EXHIBIT 10(s)
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement"), made this 27th day of May,
1996, between and among NATIONAL CANADA FINANCE CORP., a Delaware Corporation
with offices at 125 West 55th Street, New York, New York 10019 ("Lender"),
MEDIVATORS, INC., a Minnesota corporation with offices at Cannon Plaza South,
6352 320 Street Way, Cannon Falls, Minnesota 50009 ("MediVators") and DISPOSAL
SCIENCES, INC., a Minnesota corporation, with offices at Cannon Plaza South,
6352 320 Street Way, Cannon Falls, Minnesota 50009 ("Disposal").
W I T N E S S E T H:
WHEREAS, National Canada Finance Corp. has agreed to make certain advances
to MediVators and Disposal up to the amount of $2,000,000 in accordance with the
conditions hereinafter stated; and
WHEREAS, MediVators and Disposal and National Canada Finance Corp. wish to
provide herein and in the supplemental documents executed in conjunction with
the execution of this Loan and Security Agreement for the terms of such
borrowing.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 Certain Defined Terms: As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Accountant's Letter" shall mean a letter in form and substance
reasonably satisfactory to Lender from independent public accountants of
recognized standing acceptable to the Lender (i) stating that, in connection
with its audit of the consolidating financial statements of Guarantor and its
subsidiaries, which audit was conducted by such accounting firm in accordance
with generally accepted auditing standards, nothing came to such accounting
firm's attention to cause it to believe that Borrowers failed to comply with the
terms, covenants, provisions or conditions of the Agreement, and (ii) setting
forth the following acknowledgment or other acknowledgment of a similar nature
generally used by such accountants to effect compliance with N.J.P.L. 1995, C.
49 or like statutes applicable in other jurisdictions: "We hereby acknowledge
that (1) the financial statements referenced in this Accountant's Letter and
this Accountant's Letter are being made available to Lender, (2) Lender intends
to rely on this Accountant's Letter and
such financial statements, and (3) Borrowers have knowledge of that reliance.
This acknowledgement is made pursuant to section 1.B(3) of N.J.P.L. 1995, C.49,
and any like statutes having applicability in other jurisdictions."
"Accounts", "Chattel Paper", "Documents", "Equipment", "General
Intangibles", "Goods", "Instruments" and "Money" have the same respective
meanings as are given to those terms in the UCC. "Accounts" shall include
"contracts" and "contract rights" (including MediVators' right to receive
payments under the Olympus Agreement) without respect to the definition of the
latter terms under applicable laws, and shall also include any rights which may
also be evidenced by Instruments, Documents or Chattel Paper.
"Accounts Receivable" means accounts receivable of the Borrowers from time
to time, determined in accordance with reasonable accounting methods
consistently applied.
"Advance" shall include any sums advanced by Lender or credited by Lender
to or for the account of the Borrowers under this Agreement, including without
limitation advances of principal or to pay interest or fees, or the incurring of
expenses reimbursable by the Borrowers under this Agreement.
"Advance Request" has the meaning specified in Section 2.2(b) hereof.
"Affiliate" includes any corporation, partnership, association, joint
venture, company, limited liability company, limited partnership, limited
liability partnership, trust, individual or other legal entity, which now or
hereafter at any time controls, is controlled by, or is under common control
with any of the Borrowers.
"Agreement" means this Loan and Security Agreement as amended in writing
from time to time.
"Availability" shall mean, as to the Revolving Line of Credit Loan, an
amount, varying from time to time, equal to the Borrowing Base, minus all
Advances outstanding and unpaid.
"Bank" means National Bank of Canada, a chartered bank constituted under
the Bank Act of Canada, with offices at 125 West 55th Street, New York, New York
10019.
"Borrowers" means MediVators, Inc., a corporation organized under the laws
of the State of Minnesota and Disposal Science, Inc., a corporation organized
under the laws of the State of Minnesota, and any successor thereto permitted
hereunder (either of the Borrowers individually a "Borrower").
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"Borrowing Base" means, as to the Revolving Line of Credit Loan, the sum
of the following: (a) 80% of the Net Balance of Eligible Accounts Receivable of
the Borrowers, plus (b) 50% of the cost or market value, whichever is lower, of
all Eligible Inventory. Whenever the Borrowing Base is used as a measure of the
Revolving Line of Credit Loan, it shall be computed as of, and the balance owing
on the Revolving Line of Credit Loan shall be determined as of, the required
reporting date for the Borrowing Base Certificate most recently due hereunder.
"Borrowing Base Certificate" means a certificate signed by the president,
vice president, chief financial officer or controller of a Borrower completed
and supplemented in a manner acceptable to Lender, mathematically computing the
Borrowing Base, in the form annexed as Exhibit I or otherwise as required by
Lender from time to time.
"Carsen" means Carsen Group, Inc., an Ontario corporation.
"Chief Executive Office" shall have the meaning ascribed to it under the
UCC.
"Closing Date" or "Closing" shall mean the date of this Agreement.
"Collateral" shall mean all real and personal property in which the
Borrowers grant Lender a lien or security interest to secure the Obligations,
pursuant to this Agreement or any security agreement, mortgage, deed of trust or
other undertaking or instrument related to the Loans or this Agreement.
"Controlled Group Member" means each trade or business (whether or not
incorporated) which together with Borrower are treated as a single employer
under Section 4001(b)(1) of ERISA.
"Default" means an Event of Default or Potential Event of Default.
"Dividends" shall mean dividends approved by Lender.
"Documents of Title" means one or more original, duly issued "documents of
title" as that term is defined in the UCC (and originals or copies of shipping
receipts, or license, customs, tax or other documentation related to the Goods
or their shipment), all in form and substance, and issued by such persons, as
may be satisfactory to Lender from time to time.
"Dollars" and "$" shall mean lawful money of the United States of America.
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"Eligible Account Receivable" means an Account Receivable which conforms
and continues to conform to the requirements and warranties set forth in Section
8.1 hereof.
"Eligible Inventory" means Inventory (whether raw materials, work in
process or finished goods or Inventory in transit, provided, as to Inventory in
transit, Borrower holds title to such Inventory and the sale of such Inventory
has not given rise to an Account Receivable) which initially and at all times
until sold is (i) as to finished goods, new and unused and fully saleable
through normal trade channels, (ii) owned by either Borrower free and clear of
any lien except in favor of Lender, (iii) valued at lower of cost or market on a
specific identification basis, (iv) at any one of the Locations and is subject
to a perfected first priority security interest in favor of Lender, (v) has not
been designated by Lender in its reasonable discretion as unacceptable for any
reason, and (vi) has not at any previous time had its value "written off" by
either Borrower for accounting purposes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder as in effect from time to time.
"Event of Default" means an event specified in Article 9 hereof following
any required notice and/or expiration of any applicable grace or cure period.
"GAAP" means generally accepted accounting principles consistently
applied.
"Guarantor" means Cantel Industries, Inc., a Delaware corporation, and the
sole shareholder of MediVators.
"Guaranty" means the unlimited guaranty of Guarantor given to Lender in
conjunction with the execution of this Agreement.
"Indebtedness" means, as the context shall require, all items of
indebtedness, obligation or liability, whether matured or unmatured, liquidated
or unliquidated, direct or contingent, joint or several, including, but without
limitation:
(a) All indebtedness guaranteed, directly or indirectly, in any manner, or
endorsed (other than for collection or deposit in the ordinary course of
business) or discounted with recourse;
(b) All indebtedness in effect guaranteed, directly or indirectly, through
agreements, contingent or otherwise: (i) to purchase such indebtedness; or (ii)
to purchase, sell or lease (as lessee or lessor) property, products, materials
or supplies or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such indebtedness or to assure the
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owner of the indebtedness against loss; or (iii) to supply funds to or in any
manner invest in the debtor;
(c) All indebtedness secured by (or for which the holder of such
indebtedness has a right, contingent or otherwise, to be secured by) any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance upon property owned or acquired subject thereto, whether or not the
liabilities secured thereby have been assumed;
(d) All indebtedness incurred as the lessee of goods or services under
capital or operating leases; and
(e) All reimbursement, indemnity or similar obligations.
"Inventory" means all Goods now owned or hereafter acquired, intended for
sale or lease, or to be furnished or delivered or consumed under contracts of
service; and all raw materials, work in process, finished goods, and materials
and supplies of every nature and description, now owned, or hereafter acquired,
used or consumed, or which might be acquired, used or consumed in connection
with any business of either Borrower; but only to the extent the foregoing would
be classified as inventory in accordance with reasonable accounting methods
consistently applied.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs or decrees of any government or political subdivision or
agency thereof, or any work similar entity.
"Lender" means National Canada Finance Corp., a Delaware corporation, and
any successor or assignee thereto hereunder.
"Leverage Ratio" means the ratio, expressed as a decimal, of Total
Liabilities to Tangible Net Worth.
"Lien" includes, without limitation, all mortgages, security interests,
liens, chattel mortgages, capital leases, operating leases, rental agreements,
trusts, charges, pledges, claims or other interests in property, legal or
equitable, whether consensual or nonconsensual, fixed, or contingent, choate or
in choate, and whether given or implied by statute or common law or by agreement
or grant.
"Loan(s)" means the Revolving Line of Credit Loan and any Advances made
for the benefit of the either Borrower pursuant to this Agreement.
"Loan Account" means the account or accounts on the books of Lender in
which Lender may record Loans, Advances, payments made on the Loans, and other
appropriate debits and credits as provided by this Agreement.
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"Loan Documents" means, individually and collectively, this Agreement, the
Note, the Guaranty, the Pledge Agreement, and all other existing and future
agreements, instruments, documents, assignments, guaranties and undertakings
(including amendments to any of the foregoing) delivered by either Borrower, or
any other person or entity in connection with any of the Loans.
"Locations" means any one or more of the places identified on Exhibit E,
or required to be identified pursuant to Section 8.2(q).
"Net Balance of Eligible Accounts Receivable" means the net value of all
Eligible Accounts Receivable, deducting all chargebacks, freight claims, finance
charges, contras, retainages, discounts, returns, credits, allowances,
adjustments, and losses.
"Net Income" shall mean, for any fiscal period, the net income (or net
loss) of Borrowers as determined in accordance with GAAP.
"Note" means the Revolving Line of Credit Note, including all amendments,
renewals and modifications thereof.
"Obligations" means the obligations (whether sole, joint or several,
contingent or fixed, or otherwise, and whether now existing or hereafter
arising) of the Borrowers, to Lender and/or Bank:
(a) To pay the principal of and interest on and other fees, charges and
expenses accruing with respect to the Advances, the Loans or any of the Loan
Documents, and to satisfy all other Indebtedness to Lender or Bank , whether
hereunder or otherwise, whether now existing or hereafter incurred, including
any extensions, modifications, renewals thereof and substitutions therefor;
(b) To repay to Lender or Bank all amounts advanced by Lender or Bank in
connection with this Agreement or any other Loan Document herewith, to any
person or entity whatever, including without limitation advances of principal,
advances of interest, fees or other charges or expenses, payments to prior
secured parties, mortgagees, or lienors, or for taxes, levies, insurance, rent,
repairs to or maintenance of any of the Collateral; and
(c) To reimburse Lender or Bank, on demand, to the extent provided for in
this Agreement, for all of Lender's or Bank's reasonable expenses and costs,
before or after closing hereon, including the reasonable fees and expenses of
their counsel, in connection with the preparation, administration, amendment,
modification, or enforcement of this Agreement and the documents required
hereunder, including, without limitation, prosecution or defense of any
proceeding brought, contemplated or threatened with respect to the obligations
referred to in the foregoing paragraphs (a) and (b) or any of the transactions
relating thereto.
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"Obligee" means, as to any Account Receivable, the applicable Borrower or
any third party undertaking the transaction giving rise to the Account.
"Obligor" means, as to any Account Receivable, the party or parties who
are liable to the Obligee with respect thereto.
"Officer" means any authorized president or vice president of either
Borrower.
"Olympus Agreement" means the Distributor Agreement between Olympus
America, Inc. - Endoscope Division and MediVators dated March 16, 1996, as
amended.
"Periodic Recap" means a "Period End Recapitulation Report" and a "Period
End Accounts Receivable and Loan Reconciliation" signed by Officers of both the
Borrowers, acceptable to Lender, reconciling Accounts Receivable and the
Borrowing Base with the Borrowers' general ledgers.
"Permitted Liens" or "Permitted Exceptions" means:
(a) Liens for taxes, assessments, or similar charges incurred in the
ordinary course of business that are not yet due and payable;
(b) Pledges or segregated deposits made in the ordinary course of business
to secure payment of workmen's compensation, or to participate in any fund in
connection with workmen's compensation, unemployment insurance, old-age pension
or other social security programs;
(c) Liens in favor of Lender;
(d) Purchase money security interests, motor vehicles liens, capital
leases, operating leases and rental agreements which are existing including
renewals and extensions thereof and disclosed on Exhibit G hereto; and
(e) The following, if incurred in the ordinary course of business and the
validity or amount thereof is being contested in good faith by appropriate and
lawful proceedings, to the extent (i) levy and execution thereon have been
stayed and continue to be stayed, (ii) an adequate holdback from Availability
shall have been established hereunder, and (iii) aggregate amounts being
contested do not exceed $25,000;
(1) Claims or liens for taxes or assessments,
(2) Claims or liens of mechanics, materialmen, warehousemen,
carriers or other like liens, and adverse judgments.
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"Person" means, any individual, limited liability company, limited
partnership, limited liability partnership, corporation, partnership,
association, joint-stock company, trust, incorporated organization, joint
venture, court or government or political subdivision or agency thereof.
"Plan" means any employee pension benefit plan to which Section 4021(a) of
ERISA applies and (i) which is maintained for employees of either Borrower or
any Controlled Group Member with respect to either Borrower, or (ii) to which
either Borrower or Controlled Group Member with respect to either Borrower made,
or was required to make, contributions at any time within the preceding five (5)
years. "Multiemployer Plan" means any Plan which is a "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA.
"Pledge Agreement" means the Pledge Agreement of even date herewith
between Guarantor and Lender whereby Guarantor pledges the Stock of MediVators
as security for the Loan.
"Policies" shall have the meaning ascribed to such term in Section
6.12(a).
"Post-Default Rate" shall have the meaning ascribed to it in Section
2.3(a).
"Potential Default" means an event, circumstance, act, omission or state
of affairs which would, with the passing of time or of any grace period, or the
giving of notice by the Lender or any third party, or any combination of the
foregoing, become an Event of Default.
"Prime Rate" means the rate of interest established by Bank and announced
in New York, N.Y. from time to time as its "prime rate" of interest. The
Borrowers acknowledge that Lender may lend to other borrowers, or classes of
borrowers, at rates below the Prime Rate or at rates based on other indices, and
that Lender may change the index from time to time.
"Records" means correspondence, memoranda, tapes, data processing cards,
discs, papers, tabulating runs, programs, books and other documents, or manually
or electronically recorded information (whether or not transcribed) of any type,
whether expressed in ordinary or machine or other language.
"Revolving Line of Credit Loan" means the revolving line of credit
provided for in Article 2 hereof, and the Advances made pursuant thereto.
"Revolving Line of Credit Loan Rate" means with respect to the Revolving
Line of Credit Loan a variable rate of one and one-half
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percent (1 1/2%) per annum in excess of the Prime Rate in effect from time to
time.
"Revolving Line of Credit Note" means the Revolving Line of Credit Note
referred to in Section 2.2(a) hereof and shall include all amendments, renewals
and modifications of the Revolving Line of Credit Note.
"Revolving Line of Credit Termination Date" shall have the meaning
ascribed to it in Section 2.1.
"Tangible Net Worth" shall mean, for any fiscal period, shareholders'
equity as determined in accordance with GAAP less (i) intangibles (as determined
in accordance with GAAP) and (ii) Indebtedness owing a Borrower from an
Affiliate or stockholder.
"Total Liabilities" means at any time, all short term and long term
liabilities of Borrowers as determined in accordance with GAAP.
"UCC" means the Uniform Commercial Code in effect from time to time in New
York, or as to issues with respect to which the UCC of the jurisdiction of the
applicable property takes precedence, the UCC applicable to such jurisdiction.
1.2 Accounting Terms: All accounting terms, whether defined or not
specifically defined herein shall be construed, and all financial data submitted
pursuant to this Agreement shall (unless otherwise provided herein) be prepared,
in accordance with GAAP.
ARTICLE 2 - THE REVOLVING LINE OF CREDIT LOAN
2.1 General Terms: Subject to the terms hereof, Lender has established a
Revolving Line of Credit Loan in favor of the Borrowers under which Lender
shall, from time to time during the period from the date hereof through and
including the Revolving Line of Credit Termination Date (as hereinafter
defined), make Advances to either or both Borrowers up to the Availability,
provided, in no event shall the Advances in the aggregate at any time
outstanding exceed $2,000,000, all subject to the other terms and conditions
contained herein. The entire outstanding balance of principal, and any accrued
and unpaid interest thereon, shall be due and payable and the Revolving Line of
Credit Loan shall terminate on the earlier of (i) the date thirty months from
the date of this Agreement, or (ii) acceleration of the Obligations upon an
Event of Default (the earlier of such dates being the "Revolving Line of Credit
Termination Date").
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2.2 Borrowing Procedures:
(a) The Borrowers are simultaneously with the execution of this Agreement
executing and delivering to Lender a Revolving Line of Credit Note in the face
amount of $2,000,000 which Note shall evidence the aggregate of all Advances
outstanding from time to time pursuant to the Revolving Line of Credit Loan, and
shall be payable on the Revolving Line of Credit Termination Date.
(b) At any time of reference, additional Advances may be made available by
Lender to either Borrower subject to the conditions of this Agreement, up to the
amount of the Availability and subject to the limitations of Sections 2.1 and
2.6, upon the request of either Borrower dated the date of the request which the
Lender may require be made in writing (the "Advance Request"). Upon compliance
by either Borrower with the applicable terms and conditions, Lender will make
each Advance by crediting the amount of the Advance to the Loan Account, or by
wiring the amount of the Advance to the account of the Borrower according to
instructions given to Lender by the Borrower, or by otherwise disbursing to a
third party upon terms and conditions mutually agreeable to Lender and the
Borrowers.
2.3 Interest Rate and Payments; Charging the Borrowers' Accounts; Fees:
Interest on the Advances shall be accrued, paid and calculated as follows:
(a) Interest will accrue daily and be payable on principal amounts
advanced by the Lender at the Revolving Line of Credit Loan Rate, and shall be
payable as accrued on the last day of each calendar month, commencing
immediately hereafter. Notwithstanding any provision herein to the contrary, or
any provision in the Note, upon the occurrence of an Event of Default, the
applicable interest rate shall be increased to a rate (the "Post-Default Rate")
three (3%) percent per annum over and above the interest rate otherwise
applicable hereunder.
(b) If at any time the rate of interest set forth above on any Loan (the
"Stated Rate" for such Loan) exceeds the maximum non- usurious interest rate
permissible for Lender to charge commercial borrowers under applicable law (the
"Maximum Rate"), the rate of interest charged on such Loan hereunder shall be
limited to the Maximum Rate.
In the event the Stated Rate for any Loan that has theretofore been
subject to the preceding paragraph at any time is less than the Maximum Rate,
the principal amount of such Loan shall bear interest at the Maximum Rate until
the total amount of interest paid or accrued on its Loans hereunder equals the
amount
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of interest which would have been paid or accrued on such Loans hereunder if the
Stated Rate had at all times been in effect.
In the event, upon payment in full of all amounts payable hereunder,
the total amount of interest paid to Lender or accrued on the Loans under the
terms of this Agreement is less than the total amount of interest which would
have been paid or accrued if the Stated Rate had, at all times, been in effect,
then Borrowers shall, to the extent permitted by applicable law, pay to Lender
an amount equal to the difference between (a) the lesser of (i) the amount of
interest which would have accrued on the Loans to Borrowers if the Maximum Rate
had at all times been in effect or (ii) the amount of interest which would have
accrued on the Loans if the Stated Rate had at all times been in effect and (b)
the amount of interest actually paid to Lender or accrued on such Loans under
this Agreement.
In the event Lender ever receives, collects or applies as interest
in respect of any Loan any sum in excess of the Maximum Rate, such excess amount
shall be applied to the reduction of the principal balance of the Loans to the
Borrowers or to other amounts (other than interest) payable by Borrowers
hereunder, and if no such principal is then outstanding, such excess or part
thereof remaining shall be paid to Borrowers.
(c) Interest shall be calculated on the basis of a 360-day year, counting
the actual number of days elapsed. All accrued and then unpaid interest shall
nevertheless be payable upon the Revolving Line of Credit Termination Date.
(d) All sums payable to Lender hereunder including repayments of Advances,
and payments of interest, reasonable fees, late charges and other charges shall
be paid directly to Lender on the date due. Any interest due as of the last day
of any month which remains unpaid five days thereafter shall be added to the
principal of the Loans. At Lender's option, the Borrower shall execute a
promissory note reflecting their obligations therefor, but the execution and
delivery of any such note shall not limit the Borrowers' obligations therefor as
provided in this Agreement. Lender is authorized to charge the Loan Account, or
any deposit account of the Borrowers with Bank, for principal, interest, and
with prior notice to Borrowers, other amounts due hereunder as they come due, or
at Lender's option make an Advance to pay any of the same; if Lender bills the
Borrowers for principal, interest or other amounts due hereunder, such will be
payable, as to principal and interest within one (1) business day after billing,
and, as to other amounts due, within ten business days after billing.
2.4 Borrowing Base Certificates: Borrowers shall upon Lender's request
prepare and forward to Lender completed Borrowing Base Certificates.
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2.5 Loan Account: Lender may, in its discretion, establish a Loan Account
and enter therein Advances, interest, fees, other charges, expenses and other
items properly chargeable to the Borrowers under this Agreement; all payments
made by the Borrowers on account of Indebtedness relating to any Loans; all
proceeds of collateral which are finally paid to Lender at its offices in cash
or solvent credits; and any other appropriate debits and credits. Subaccounts
may be established for each Loan or Advance established hereunder. Absent
manifest error, the aggregate of the debit balances in the Loan Account shall
reflect the Borrowers' aggregate Indebtedness to Lender and Bank from time to
time by reason of the Loans or otherwise with respect hereto.
2.6 Limits on Advances Under Revolving Line of Credit Loan:
Notwithstanding any other provision hereof, the aggregate unpaid balance of the
Borrowers' Obligations, including without limitation all principal, interest,
fees and other charges, under the Revolving Line of Credit Loan at any time
shall not exceed the lesser of (i) the Borrowing Base or (ii) $2,000,000. Each
Borrower agrees that it shall, immediately upon Lender's demand, pay or cause to
be paid to Lender the amount of any such excess, or, at Lender's option, deposit
with Lender collateral therefor which shall continue to be satisfactory to
Lender at all times thereafter.
2.7 Fees: (a) On any payment by any Borrower of interest and/or principal
not received within ten (10) days of the due date, a late charge of five percent
(5%) of the payment of interest and/or principal, as applicable shall be
assessed.
(b) Borrowers agree to pay to Lender a commitment fee on the average
daily Availability calculated on a monthly basis, for the period from the date
hereof to the Revolving Line of Credit Termination Date, at a rate per annum of
one-half of one percent. Accrued commitment fees shall be payable in arrears on
the last day of each month.
(c) Borrowers shall pay at Closing to Lender a closing fee in the
amount of $10,000 (and are entitled to a credit toward such fee of $5,000
previously paid).
2.8 Use of Proceeds: The proceeds of the Revolving Line of Credit Loan
shall be used by the Borrowers for working capital purposes.
ARTICLE 3 - PREPAYMENT; EARLY TERMINATION
3.1 Term of the Borrowers' Commitment; Early Termination: Borrowers may
prepay the Loans in full at any time without penalty or fee. Borrowers shall
notify Lender of the Borrowers' desire to terminate this Agreement by giving not
less than ninety (90) days
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prior written notice thereof to Lender; provided, however, upon a termination,
the terms and conditions of this Agreement (including the maintenance of
Lender's security interest in the Collateral) shall continue until all
Obligations of the Borrowers to Lender shall have been fully paid and satisfied.
ARTICLE 4 - CONDITIONS PRECEDENT AND SUBSEQUENT
The obligation of Lender to enter into this Agreement and to make any
Advance is subject to the following conditions:
4.1 Documents Required for the Closing: The Borrowers shall have delivered
or caused to be delivered to Lender, at the Closing and execution hereof, the
following, in form and substance satisfactory to Lender:
(a) The Note;
(b) All necessary releases, satisfactions, discharges, assignments and
termination statements to cause the security interests granted herein to be
first priority security interests (subject to Permitted Exceptions) in the
Collateral;
(c) The financing statements required by Section 5.6 hereof, or otherwise
necessary to perfect the security interests in the Collateral;
(d) Any financial statements required under the terms of this Agreement in
form and substance satisfactory to Lender;
(e) Copies of the resolutions of the board of directors and shareholders
of each Borrower authorizing the execution, delivery and performance of this
Agreement, the Note, and each other Loan Document to be delivered to Lender
pursuant hereto;
(f) Copies (certified by the Secretary of State of the state of
incorporation, and by authorized officers of each Borrower), of the certificate
of incorporation of each Borrower, together with a copy (certified by the
secretary or assistant secretary or other authorized officer of each Borrower)
of the by-laws of each Borrower, and a certificate (dated as of the Closing
Date) of each such officer to the effect that the foregoing documents have not
been amended and remain in full force and effect;
(g) The Guaranty, executed by Guarantor and documents as to the Guarantor
corresponding to the deliveries for Borrowers under Sections 4.1(e), (f), (h)
and (i);
(h) A certificate of an authorized officer of each Borrower as to the
incumbency and signatures of the officers who are executing this Agreement on
behalf of each Borrower;
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(i) Certificates of good standing with respect to each Borrower as of the
most recent date practicable from each state in which each Borrower is organized
or qualified to transact business;
(j) Evidence of the insurance coverages required under the terms of this
Agreement together with evidence of payment of all premiums which are due and
payable as of the date hereof;
(k) An initial Periodic Recap duly completed and executed by the each
Borrower;
(l) UCC, Judgment, Tax Lien and Title Searches satisfactory to Lender
regarding each Borrower and all Collateral in each jurisdiction in which
Collateral is situate;
(m) Written opinions of counsel to the Borrowers, and addressed to Lender,
in form and substance reasonably satisfactory to Lender regarding such legal
matters as Lender shall reasonably request relating to the subject matter
hereof;
(n) A certificate of each Borrower and its officers attesting that all
Collateral has been and will be assigned to Lender for full and adequate
consideration, in good faith and without fraud or fraudulent intent;
(o) All other Loan Documents executed by the applicable obligors along
with all deliveries required under the terms of such Loan Documents;
(p) Documents confirming establishment of an operating account with Bank;
and
(q) Such other undertakings, instruments and documents as Lender shall
reasonably require.
4.2 Other Conditions Precedent: There shall have occurred no changes in
the financial condition or business of the Borrowers, which are singly or
collectively materially adverse when compared with the respective financial
condition and business of the Borrowers as previously represented to Lender.
Lender shall have received satisfactory results of its field examination and
standard customer, trade and bank checks.
4.3 Conditions Subsequent to Signing and Effective Date: Each of the
following shall have occurred within the respective times indicated after the
Closing Date, or else Lender shall not be obligated to make any further
Advances, and Lender shall have the option, at any time thereafter, to declare
that an Event of Default has occurred:
(a) The Borrowers shall pay or reimburse to Lender and Lender's legal
counsel or agents, as the case may be, all of their
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respective reasonable fees (with legal fees not to exceed $10,000), charges and
expenses incurred in completing all of the matters contemplated by this
Agreement. Charges and expenses shall be limited to the cost of (i) UCC
searches, (ii) corporate searches, (iii) UCC financing statement filing charges
and (iv) photocopy, telecopy, and long distance telephone charges.
(b) Any conditions precedent which shall not have been satisfied as of the
Closing Date, or at the time Lender made any Advance, and which Lender shall not
have specifically waived in writing.
ARTICLE 5 - COLLATERAL SECURITY
5.1 The Collateral: The Collateral, together with all of the Borrowers'
other property of any kind held by Lender or any of Lender's Affiliates from
time to time, in any capacity whatsoever, shall stand as one general, continuing
collateral security for the Obligations of the Borrowers.
5.2 Rights in Property Held by Lender: As security for the Obligations,
including without limitation payment of the Indebtedness evidenced by the Note,
each Borrower hereby assigns, transfers, and sets over to Lender and Bank all of
its right, title, and interest in and to, and grants Lender and Bank a lien upon
and security interest in, all amounts that may be owing from time to time
hereafter to it by Lender or Bank from time to time in any capacity, including,
but without limitation, any balance or share belonging to any of them of any
deposit or other account, which lien and security interest shall be independent
of any right of set-off which Lender or Bank may have.
Any and all deposits or other sums at any time credited by or due from
Bank or Lender to Borrowers shall at all times constitute security for
Obligations and may be set-off against any Obligations which are then due.
Any and all instruments, documents, policies and certificates of
insurance, securities, goods, accounts, choses in action, general intangibles,
chattel paper, cash, property and the proceeds thereof (whether or not the same
are Collateral or proceeds thereof) owned by the Borrowers or in which either
Borrower has an interest, which now or hereafter are at any time in possession
or control of Lender or Bank or in transit by mail or carrier to or from Lender
or Bank or in the possession of any third party acting in Lender's or Bank's
behalf, without regard to whether Bank or Lender received the same in pledge,
for safekeeping, as agent for collection or transmission or otherwise or whether
Bank or Lender had conditionally released the same, shall constitute security
for Obligations and may be applied at any time to Obligations which are then due
and owing.
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5.3 Rights in Property Held by the Borrowers: As security for the
Obligations, including without limitation payment of the Indebtedness evidenced
by the Note, each Borrower hereby assigns, transfers, and sets over to Lender
all of its right, title, and interest in and to, and grants Lender a lien upon
and continuing security interest in, all of the following, wherever located,
whether now owned or existing or hereafter acquired or arising, together with
all replacements and substitutions therefor and all additions and accessions
thereto, and all proceeds (including, but without limitation, insurance
proceeds) and products thereof:
(a) All Inventory;
(b) All Accounts and Accounts Receivable, together with all documents,
contracts, contract rights, lien and security instruments and guarantees,
relating thereto;
(c) All Goods;
(d) All Equipment, including without limitation, all fixtures, furniture,
tools and supplies;
(e) Any interest (fee, leasehold or otherwise) either Borrower may have in
any real property;
(f) All cash and non-cash proceeds, products and insurance proceeds of the
foregoing and all proceeds of consignment sales; and
(g) All Records pertaining to the foregoing.
5.4 Additional Security: To further secure the Loans made and to be made
hereunder and all other Obligations of the Borrower to Bank or Lender, each
Borrower shall cause to be delivered such additional promissory notes,
undertakings, collateral, assignments, instruments, powers of attorney and other
documents as Lender may from time to time reasonably request consistent with the
security provided and the general intent of this Agreement.
5.5 Priority of Liens: The foregoing liens shall be first priority
perfected liens, subject only to Permitted Liens.
5.6 Financing Statements:
(a) Each Borrower on Lender's request will:
(1) Execute and deliver to the Lender such financing statements
(including amendments thereto and continuation statements thereof), assignments,
certificates of title and applications and powers of attorney for transfer
thereof, conveyances, notices, instruments and other documents in form
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satisfactory to Lender as Lender may specify to perfect or continue the
perfection of any security interest granted to Lender hereunder;
(2) Pay or reimburse Lender for all reasonable fees, costs and taxes
related to filing or recording the same in such public offices as Lender may
designate; and
(3) Take such other steps as Lender may reasonably direct, to
perfect Lender's interest in the Collateral.
(b) In addition to the foregoing, and not in limitation thereof to the
extent lawful, each Borrower hereby appoints Lender and Lender's attorneys and
agents severally as its attorney-in-fact (without requiring Lender to act as
such) with full power of substitution, to execute and file any financing
statement (including amendments and continuation statements thereto), and
assignments in the name of the Borrower, or its respective successors or
assigns, and to perform all other acts that Lender reasonably and in good faith
deems appropriate to perfect and continue its security interest in the
Collateral. This power of attorney is irrevocable as coupled with an interest.
5.7 Collecting on Accounts:
(a) Upon the occurrence of a Default, Lender shall have the right to
notify any and all Obligors to make payment on Accounts Receivable or other
Accounts directly to Lender, and to take control of the cash and non-cash
proceeds thereof, with full power to settle or compromise disputed claims
thereon. All such proceeds shall be applied in satisfaction of the Obligations,
including payment of the Indebtedness evidenced by the Note, in such order as
Lender shall determine.
(b) Unless and until such time as Lender elects to notify Obligors
pursuant to Section 5.7(a), Lender hereby authorizes and permits the Borrowers
to receive all amounts due on the Collateral and Accounts Receivable from the
Obligors, as Lender's collection agent, but at the Borrowers' own cost and
expense subject to the direction of Lender at all times. At either Borrower's
option, all proceeds of Collateral and Accounts Receivable shall be deposited by
the Borrower into a "Dominion Account" pursuant to an arrangement with the Bank.
Each Borrower shall issue to any such depository bank an irrevocable letter of
instruction directing said bank to transfer such funds so deposited to the
Lender, and only to Lender, either to any account maintained by the Lender at
said depository bank, by wire transfer to appropriate account(s) designated by
Lender or by checks drawn on such accounts in favor of Lender. All funds and
amounts so transferred from said Dominion Account to the Lender are to be
credited to the applicable Borrower's Loan Account upon transfer. All such
credits shall be conditioned upon clearance of funds transferred to Lender's
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Account. If any items are not so paid, the amount of any credit given shall be
charged as a debit to Borrower's Loan Account, whether or not the item is
returned. In addition to all such other charges set forth in this Agreement,
interest shall continue to accrue with respect to any credit applied to the
applicable Borrower's Loan Account from the proceeds of the Dominion Account for
two business days after transfer from the Dominion Account of the item giving
rise to the credits. Interest shall continue to accrue on all items received
from sources other than the Dominion Account for three business days after
deposit of the item giving rise to the credit or if actual collection of the
item takes longer than three days, then until Lender receives notice of actual
collection of the item. Proceeds shall be credited to Borrower's Loan Account at
the time of the notice of the deposit, provided, that if the notice of deposit
is received by the Lender after 2:30 p.m., the proceeds shall be deemed, for the
purpose of this Agreement, to have been received on the next succeeding Business
Day. All funds deposited in the Dominion Account not in excess of the then
existing Obligations shall immediately become the property of the Lender and the
applicable Borrower(s) shall obtain the agreement by such depository bank to
waive any offset rights against the funds so deposited. The Lender assumes no
responsibility for such Dominion Account arrangement, including without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any depository bank thereunder. An accounting shall be
rendered to the Borrowers once each month setting forth an accounting of the
application of the funds so collected. If Borrowers do not notify Lender, in
writing, within 15 days of the mailing of the accounting, the allocation therein
set forth shall be deemed acceptable, correct and proper, and be binding on
Borrowers.
5.8 Verification of Accounts: Lender shall at all times after the
occurrence and continuance of a Default, and on a once per year basis otherwise,
have the right to confirm orders, and to verify all Accounts or Accounts
Receivable or other Collateral in which it has a security interest and to do so
through any public accountants.
ARTICLE 6 - BORROWERS' AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that, from and after the date of this
Agreement and so long as either Borrower shall be indebted to Lender hereunder
or under the Note or any other Loan Document, unless Lender shall otherwise
consent in writing, each Borrower will comply with the following covenants:
6.1 Shipping Reports: Each Borrower will make available to
Lender at the Borrower's offices during regular business hours:
shipping and delivery receipts evidencing the shipment of the Goods
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which gave rise to an Account; completion certificates or other proof of the
satisfactory performance of services which gave rise to an Account; a copy of
the invoice for each Account; and a copy of any written contract or order from
which an Account arose.
6.2 Intentionally Omitted.
6.3 Returned Goods: Each Borrower will advise Lender whenever an account
debtor refuses to retain, or returns, other than in the ordinary course of
business, any Goods from the sale of which an Account arose.
6.4 Sales Agreements: Each Borrower will identify for Lender, and if
requested provide copies to the Lender of, any sales agreement not entered into
in the ordinary course of business, or the terms of which do not reflect terms
granted in the ordinary course of business.
6.5 Government Contracts: For any Accounts which arise out of contracts
with the United States or any department, agency, or instrumentality thereof,
each Borrower will, on Lender's reasonable request, execute any instruments and
take any steps required by Lender in order that all moneys due and to become due
under such contracts shall be assigned to Lender and notice thereof given to the
Government according to the Federal Assignment of Claims Act.
6.6 Intentionally Omitted.
6.7 Account Assignments: Each Borrower will give Lender, upon Lender's
reasonable request, specific assignments of Accounts after they come into
existence, and schedules of Accounts, the form and content of such assignments
and schedules to be satisfactory to Lender, and will execute and deliver to
Lender any instrument, document, financing statement, assignment or other
writing to carry out the terms of this Agreement, to perfect Lender's security
interest in the Accounts and any other Collateral, or to enable Lender to
enforce conveniently its security interest in any of the foregoing.
6.8 Maintenance of Books and Records: Each Borrower will maintain, in
accordance with reasonable accounting methods consistently applied, accurate
records and books of account showing, among other things, all Inventory and
Accounts, the proceeds of the said or other disposition thereof and the
collections therefrom; and hereby grants Lender the right to call at the
Borrower's places of business during regular business hours, upon reasonable
notice, at intervals to be determined by Lender (provided, Lender shall endeavor
not to unduly interfere with the operation of the Borrower's businesses), and,
without hindrance or delay, to inspect, audit, check and make extracts and
copies from the books, records, journals, orders, receipts, correspondence and
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other data relating to Inventory, Accounts, or any other Collateral.
6.9 Notation of Security Interest: If reasonably requested by Lender, each
Borrower will mark its records concerning Inventory, Accounts, and other
Collateral in a manner reasonably satisfactory to Lender to show the Lender's
security interest therein; and shall, after a Default, at Lender's request,
notify all purchasers, warehouses, warehousemen, agents, landlords, processors,
or others in possession of Inventory ("Bailees"), of Lender's security interest
in the Collateral, and instruct them to hold Collateral for Lender's account and
subject to Lender's instructions, and take such other steps and obtain such
documents, assurances and financing statements executed by such Bailees, as
Lender may reasonably require from time to time to perfect and maintain the
perfection of Lender's security interests and the priority thereof over the
claims or interests of any Bailees.
6.10 Reporting Requirements. Each Borrower will furnish to Lender:
(i) as soon as possible, and in any event within five Business Days,
after an officer of either Borrower obtains actual knowledge of the
occurrence of a Potential Event of Default or Event of Default, a
statement of an officer of such Borrower setting forth details of such
default and the action that such Borrower proposes to take with respect
thereto;
(ii) as soon as available, and in any event within 45 days after the
end of each quarter of each fiscal year (excepting the last quarter of
each fiscal year) of Guarantor, a consolidated balance sheet of Guarantor
and its subsidiaries, as of the end of such quarter and statements of
income and retained earnings and of cash flows of Guarantor and its
subsidiaries for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, setting forth in each case
in comparative form the corresponding figures for the corresponding period
of the preceding fiscal year, and the corresponding figures from the
budget of Guarantor for such period (except for the fiscal year preceding
Closing), all in reasonable detail and duly certified (subject to year-end
audit adjustments) by an Officer of Guarantor as having been prepared in
accordance with GAAP, together with a certificate of an Officer of each
Borrower stating that, to the best knowledge of such Officer, after due
inquiry, each Borrower is in compliance with Sections 6.14 and 7.13 hereof
and no Default has occurred and is continuing or, if such Officer has
knowledge that a Default has occurred and is continuing, a statement as to
the nature thereof and the action that such Borrower proposes to take with
respect thereto; and
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(iii) as soon as available, and in any event within 90 days, after
the end of each fiscal year of Guarantor, a copy of the annual
consolidated audit report for such year for Guarantor and its
subsidiaries, including therein a consolidated balance sheet of Guarantor
and its subsidiaries as of the end of such fiscal year and a consolidated
statement of income and retained earnings and of cash flows of Guarantor
and its subsidiaries for such fiscal year, in each case certified in a
manner acceptable to the Lender by independent public accountants of
recognized standing acceptable to the Lender together with an Accountant's
Letter and a certificate of an Officer of each Borrower stating that, to
the best knowledge of such Officer, after due inquiry, each Borrower is in
compliance with Sections 6.14 and 7.13 hereof and no Default has occurred
and is continuing or, if such Officer has knowledge that a Default has
occurred and is continuing, a statement as to the nature thereof and the
action that such Borrower proposes to take with respect thereto.
(iv) within twenty (20) days of the end of each month, (a) Periodic
Recaps, together with a schedule of agings and listings of Account
Receivables for the prior calendar month, and (b) a listing of the types,
and respective values of Inventory for each type, of all Inventory, in
such form as Lender may from time to time reasonably specify.
6.11 Existence, Properties, Etc.: Each Borrower will do or cause to be
done all things necessary to obtain, preserve, renew and keep in full force and
effect its existence and its qualification to do business and good standing in
the state of its incorporation or organization and any other jurisdiction in
which such qualification is necessary for the proper conduct of its business,
and conduct and operate its business in substantially the manner in which same
is presently contemplated to be conducted and operated; at all times maintain,
preserve and protect all material patents, franchises, trademarks, trade names,
copyrights and other General Intangibles; preserve the condition of all property
useful in the conduct of its business and keep the same in good repair, working
order and condition (reasonable wear and tear excepted) and from time to time
make, or cause to be made, all repairs, renewals, replacements, betterments and
improvements thereto, to the extent that the same are necessary for the proper
and advantageous conduct of its business; and comply with all present and future
regulatory and other Laws applicable to it in the operation of its business, and
with all material agreements to which it is subject.
6.12 Insurance:
(a) Each Borrower will keep its respective insurable properties adequately
insured at all times, by financially sound and reputable insurers, with Lender
named as loss payee, without contribution, on all such policies maintained as
insurance against
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loss or damage to the Collateral (any insurance policies, to the extent same
insure the Collateral, herein the "Policies"), and maintain such other
insurance, to such extent and against such risks, including fire and other risks
insured against by extended coverage, without co-insurance provisions except as
Lender shall approve in writing, and with an endorsement providing Lender not
less than ten (10) days' prior written notice of cancellation or modification of
coverage, and on such other terms as are acceptable to Lender and customary with
companies in the same or similar business, and maintain in full force and effect
public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with the use of any
realty, Location or other real or personal property belonging to it, and
products liability insurance, in such amounts as are consistent with industry
practice and are satisfactory to Lender, and maintain such other insurance as
may be required by law. Each Borrower shall pay all premiums now or hereafter
becoming due or payable with respect to any of the above insurance prior to the
expiration date of the policy therefor. Each Borrower authorizes Lender to pay
for its account any of the foregoing which its fails to pay, and any such
payment by Lender shall constitute an item of the Borrowers' Obligations. Each
Borrower agrees to notify Lender in writing prior to any change in insurance
coverage which would cause such insurance to not meet the requirements of this
Agreement; to pay all premiums when due or payable; to provide Lender upon
demand copies of all insurance policies; to assign to Lender all right to
receive proceeds received under any of the Policies (provided Lender shall pay
to Borrowers any such proceeds collected in excess of the Obligations); to
direct all Policy insurers to pay all proceeds directly to Lender; and each
Borrower hereby authorizes Lender to endorse any draft for such proceeds.
(b) Without limiting the generality of the foregoing, the Borrowers shall
each provide and maintain the following coverages:
(1) Policies of fire and extended coverage "all risk" insurance
insuring, all equipment and all Inventory, all motor vehicles and also including
coverage for valuable papers and property in transit, providing full extended
coverage and insurance against vandalism and malicious mischief. Such insurance
under the Policies shall also name Lender as an additional insured and shall be
in an amount equal to the lesser of (a) the full amount of the Loans, or (b) 80%
of the full replacement value of the property insured without deduction for
depreciation, and such insurance policy shall also contain a replacement cost
endorsement with an inflation rider and shall at all times be in an amount
sufficient to prevent Lender from becoming a coinsurer;
(2) Comprehensive general liability insurance, including personal
injury and contractual liability and products liability;
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(3) Workers Compensation and Employer's Liability Insurance meeting
statutory obligations; and
(4) If the Locations are in an area designated in the Flood Disaster
Protection Act of 1973 (P.L. 93-234) as having "specific flood hazards", flood
insurance meeting the requirements of said Act.
6.13 Taxes and Assessments: Each Borrower will pay or cause to be paid,
when due, all taxes, assessments and charges or levies imposed upon any of its
property, or which it is required to withhold and pay over, except where
contested in good faith by appropriate proceedings, promptly commenced and
diligently conducted, with adequate reserves therefor having been set aside on
its books (but it shall, in any event, pay or cause to be paid all such taxes,
assessments, charges or levies forthwith whenever a lien against the Collateral
would arise, or when foreclosure on any such Lien that attaches appears
imminent).
6.14 Financial Covenants: Borrowers will maintain on a combined basis Net
Income, Tangible Net Worth and a Leverage Ratio of not less than the amounts set
forth at Schedule H for each time period set forth at Schedule H.
6.15 Intentionally Omitted.
6.16 Collection and Records of Accounts: Each Borrower will collect its
Accounts only in the ordinary course of business, and will keep accurate and
complete Records of its Accounts, consistent with sound business practices.
6.17 Litigation Notice: Each Borrower will give Lender immediate written
notice of any action, suit or proceeding at law or in equity or by or before any
governmental instrumentality or other agency which, if adversely determined,
would impair Borrowers' right or ability to carry on its business substantially
as now conducted or would materially affect its business, operations,
properties, assets or condition (financial or otherwise) or would materially
affect its ability to perform its obligations to the Lender under this Agreement
or any of the Loan Documents, and, if requested by Lender, deliver copies of all
nonprivileged documents relating thereto. Each Borrower will also notify Lender
immediately upon the indictment of such Borrower, and immediately upon the
indictment of any director or officer with respect to any matter relating to the
affairs of such Borrower.
6.18 Changes: Each Borrower will promptly notify Lender of any and all
proposed material changes in its business practices or properties and of any
changes in its officers or directors or, in ownership of such Borrower.
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6.19 Further Assurances: From time to time, upon the written reasonable
request of Lender, each Borrower will do, execute, acknowledge and deliver or
cause to be done, executed, acknowledged, and delivered, all such further acts,
deeds, instruments, transfers, or assurances as may be reasonably necessary to
consummate the transactions contemplated by this Agreement, the Note, or any
other Loan Documents.
6.20 Authorization To Accountants: Each Borrower hereby irrevocably
declares for the benefit of Lender its irrevocable release, consent,
authorization and instruction to all accountants and auditors employed by such
Borrower at any time while there are any sums owed to Lender during the term of
this Agreement, and until all of the Obligations have been fully paid and
discharged, to, after the occurrence of an Event of Default, exhibit and deliver
to Lender copies of such Borrower's financial statements, tax returns, trial
balances, workpapers or other accounting or tax records of any sort on which
such firm has reported (other than internal, confidential memoranda) which may
be in their possession.
6.21 Valuation of Inventory: Each Borrower will promptly notify Lender of
any event causing material loss or accounting write down in the value of its
Inventory.
6.22 Computer Reports: Each Borrower irrevocably empowers Lender, after
the occurrence of Default to have full access to and to have, at the Borrower's
expense, printouts and all information maintained by their outside computer
service company, if any, respecting any and all financial records now or
hereafter maintained by the same for such Borrower's account.
6.23 Places of Business: Location of Collateral and Records: Each Borrower
will notify Lender in writing thirty (30) days in advance of each change in
Chief Executive Office, and of each change in Location at which Inventory or any
Records of Accounts Receivable, Accounts, or other Collateral, is or will be
kept.
6.24 Compliance with Obligations: Each Borrower will comply with and
perform its obligations under all other Loan Documents as fully as if such
obligations were set forth herein.
6.25 Visitation: Each Borrower shall permit such persons as the Lender may
designate to visit and inspect any of the properties of such Borrower and any
subsidiaries, to examine their respective books and records and take copies and
extracts therefrom and to discuss their affairs with the appropriate employees
at such times and as often as the Lender may reasonably request (not to exceed
four times per year prior to a Default), provided that unless there exists a
Default, such visitation shall be during regular business hours, with proper
notice, and, the Lender shall not unduly interfere with the operation of such
Borrower's business.
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6.26 Notice of Pension-Related Events: Promptly after either Borrower, or
any Controlled Group Member with respect to such Borrower, or any administrator
of a Plan:
(a) receives any notification referred to in subsections (1), (4) or (7)
of Section 9.1(k) hereof;
(b) has knowledge of (A) the occurrence of a "Reportable Event" (as
defined in Section 4043(b) of ERISA with respect to a Plan; (B) any event which
has occurred or any action which has been taken to amend or terminate a Plan as
referred to in subsections (2) and (6) of Section 9.1(k) hereof; (C) any event
which has occurred or any action which has been taken which could result in
complete withdrawal, partial withdrawal, or secondary liability for withdrawal
liability payments with respect to a Multiemployer Plan as referred to in
subsection (7) of Section 9.1(k) hereof; or (D) any action which has been taken
in furtherance of, any agreement which has been entered into for, or any
petition which has been filed with a United States district court for, the
appointment of a trustee for a Plan as referred to in subsection (3) of Section
9.1(k) hereof; or
(c) files a notice of intent to terminate a Plan with the Internal Revenue
Service or the Pension Benefit Guaranty Corporation; or files with the Internal
Revenue Service a request pursuant to Section 412(d) of the Code for a variance
from the minimum funding standard for a Plan; or files a return with the
Internal Revenue Service with respect to the tax imposed under Section 497(a) of
the Code for failure to meet the minimum funding standards established under
Section 412 of the Code for a Plan;
then, such Borrower will furnish to the Lender a copy of any notice received,
request or petition filed, and agreement entered into; the most recent Annual
Report (Form 5500 Series) and attachments thereto for the Plan; the most recent
actuarial report for the Plan; any notice, return, or materials required to be
filed with the Internal Revenue Service in connection with the event, action, or
filing; and a written statement of the Chairman, President, chief financial
officer, or managing partner, of such Borrower, as the case may be, describing
the event or the action taken and the reasons therefor.
6.27 Notice of Material Proceedings: Promptly upon becoming aware thereof,
each Borrower shall give the Lender notice of the commencement, existence or
threat of any proceeding by or before any official body against or affecting
such Borrower or any Affiliate which, if adversely decided, would have a
material adverse effect on the business, operations, properties or financial
condition of such Borrower or on the ability of such Borrower to perform its
obligations under this Agreement or the Note or other Loan Documents.
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ARTICLE 7 - NEGATIVE COVENANTS OF THE BORROWERS
Each Borrower hereby covenants and agrees that, from the date of this
Agreement and so long as such Borrower shall be indebted to Lender hereunder or
under any of the Note, or any contingent reimbursement obligation or claim
thereunder remains outstanding, such Borrower will comply with the following
covenants, unless Lender shall consent otherwise in writing:
7.1 Amendments, Mergers, Acquisitions, Etc.: Neither Borrower will change
its name, enter into any merger or consolidation, acquire the stock, ownership,
equity, business, assets or franchises of any other Person, enter into any
reorganization or recapitalization, reclassify its capital stock or partnership
interests, as the case may be, or issue any additional shares of capital stock
or partnership interests, as the case may be, whether through the payment of
stock dividends, distributions or otherwise.
7.2 Sale of Assets: Neither Borrower will sell, transfer, lease or
otherwise dispose of all or (except in the ordinary course of business), any
material part of its assets. In the event of any such sale of assets, whether
such assets constitute Collateral or not, the proceeds of such sale shall be
applied to repayment of the Loans.
7.3 Liens: Neither Borrower will mortgage, pledge, grant or permit to
exist any Lien or Liens upon any of its assets, of any kind, now owned or
hereafter acquired, except for Permitted Liens and Liens in favor of Lender, or
hypothecate or grant a Lien on any its capital, net worth, equity accounts, or
any capital stock or partnership interests, as the case may be.
7.4 Disposition of Right to Income: Neither Borrower will sell, discount,
transfer, assign, factor, mortgage or otherwise dispose of or grant or permit to
exist any Lien or Liens in any of the Collateral (including, without limitation,
the Accounts), other than to Lender, except for Permitted Liens and sales of
Inventory and other assets in the ordinary course of business.
7.5 Guarantor: Neither Borrower will become liable, directly or
indirectly, as guarantor or otherwise, for any obligation of any other Person.
7.6 Indebtedness: Neither Borrower will incur, create, or assume any
Indebtedness, except: (i) the Loans; (ii) Indebtedness secured only by Permitted
Liens (including capital or operating leases); (iii) unsecured Indebtedness
incurred in the ordinary course of business; (iv) Indebtedness due under a
management agreement between MediVators and Guarantor reasonably approved by
Lender; and (v) Indebtedness arising from other intercompany
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transactions between Borrower and Guarantor, provided such transactions are on
terms reasonably satisfactory to Lender.
7.7 Capital Stock Repurchase: Neither Borrower will redeem, purchase, or
retire any of its capital stock.
7.8 Statements Not Misleading, Etc.: Neither Borrower will furnish Lender
any certificate or other document that will contain any untrue statement of
material fact or that will omit to state a material fact necessary to make it
not misleading in light of the circumstances under which it is furnished.
7.9 Payments to Employees: Neither Borrower will permit any transfers of
property or payments to any present or former Affiliate, shareholder, officer or
employee of a Borrower, or the successors, assigns or transferees of such
individuals except for (i) normal compensation reasonable in amount under the
circumstances (Lender having approved of compensation levels existing as of the
date of this Agreement as "reasonable" for these purposes), (ii) repayments of
loans or advances approved in writing by Lender, (iii) Dividends, and (iv)
payments of Indebtedness permitted under Subsections (iv) and (v) of Section
7.6.
7.10 Disposition of Stock In and Indebtedness of Subsidiaries: Neither
Borrower will directly or indirectly sell, pledge or otherwise dispose of, or
part with control of, any shares of capital stock of a Borrower subsidiary (if
any) which is majority owned or controlled at any time hereafter ("Majority
Owned Subsidiary") or any Indebtedness of a Majority Owned Subsidiary
("indirect" disposition or issuance of share of capital stock includes but is
not limited to disposition or issuance of warrants, rights or options for, or
securities convertible into, such shares).
7.11 Regulation U: Neither Borrower shall use the proceeds of any Loans
hereunder directly or indirectly to purchase or carry any "margin stock" (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System) or to extend credit to others for the purpose of purchasing or carrying,
directly or indirectly, any such margin stock.
7.12 Lines of Business: Neither Borrower shall enter into a new line of
business or cease operations in any existing line of business without Lender's
consent.
7.13 Capital Expenditures. Borrowers will not make capital expenditures or
payments in the nature of capital expenditures in any fiscal year in the
aggregate in excess of $100,000 for the fiscal year ending July 31, 1996,
$150,000 for the fiscal year ending July 31, 1997 and $175,000 for the fiscal
year ending July 31, 1998.
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ARTICLE 8 - REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, each Borrower jointly and
severally makes the following continuing representations and warranties to
Lender, which shall be deemed renewed as of the date of each request for an
Advance, and deemed incorporated in each such request (the representations and
warranties in Section 8.1 shall also be deemed incorporated into each Borrowing
Base Certificate delivered to Lender with respect to the Accounts reflected in
such Borrowing Base Certificate):
8.1 Representations and Warranties as to Accounts Receivable: As to each
Account Receivable used as a base for borrowing hereunder (it being agreed that
Lender's recourse for a breach of the representations set forth in subparagraphs
(f) and (p) shall be limited to removing the Account Receivable from Eligible
Account Receivables):
(a) The Account Receivable arose from a bona fide outright sale of Goods
or services by a Borrower (and not consignments or "sale or return"
transactions) and, as to the sale of Goods, such Goods have been shipped to and
title to the Goods is vested with the respective Obligors or their designees;
(b) The Account Receivable is based on an enforceable order or contract
for Goods shipped and that the same will be delivered in accordance with such
order or contract;
(c) The title of Borrower to the Account Receivable is absolute and is not
subject to any prior assignment, claim, lien or security interest, except the
security interest of Lender;
(d) The amount shown as an Account Receivable on Borrower's books and on
any invoice or statement delivered to Lender is owing to Borrower and no partial
payment has been made thereon by anyone;
(e) The Account Receivable, or any portion thereof which is included in
the Borrowing Base, is not subject to any contra, credit, claim of reduction,
counterclaim, set-off, recoupment, or any claim for credit, allowances or
adjustments by the Obligor because of returned, inferior or damaged Goods or
unsatisfactory services, or for any other reason;
(f) The Account Receivable is not one as to which Lender has determined,
with notice to either Borrower, to be ineligible in whole or in part for the
following or similar reasons:
(1) payment terms not customary,
(2) credit weakness of the Obligor,
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(3) foreign country risks, including governmental regulation, war,
revolution, economic or social instability and the like,
(4) payment is to be made in foreign exchange,
(5) history of slow payments or disputes, or
(6) any questions as to the bona fide nature of the Obligor or its
undertaking to pay.
(g) To the extent the Account Receivable is reflected in the Borrowing
Base, the Obligor has not as of the date of the Borrowing Base Certificate
returned, or refused to retain, or asserted a right to return or refuse, any of
the Goods from the sale out of which the Account Receivable or portion thereof
arose;
(h) The Account Receivable is unpaid not more than ninety (90) days from
the invoice date unless the conditions of Section 8.1(m)(ii) below are met as to
such Account Receivable;
(i) The Account Receivable does not arise out of a contract with or order
from an Obligor which by its terms forbids or makes void or unenforceable the
assignment by Obligee to Lender of the Account arising with respect thereto;
(j) Neither Borrower has received and taken actions constituting
acceptance of any note, trade acceptance, draft or other instrument with respect
to or in payment for the Account Receivable (other than a check or checks, duly
endorsed, not postdated or payable other than to a Borrower, or subject to
conditions to payment, or containing any accord and satisfaction, and not
returned unpaid for any reason) nor any chattel paper with respect to the Goods
giving rise to the Account Receivable, and if any such instrument or chattel
paper is received, the applicable Borrower will immediately notify Lender in
writing and at the Lender's request, endorse or assign and deliver the same to
Lender;
(k) Neither any Borrower nor any Affiliate of a Borrower (other than
Carsen) is an Obligor with respect to the Account Receivable;
(l) The amount of each Account Receivable reported on a Periodic Recap as
an Eligible Account Receivable excludes as of the date of the Periodic Recap (i)
all partial or total payments received therefor, (ii) all chargeback billings,
(iii) all freight items and claims, (iv) all finance charges, late charges or
other service charges, (v) any retainages agreed to by the Obligee or asserted
by Obligor, (vi) reversals of credits previously given to the Obligor, or (vii)
credits received from any Obligor if the credit has been issued, aged or
outstanding ninety (90) days or more;
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(m) The Account Receivable does not represent a sale to a foreign Obligor
unless (i) the Obligor is Carsen, or (ii) an irrevocable, transferable
merchandise letter of credit, stipulating governance by the Uniform Customs and
Practices for Documentary Credits, and supporting the full obligation of the
Obligor, in form reasonably satisfactory to Lender, shall have been obtained and
collaterally assigned to Lender, on terms reasonably satisfactory to Lender;
(n) The Account Receivable does not represent progress or contract
billings, or proceeds of a consignment sale;
(o) The Obligor is not bankrupt or insolvent or the subject of
receivership proceedings, nor has made an assignment for benefit of creditors or
a composition with creditors;
(p) The Obligor is not a federal or state governmental or administrative
agency or entity; and
(q) The Account Receivable is not one which the Lender, reasonably deems
to be inadequately secured.
8.2 Other Representations and Warranties:
(a) Each Borrower is a business corporation duly organized, validly
existing and in good standing under the Laws of its state of incorporation set
forth on Exhibit A, is in good standing in each other jurisdiction wherein it is
required to be qualified as a foreign corporation (as designated at Exhibit A),
has the shareholders, directors, officers and principal place of business as
designated at Exhibit A and has the lawful power to own its properties and to
engage in the businesses it conducts;
(b) The making, delivery and performance of this Agreement, the Note, and
the Loan Documents, or amendments thereof, will not immediately, or with the
passage of time, the giving of notice, or both:
(1) Violate the certificate of incorporation or by-law provisions of
either Borrower or violate any Laws or result in a default under any contract,
agreement, or instrument to which either Borrower is a party or by which
Borrower or its property is bound; or
(2) Terminate or give any party the right to terminate any contract,
agreement or instrument to which either Borrower is a party or by which its
properties may be bound or affected;
(3) Result in the creation or imposition of any Lien upon any of the
assets of a Borrower except in favor of the Lender;
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(c) Each Borrower has the corporate power and authority to enter into and
perform this Agreement, the Note, and the other Loan Documents, and to incur the
Obligations herein and therein provided for, and has taken all action necessary
to authorize the execution, delivery, and performance of the same;
(d) This Agreement, the Note, and the other Loan Documents, and the
Obligations of each Borrower, are and continue to be valid, binding, and
enforceable in accordance with their respective terms, subject to applicable
bankruptcy laws and general principles of equity;
(e) Except as described on Exhibit C attached hereto, neither Borrower is
a party to or, to its best knowledge, threatened with, any litigation, suit,
action, investigation, proceedings or controversy before any court,
administrative agency or other governmental authority which, if adversely
determined, would result, in any material adverse change in its business
operations, properties or assets or in its condition, financially or otherwise,
or in any way affect this Agreement or the transactions contemplated hereby, and
neither Borrower is aware that it is in violation of or in default with respect
to any judgment, order, writ, injunction, decree or rule of any court,
administrative agency or governmental instrumentality or in any material respect
under any regulation of any administrative agency or governmental
instrumentality;
(f) Each Borrower has good and marketable title to all of its assets,
subject to no Lien or other claim of any third person except for Permitted
Liens;
(g) Borrower has filed all federal, state, and local tax returns, and
other reports which it is required by Law to file prior to the date hereof and
which are material to the conduct of its businesses, has paid or caused to be
paid all taxes, assessments and other governmental charges that are due and
owing prior to the date hereof, and has made adequate provision for the payment
of such taxes, assessments or other charges accruing but not yet payable;
neither Borrower has any knowledge of any deficiency or additional assessment in
a materially important amount in connection with any taxes, assessments or
charges not provided for on its books;
(h) Neither Borrower has in effect any "Defined Benefit Pension Plans", as
defined in ERISA, or had any in effect at any previous date, and except as
previously disclosed to the Lender in writing, no Reportable Event or Prohibited
Transaction, as defined in ERISA, has occurred with respect to any Plan;
(i) All financial statements delivered by Borrowers to Lender including
any schedules and notes pertaining thereto have been prepared in accordance with
GAAP, and fully and fairly present the
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financial condition of the Borrowers at the dates thereof and the results of
operations for the periods covered thereby. There have been no material adverse
changes in the financial condition of the Borrowers from that reflected in said
financial statements;
(j) Each Borrower has complied in all material respects with all
applicable regulatory and other Laws with respect to: (1) the conduct of its
businesses; and (2) the use, maintenance, and operation of the real and personal
properties owned or leased by it in the conduct of its businesses; neither
Borrower, nor any Affiliate, is in violation of or subject to any contingent
liability under the provisions of ERISA, the Internal Revenue Code of 1986, as
amended, any applicable occupational or health or safety law, including but not
limited to (i) any restrictions, specifications or requirements pertaining to
products that the Borrower or any subsidiary manufacturers, process or sell or
pertaining to the services each performs, (ii) the conduct of its business and
(iii) the use, maintenance or operation of the real and personal properties
owned or possessed by it;
(k) No representation or warranty furnished pursuant hereto contains any
untrue statement of material fact or omits to state a material fact necessary to
make such representation or warranty not misleading in light of the
circumstances under which it was made;
(l) Each consent, approval or authorization of, or filing, registration or
qualifications with, any Person which is required to be obtained or effected by
a Borrower in connection with the execution and delivery of this Agreement, the
Note, and the other Loan Documents, or the undertaking or performance of any
obligation hereunder or thereunder, has been duly obtained or effected;
(m) Except as generally disclosed in Exhibit D or any other exhibit hereto
attached hereto, neither Borrower has any leases, contracts or commitments of
any kind, such as employment agreements, collective bargaining agreements,
powers of attorney, contracts for future purchase or delivery of goods or
rendering of services, bonus, pension and retirement plans, or accrued vacation
pay, insurance and welfare agreements, or any contingent or noncontingent
liability, which is or are material in amount, and all parties to all leases,
contracts and other commitments to which the Borrower is a party have complied
with the provisions of such leases, contracts and other commitments, no party is
in default under any thereof and no event has occurred which, but for the giving
of notice or the passage of time, or both, would constitute a default with
respect thereto;
(n) Neither Borrower has made any agreement or taken any action which may
cause anyone to become entitled to a commission or finder's fee, a result of the
making of the Loans;
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(o) Each Borrower has taken all necessary steps to preserve its corporate
existence and all of its franchises and licenses, and has complied with all
present regulatory and other Laws applicable to it in the operation of its
businesses, and with all material agreements to which it is subject;
(p) Neither Borrower will make any borrowing hereunder for the purpose of
buying or carrying any "margin stock," as such term is used in Regulation U of
the Board of Governors of the Federal Reserve System, as amended from time to
time. Neither Borrower nor any subsidiary own any "margin stock". Neither
Borrower is engaged in the business of extending credit to others for such
purpose, and no part of the proceeds of any borrowing hereunder will be used to
purchase or carry any "margin stock" or to extend credit to others for the
purpose of purchasing or carrying any "margin stock";
(q) Each of Borrower's Locations, the current locations of all Inventory,
and the locations of each office at which each Borrower maintains Records
concerning Accounts Receivable or other Accounts, and other financial matters,
are solely as set forth on Exhibit E hereto;
(r) Attached hereto as Exhibit F is a schedule setting forth all
Indebtedness (other than trade Indebtedness incurred in the ordinary course of
business) of each Borrower where the principal amount of the Indebtedness or the
present value of all future payments with respect to the Indebtedness (in the
case of all other Indebtedness) exceeds $25,000;
(s) All Permitted Exceptions and Permitted Liens and all leases (whether
capital or operating leases) to which either Borrower or its assets are subject,
are listed on Exhibit G hereto.
ARTICLE 9 - DEFAULT
9.1 Events of Default: The occurrence of any one or more of the following
shall constitute an Event of Default hereunder:
(a) Borrowers shall fail to pay when due and requested by Lender any
amount of principal or any amount of interest, or any reasonable fee, charge or
expense, payable hereunder or under the Note or other Loan Documents;
(b) Borrowers or Guarantor shall fail to pay when due, any Indebtedness
(not being reasonably disputed by Borrowers) for which the nonpayment exceeds
$100,000 or shall suffer to exist any other event of default under any material
agreement binding upon it or him provided, no Event of Default shall exist
unless such non-payment event of default has not been cured within 30 days of
notice by Lender;
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(c) Any financial statement, Periodic Recap, representation or warranty
made or furnished by any Borrower or its agents or Guarantor to Lender in
connection with this Agreement or its performance, or as an inducement to Lender
to enter into this Agreement or make any Advance, or in any separate statement
or document to be delivered hereunder to Lender, shall be false, incorrect, or
incomplete when made as to any material fact or facts, provided, if the adverse
effect of such false, incorrect or incomplete writing can be remedied by the
payment of monetary amounts, no event of default shall exist hereunder unless
such Borrower shall have failed to pay an amount sufficient to cure such default
within ten days of notice by Lender;
(d) Any Borrower or Guarantor shall admit its or his inability to pay, or
shall fail to pay, debts as they mature, or shall make an assignment for the
benefit of creditors;
(e) Proceedings in bankruptcy, or for reorganization of any Borrower or
for the readjustment of debts, under the Bankruptcy Code, as amended, or any
part thereof, or under any other Laws, whether state or federal, for the relief
of debtors, now or hereafter existing, shall be commenced by or against any
Borrower or Guarantor and if commenced against such Borrower or Guarantor shall
not be stayed or discharged within sixty (60) days of commencement;
(f) A receiver or trustee shall be appointed for any Borrower or Guarantor
or any substantial part of its assets, or any proceedings shall be instituted
for the dissolution or the full or partial liquidation of any Borrower and such
receiver or trustee shall not be discharged within sixty (60) days of initial
appointment, or such proceedings shall not be stayed or discharged within sixty
(60) days of their commencement, or any Borrower shall discontinue business or
materially change the nature of its business;
(g) Any Borrower or Guarantor shall suffer a final judgment for the
payment of money in excess of $100,000, and shall not discharge the same within
a period of thirty (30) days unless execution thereon is effectively stayed or
bonded pending further proceedings;
(h) A judgment creditor of any Borrower or Guarantor shall obtain
possession of or any attachment or other judicial process shall issue against,
any of the Collateral by any means, including, but without limitation, levy,
distraint, replevin or self-help or on a consensual basis, if such possession,
attachment, process, levy or distraint is, in Lender's reasonable opinion,
material or if such possession, attachment, process, levy or distraint shall not
have been finally stayed, enjoined or terminated within fifteen (15) days after
it was first obtained;
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(i) Any Borrower or any other Obligor or Affiliate of a Borrower shall
fail to observe or perform any other obligation to be observed or performed by
it hereunder or under any of the Notes, or other Loan Documents (giving effect
to applicable notice and cure periods), as the same may be amended;
(j) Any default by any Borrower or Guarantor or any other party with
respect to any other obligation to Lender or Bank under any Loan Document or
otherwise as to which any required notice has been given, any applicable grace
period has expired, and such default remains uncured and unwaived;
(k) Any one or more of the following events occurs which, in Lender's
reasonable opinion, when taken individually or collectively, have, or is or are
likely to have, a material, adverse effect on the financial condition or
business operations of Borrower and such event or circumstance continues for a
period of fifteen (15) days after written notice to cure is given by Lender:
(1) The PBGC notifies a Plan pursuant to Section 4042 of ERISA by
service of a complaint of its determination that an event described in Section
4042 (a) of ERISA has occurred, a Plan should be terminated, or a trustee should
be appointed for a Plan; or
(2) Any action is taken to terminate a Plan pursuant to its
provisions or the Plan administrator files with the PBGC a notice of intent to
terminate a Plan in accordance with Section 4041 of ERISA; or
(3) Any action is taken by a plan administrator to have a trustee
appointed for a Plan pursuant to Section 4042 of ERISA: or
(4) A return is filed with the Internal Revenue Service, or a Plan
is notified by the Secretary of the Treasury that a notice of deficiency under
Section 6212 of the Code has been mailed, with respect to the tax imposed under
Section 4971 (a) of the Code for failure to meet the minimum funding standards
established under Section 412 of the Code; or
(5) A Reportable Event occurs with respect to a Plan; or
(6) Any action is taken to amend a Plan to become an employee
benefit plan described in Section 4021(b)(1) of ERISA, causing a Plan
termination; or
(7) Any Borrower or a Controlled Group Member receives a notice of
liability or demand for payment on account of complete withdrawal under Section
4203 of ERISA, partial withdrawal under Section 4203 of ERISA or on account of
becoming secondarily liable for withdrawal liability payments under Section 4204
of ERISA (sale of assets);
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(l) Any Borrower, or any shareholder, director or officer of Borrower
shall be convicted of a felony;
(m) The commencement of dissolution or liquidation proceedings with
respect to any Borrower (other than proceedings commenced by third parties
stayed or dismissed within thirty (30) days of commencement) or a change in the
shareholder ownership of any Borrower; or
(n) There shall occur a default under or termination or modification of
the Olympus Agreement which in the reasonable opinion of Lender has a negative
effect on the value of Borrowers' business or economic position;
(o) There shall exist a default under or termination (other than a
termination in the ordinary course at maturity) of the credit relationship
between Bank and Carsen; or
(p) There shall be a material adverse change at any time in the financial
condition of any Borrower or Guarantor.
9.2 Acceleration: Immediately and without notice upon the occurrence of an
Event of Default specified in subsection 9.1(e) or subsection 9.1(f), or in the
case of any other Event of Default at the option of Lender, upon notice by
Lender or its agent or attorney to the Borrowers, all Obligations, whether
hereunder or otherwise, including without limitation those evidenced by the
Note, shall immediately become due and payable, without further action or notice
of any kind.
9.3 Remedies: Upon the occurrence of an Event of Default Lender shall
have, in addition to the rights and remedies given it by this Agreement, the
Note, or any other of the Loan Documents, as amended, and the remaining
documents delivered pursuant hereto, all those allowed by all applicable Laws,
including, without limitation, the UCC.
Without limiting the generality of the foregoing, upon an Event of
Default, Lender may immediately, without demand for performance and without
other notice or demand whatsoever to the Borrowers (except as specifically
required by this Agreement or the documents delivered pursuant hereto or as
required by applicable Laws), sell at public or private sale or otherwise
realize upon, at any place designated by Lender in its sole discretion,
including any place of business of Lender or any of its affiliates, the whole
or, from time to time, any part of the Collateral, or any interest which the
Borrowers may have therein. The Borrowers shall, at Lender's request, subsequent
to an Event of Default, cooperate, assist and, as requested, supervise, and
cause their officers, directors, agents and employees to cooperate, assist and
supervise in any disposition of Collateral directed by Lender, including
transfers of Collateral to Lender or third party purchasers, as
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Lender, in its sole discretion may elect. After deducting from the proceeds of
sale or other disposition of the Collateral all expenses (including all expenses
for legal services), Lender shall apply such proceeds toward the satisfaction of
the Obligations, in such order as it shall determine. Any remainder of the
proceeds after satisfaction in full of the Obligations shall be distributed as
regulated by applicable Laws. At any such sale or other disposition, Lender may,
to the extent permissible under applicable Laws, purchase the whole or any part
of the Collateral, free from any right of redemption on the part of the
Borrowers, which right is hereby waived and released. Notice of any sale or
other disposition shall be given to the Borrowers at the address set forth on
Exhibit B or such other address as may from time to time be shown on Lender's
records at least ten (10) days before the time of any intended public sale or of
the time after which any intended private sale or other disposition of the
Collateral is to be made, which the Borrowers hereby agree shall be reasonable
notice of such sale or other disposition. Borrowers agree to assemble, or to
cause to be assembled, at the Borrowers' own expense, the Collateral at such
place or places as Lender shall designate. Without limiting the generality of
any of the rights and remedies conferred upon Lender under this Section, Lender
may, to the full extent permitted by applicable Laws do any or all of the
following:
(a) Enter upon any premises of each Borrower, exclude the Borrower
therefrom, and take immediate possession of the Collateral, either personally or
by means of a receiver appointed by a court of competent jurisdiction, or by
other lawful means;
(b) At Lender's option, use, operate, manage and control the Collateral in
any lawful manner;
(c) Collect and receive any or all rents, income, revenue, earnings,
issues, and profits (including the Accounts), and proceeds therefrom; and
(d) Maintain, repair, renovate, alter or remove the Collateral as Lender
may determine in its discretion.
9.4 Application of Proceeds: Borrowers hereby irrevocably waive the right
to direct the application of all payments, including proceeds of Collateral,
that may be received by Lender or for the benefit of Borrowers. The proceeds of
any sale or other disposition of all or any part of the Collateral, or any
interest which either Borrower may have therein, shall be applied by Lender in
the following order:
(a) First, to payment of all reasonable costs and expenses incurred by
Lender under any of the Loan Documents including without limitation all
reasonable costs and expenses relating to disposition of Collateral or
enforcement of the Borrowers' Obligations, and reasonable attorneys' fees,
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(b) Second, to the payment in full of (i) all accrued and unpaid interest
on, and, thereafter (ii) the unpaid principal balance of the Loans, the Note and
other Obligations, all in accordance with the terms of the Notes, this Agreement
and the other Loan Documents, and
(c) Third, to the payment in full of all other Obligations of the
Borrowers to Lender, and
(d) Fourth, to the Borrowers to the extent of any surplus.
The Borrowers shall remain jointly and severally liable to Lender for any
deficiency in payment of the Obligations to Lender after application of the
proceeds in accordance with this Section 9.4.
9.5 Jurisdiction: The Borrowers consent to the personal jurisdiction of
the Federal or State Courts located in the State of New York; if suit is filed
by any party to enforce, interpret or construe this Agreement.
9.6 Enforcement and Waiver by the Lender: Lender shall have the right at
all times to enforce the provisions of this Agreement and the documents
delivered pursuant hereto in strict accordance with the terms hereof and
thereof, notwithstanding any conduct or custom on the part of Lender in
refraining from so doing at any time or time. The failure of Lender at any time
or times to enforce its rights under such provisions, strictly in accordance
with the same, shall not be construed as having created a custom in any way or
manner contrary to specific provisions of this Agreement or as having in any way
or manner modified or waived the same. All rights and remedies of Lender are
cumulative and concurrent and the exercise of one right or remedy shall not be
deemed a waiver or release of any other right or remedy.
ARTICLE 10 - MISCELLANEOUS
10.1 Interpretation: The provisions of this Agreement shall be in addition
to those of any letter of credit agreement, security agreement, note or other
evidence of liability now or hereafter at any time held by Lender, all of which
shall be construed as complementary and supplementary to each other to the
extent possible. Nothing herein contained shall prevent Lender from enforcing
any or all other agreements in accordance with their respective terms.
10.2 Further Assurances: From time to time, each Borrower will execute and
deliver to Lender such additional documents and will provide such additional
information as Lender may reasonably require, to carry out the terms of this
Agreement and be informed of such Borrower's status and affairs.
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10.3 Power to Execute Documents: Each Borrower hereby irrevocably (this
power being coupled with an interest) appoints, constitutes and names Lender, or
any of its attorneys or agents, the true and lawful attorney for such Borrower,
with full power of substitution, to do any or all of the following at any time
after the occurrence of an Event of Default (but this grant of authority shall
not negate any other grant of authority under this Agreement which may authorize
other actions, or similar actions under other circumstances):
(a) To receive, endorse, sign and deliver, in the name of the Borrower, or
in Lender's name, all checks, drafts, money orders and other instruments, for
the payment of moneys which are payable to such Borrower;
(b) To sign the names of such Borrower, and to receipt for such Borrower,
on any schedules, assignments, instruments, documents and UCC financing,
amending or continuation statements which such Borrower is obligated to give
Lender hereunder or any invoice, warehouse receipt, bill of lading or other
Document, Instrument or Chattel Paper, or any Accounts, Accounts Receivable,
statements therefor, drafts against Obligors or drawn or to be drawn under any
letters of credit, notices to Obligors, certificates or other documents to be
delivered or presented under letters of credit or schedules or assignments of
Accounts; and
(c) To take or bring at such Borrower's expense, in the name of such
Borrower, or Lender, all steps, actions and suits that Lender considers
necessary or desirable to effect collections of Accounts, to enforce payment of
any Account, to settle, compromise, sell, assign, discharge or release, in whole
or in part, any amounts owing on Accounts, to extend the time of payment of any
and all Accounts and to make allowances and adjustments with regard to Accounts;
and
(d) To do such other and further acts and deeds in the name of such
Borrower that Lender may deem necessary or desirable to enforce the rights of
such Borrower against third parties with respect to any Collateral.
10.4 Cost, Expenses, and Fees Paid and Payable to Lender: Each Borrower
agrees that all reasonable costs, expenses, and reasonable attorneys fees of, or
incidental to the custody, care, management, sale or collection of, or
realization upon, any of the Collateral or in any way relating to the care,
enforcement or protection of the Collateral or in the enforcement of any and all
rights of Lender either hereunder or under any applicable law or custom
excluding, all out of pocket costs incurred by Lender in conjunction with field
exams of Collateral (at a rate of $500 per man day per day plus expenses, but,
if a Default has not occurred, not to exceed $4,000 per year, plus reasonable
expenses, with such exams to take place as often as sixty days after Closing and
each
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ninety days thereafter) and location visitations shall become part of the
Obligations and entitled to the benefits of this Agreement as if an Advance had
been made hereunder upon the application of the Borrower, and Lender may at any
time after same is due apply to the payment of all such costs and expenses all
moneys of Collateral or other proceeds arising from the possession or
disposition of all or any portion of the Collateral.
10.5 Indemnification: Each Borrower shall jointly and severally pay, and
shall protect, indemnify and save harmless the Lender and Bank and their
officers, directors, shareholders, employees, contractors, attorneys, agents and
servants from and against any and all losses, liabilities (including liabilities
for penalties), actions, suits, judgments, demands, damages, costs or expenses
(including without limitation, reasonable attorneys' fees and expenses) of any
nature arising from or relating to this Agreement or any Loan, Advance, or any
action or omission of Lender or Bank in connection therewith, except for any
such losses, liabilities, actions, suits, judgments, demands, damages, costs or
expenses resulting from the negligence or willful misconduct of the Bank or
Lender. If any action, suit or proceeding arising from any of the foregoing is
brought against the Bank or Lender or any person indemnified or intended to be
indemnified pursuant to this Section, each Borrower, to the extent and in the
manner directed by the Lender, will jointly and severally resist and defend such
action, suit or proceeding or cause the same to be resisted and defended by
counsel designated by the Borrowers (which counsel shall be reasonably
satisfactory to the person or persons indemnified or intended to be
indemnified). The obligations of the Borrowers under this Section shall survive
the termination of this Agreement and the discharge of the Borrowers'
Obligations hereunder.
10.6 Notices: Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed delivered if delivered by hand
or if sent by certified mail, postage prepaid, return receipt requested, as
follows, unless such address is changed by written notice hereunder:
If to the Borrowers: To their addresses designated on the
first page of this Agreement.
with a copy to: Eric W. Nodiff, Esq.
Dornbush Mensch Mandelstam &
Schaeffer, LLP
747 Third Avenue
New York, New York 10017
and
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Cantel Industries, Inc.
1135 Broad Street
Clifton, New Jersey 07013
Attention: Craig Sheldon, Vice President
and Controller
If to Lender: National Canada Finance Corp.
125 West 55th Street
New York, NY 10019
Attention: John Richter
with a copy to: National Canada Finance Corp.
85 Livingston Avenue
Roseland, N.J. 07068
Attention: Joseph Accardi
and John Leifer
Any notice hereunder shall be deemed to have been given five (5) days
after mailing thereof, or upon actual delivery to an agent of the recipient
party if by hand, to the other party at such party's then effective address
hereunder. Notices by Lender may be given on its behalf by its agent or
attorney.
10.7 Waiver and Release by the Borrowers: To the maximum extent permitted
by applicable Laws, the Borrowers waive demand, protest, presentment, and notice
of dishonor of all commercial paper at any time held by Lender on which the
Borrowers are in any way liable.
10.8 Applicable Law: The internal substantive laws of the State of New
York shall govern the construction of this Agreement and the rights and remedies
of the parties hereto without regard to any rules relating to conflict of laws
or choice of law.
10.9 Binding Effect, Assignment and Entire Agreement: This Agreement shall
inure to the benefit of, and shall be binding upon, the respective heirs,
executors, administrators, successors and permitted assigns of the parties
hereto. Neither Borrower has any right to assign any of its rights or
obligations hereunder without the prior written consent of Lender. This
Agreement, and the documents executed and delivered pursuant hereto, constitute
the entire agreement between the parties and supersede all prior commitments,
understandings and agreements, and may be amended only by a writing signed on
behalf of each party. If there is any inconsistency between the express terms of
this Agreement and the express terms of any other Loan Document, the terms of
this Agreement shall prevail.
10.10 Severability: If any provision of this Agreement shall be held
invalid under any applicable Laws, such invalidity shall not affect any other
provision of this Agreement which can be given
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effect without the invalid provision. To this end, the provisions hereof are
severable.
10.11 Counterparts: This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
10.12 Waiver of Trial by Jury: EACH BORROWER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVES ANY RIGHT THE BORROWER MAY HAVE OR MAY HEREAFTER HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT. Each Borrower hereby certifies that neither
Lender nor any of its representatives, agents or counsel has represented,
expressly or otherwise, that Lender would not, in the event of any such suit,
action or proceeding, seek to enforce this waiver of right to trial by jury.
Each Borrower acknowledges that its has made this waiver knowingly, voluntarily
and intentionally.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
under seal, as of the day and year first above written.
NATIONAL CANADA FINANCE CORP.
By: /s/ Joseph Accardi
------------------
Joseph Accardi,
Vice President
/s/ John Leifer
-----------------------------
John Leifer,
Vice President
Attest: MEDIVATORS, INC.
By: /s/ Craig Sheldon By: /s/ Donald L. Sturtevant
----------------- ---------------------
Craig Sheldon, Vice President, Donald L. Sturtevant,
Treasurer and Secretary President and Chief
Financial Officer
Attest: DISPOSAL SCIENCES, INC.
By: /s/ Craig Sheldon By: /s/ Donald L. Sturtevant
----------------- ---------------------
Craig Sheldon, Vice President, Donald L. Sturtevant,
Treasurer and Secretary President and Chief
Financial Officer
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