Capital Expenditures Year to Date _________________________
Requirement _________________________
V. CONSOLIDATED TANGIBLE NET WORTH - SECTION 6.1(E) measured on December 31,
1997:
Consolidated Tangible Net Worth at
December 31, 1997 _________________________
Requirement
(a) $9,600,000 _________________________
(b) 100% of the net proceeds received by the
Borrower or its Subsidiaries after the Closing Date
through the sale of equity of the Borrower and/or
its Subsidiaries (plus)
_________________________
Total Requirement _________________________
I-5
SCHEDULE 1 TO COMPLIANCE CERTIFICATE -
FOR PERIOD ENDING
▇▇▇▇▇ ▇▇, ▇▇▇▇
▇. LEVERAGE RATIO - SECTION 6.1(A) measured on March 31, 1998 on a rolling
four (4) fiscal quarter consolidated basis:
PROXY ACTUAL
APRIL 1, 1997 JULY 1, ▇▇▇▇ -
- ▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇
(▇) Consolidated Total
Indebtedness, including
outstanding L/Cs -----------
(b) Consolidated EBITDA $736,000 plus ---------- = -----------
(c) Leverage Ratio
Requirement -----------
-----------
II. INTEREST COVERAGE RATIO - SECTION 6.1(B) measured on March 31, 1998 on a
rolling four (4) fiscal quarter consolidated basis:
PROXY ACTUAL
APRIL 1, 1996 JULY 1, ▇▇▇▇ -
- ▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇
(▇) Consolidated EBITDA $736,000 plus ---------- = -----------
(b) Consolidated Cash
Interest Expense $236,000 plus ---------- = -----------
(c) Interest Coverage
Ratio Requirement -----------
-----------
I-6
III. FIXED CHARGE COVERAGE RATIO - SECTION 6.1(C) measured on March 31, 1998 on
a rolling four (4) fiscal quarter consolidated basis:
PROXY ACTUAL
APRIL 1, 1996 JULY 1, ▇▇▇▇ -
- ▇▇▇▇ ▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇
(▇) Consolidated EBITDA $736,000 plus ---------- = -----------
(b) Consolidated Fixed
Charges $679,000 plus ---------- = -----------
(c) Fixed Charge Coverage
Ratio Requirement -----------
-----------
IV. CAPITAL EXPENDITURES - SECTION 6.1(D) measured on March 31, 1998:
(a) Capital Expenditures Year to Date _________________________
Requirement _________________________
V. CONSOLIDATED TANGIBLE NET WORTH - SECTION 6.1(E) measured on March 31,
1998:
Consolidated Tangible Net Worth at
March 31, 1998 _________________________
Requirement
(a) $9,006,000 _________________________
(b) 75% of cumulative Consolidated Net Income
for all fiscal quarters ending after the Closing Date
(determined without making any reduction in the
amount thereof by reason of any net loss arising in
any fiscal quarter)
(plus)
_________________________
(c) 100% of the net proceeds received by the
Borrower or its Subsidiaries after the Closing Date
through the sale of equity of the Borrower and/or
its Subsidiaries (plus)
_________________________
Total Requirement _________________________
I-7
SCHEDULE 1 TO COMPLIANCE CERTIFICATE -
FOR PERIOD ENDING
___________________________________________
I. LEVERAGE RATIO - SECTION 6.1(A) measured on ____________________ on a
rolling four (4) fiscal quarter consolidated basis:
(a) Consolidated Total
Indebtedness, including
outstanding L/Cs _________________
(b) Consolidated EBITDA _________________
(c) Leverage Ratio _________________
Requirement _________________
II. INTEREST COVERAGE RATIO - SECTION 6.1(B) measured on ____________________
on a rolling four (4) fiscal quarter consolidated basis:
(a) Consolidated EBITDA _________________
(b) Consolidated Cash
Interest Expense _________________
(c) Interest Coverage _________________
Ratio Requirement _________________
III. FIXED CHARGE COVERAGE RATIO - SECTION 6.1(C) measured on
____________________ on a rolling four (4) fiscal quarter consolidated basis:
(a) Consolidated EBITDA _________________
(b) Consolidated Fixed
Charges _________________
(c) Fixed Charge Coverage _________________
Ratio Requirement _________________
I-8
IV. CAPITAL EXPENDITURES - SECTION 6.1(D) measured on
________________________:
(a) Capital Expenditures Year to Date ___________________________
Requirement ___________________________
V. CONSOLIDATED TANGIBLE NET WORTH - SECTION 6.1(E) measured on
________________________:
Consolidated Tangible Net Worth
Requirement ___________________________
(a) $9,006,000 ___________________________
(b) 75% of cumulative Consolidated Net Income
for all fiscal quarters ending after the Closing Date
(determined without making any reduction in the
amount thereof by reason of any net loss arising in
any fiscal quarter)
(plus)
___________________________
(c) 100% of the net proceeds received by the
Borrower or its Subsidiaries after the Closing Date
through the sale of equity of the Borrower and/or
its Subsidiaries (plus)
___________________________
Total Requirement ___________________________
I-9