LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION
as Lender
and
IMPAX LABORATORIES, INC.
as Borrower
Dated: October 23, 2002
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS ...................................................................1
SECTION 2. CREDIT FACILITIES ............................................................26
2.1 Revolving Loans ..............................................................26
2.2 Letter of Credit Accommodations ..............................................27
2.3 Term Loan ....................................................................30
2.4 Equipment Purchase Term Loans ................................................31
SECTION 3. INTEREST AND FEES ............................................................33
3.1 Interest .....................................................................33
3.2 Closing Fee ..................................................................34
3.3 Facility Fee .................................................................34
3.4 Servicing Fee ................................................................34
3.5 Unused Line Fee ..............................................................35
3.6 Changes in Laws and Increased Costs of Loans .................................35
SECTION 4. CONDITIONS PRECEDENT .........................................................37
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations ....37
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations ........39
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST ....................................40
5.1 Grant of Security Interest ...................................................40
5.2 Perfection of Security Interests .............................................41
SECTION 6. COLLECTION AND ADMINISTRATION ................................................45
6.1 Borrower's Loan Account ......................................................45
6.2 Statements ...................................................................45
6.3 Collection of Accounts .......................................................45
6.4 Payments .....................................................................47
6.5 Authorization to Make Loans ..................................................48
6.6 Use of Proceeds ..............................................................48
SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS ................................48
7.1 Collateral Reporting .........................................................48
7.2 Accounts Covenants ...........................................................49
7.3 Inventory Covenants ..........................................................50
7.4 Equipment and Real Property Covenants ........................................51
(i)
7.5 Power of Attorney ............................................................51
7.6 Right to Cure ................................................................52
7.7 Access to Premises ...........................................................53
SECTION 8. REPRESENTATIONS AND WARRANTIES ...............................................53
8.1 Corporate Existence; Power and Authority .....................................53
8.2 Name; State of Organization; Chief Executive Office; Collateral Locations ....54
8.3 Financial Statements; No Material Adverse Change .............................54
8.4 Priority of Liens; Title to Properties .......................................54
8.5 Tax Returns ..................................................................55
8.6 Litigation ...................................................................55
8.7 Compliance with Other Agreements and Applicable Laws .........................55
8.8 Environmental Compliance .....................................................55
8.9 Employee Benefits ............................................................56
8.10 Bank Accounts ................................................................57
8.11 Intellectual Property ........................................................57
8.12 Subsidiaries; Affiliates; Capitalization; Solvency ...........................58
8.13 Labor Disputes ...............................................................58
8.14 Restrictions on Subsidiaries .................................................59
8.15 Material Contracts ...........................................................59
8.16 Payable Practices ............................................................59
8.17 Accuracy and Completeness of Information .....................................59
8.18 Survival of Warranties; Cumulative ...........................................59
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS ...........................................59
9.1 Maintenance of Existence .....................................................59
9.2 New Collateral Locations .....................................................60
9.3 Compliance with Laws, Regulations, Etc. ......................................60
9.4 Payment of Taxes and Claims ..................................................61
9.5 Insurance ....................................................................62
9.6 Financial Statements and Other Information ...................................63
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. .....................65
9.8 Encumbrances .................................................................66
9.9 Indebtedness .................................................................67
9.10 Loans, Investments, Etc. .....................................................72
9.11 Dividends and Redemptions ....................................................73
9.12 Transactions with Affiliates .................................................73
9.13 Compliance with ERISA ........................................................74
9.14 End of Fiscal Years; Fiscal Quarters .........................................74
9.15 Change in Business ...........................................................74
9.16 Limitation of Restrictions Affecting Subsidiaries ............................74
(ii)
9.17 Adjusted Tangible Net Worth ..................................................75
9.18 Minimum EBITDA ...............................................................75
9.19 Capital Expenditures .........................................................76
9.20 License Agreements ...........................................................76
9.21 After Acquired Real Property .................................................77
9.22 Costs and Expenses ...........................................................78
9.23 Further Assurances ...........................................................78
SECTION 10. EVENTS OF DEFAULT AND REMEDIES ...............................................79
10.1 Events of Default ............................................................79
10.2 Remedies .....................................................................81
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW .................84
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver ........84
11.2 Waiver of Notices ............................................................86
11.3 Amendments and Waivers .......................................................86
11.4 Waiver of Counterclaims ......................................................86
11.5 Indemnification ..............................................................86
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS .............................................87
12.1 Term .........................................................................87
12.2 Interpretative Provisions ....................................................89
12.3 Notices ......................................................................90
12.4 Partial Invalidity ...........................................................91
12.5 Successors ...................................................................91
12.6 Entire Agreement .............................................................91
12.7 Counterparts, Etc. ...........................................................92
12.8 Confidentiality ..............................................................92
(iii)
INDEX TO EXHIBITS
Exhibit A Information Certificate
Exhibit B Compliance Certificate
Exhibit C Form of Equipment Purchase Term Note
(i)
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated October 23, 2002 is entered into
by and between Congress Financial Corporation, a Delaware corporation ("Lender")
and Impax Laboratories, Inc., a Delaware corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment of a monetary obligation, whether or not earned by performance, which is
not evidenced by chattel paper or an instrument, (a) for property that has been
or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for
services rendered or to be rendered, (c) for a secondary obligation incurred or
to be incurred, or (d) arising out of the use of a credit or charge card or
information contained on or for use with the card.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or loans. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
1.3 "Adjusted Excess Availability" shall mean the amount, as determined
by Lender, calculated at any time, equal to: (a) the sum of (i) the Qualified
Cash Collateral plus (ii) the lesser of: (A) the Borrowing Base and (B) the
Revolving Loan Limit (in each case under clause (A) or (B) after giving effect
to any Reserves other than any Reserves in respect of Letter of Credit
Accommodations), minus (b) the sum of: (i) the amount of all then outstanding
and unpaid Obligations (but not including for this purpose the then outstanding
Letter of Credit Accommodations and the then outstanding principal amount of the
Term Loan and the Equipment Purchase Term Loans), plus (ii) the amount of all
Reserves then established in respect of Letter of Credit Accommodations, plus
(iii) the aggregate amount of all then outstanding and unpaid trade payables and
other obligations of Borrower which are more than sixty (60) days past due as of
such time (other than trade payables and other obligations being contested by
Borrower in good faith by appropriate proceedings for which adequate reserves
have been set aside on its books), plus (iv) the amount of checks issued by
Borrower to pay trade payables and other obligations which are more than sixty
(60) days past due as of such time, but not yet sent (but without duplication of
clause (b)(iii) and the book overdraft of Borrower.
1.4 "Adjusted Tangible Net Worth" shall mean as to any Person, at any
time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its Subsidiaries (if any),
the amount equal to the difference between: (a) the aggregate net book value of
all assets of such Person and its Subsidiaries (excluding the value of patents,
trademarks, tradenames, copyrights, licenses, goodwill, prepaid assets and other
intangible assets), calculating the book value of inventory for this purpose on
a first-in-first-out basis, after deducting from such book values all
appropriate reserves in accordance with GAAP (including all reserves for
doubtful receivables, obsolescence, depreciation and amortization) and (b) the
aggregate amount of the Indebtedness and other liabilities of such Person and
its Subsidiaries (including tax and other proper accruals).
1.5 "Affiliate" shall mean, with respect to a specified Person, any
other Person which directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such Person, and
without limiting the generality of the foregoing, includes (a) any Person which
beneficially owns or holds five (5%) percent or more of any class of Voting
Stock of such Person or other equity interests in such Person, (b) any Person of
which such Person beneficially owns or holds five (5%) percent or more of any
class of Voting Stock or in which such Person beneficially owns or holds five
(5%) percent or more of the equity interests and (c) any director or executive
officer of such Person. For the purposes of this definition, the term "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise.
2
1.6 "ANDAs" shall mean Abbreviated New Drug Applications filed by
Borrower with the United States Food and Drug Administration.
1.7 "Applicable Margin" shall mean, at any time, as to the Interest
Rate for Revolving Loans, the applicable percentage (on a per annum basis) set
forth below if the Quarterly Average Excess Availability for the immediately
preceding fiscal quarter is at or within the amounts indicated for such
percentage:
Applicable Applicable
Quarterly Average Prime Eurodollar
Excess Availability Rate Margin Rate Margin
------------------- ----------- -----------
$12,500,000 or more 1.00% 3.00%
Greater than or equal to $10,000,000 1.50% 3.50%
and less than $12,5000,000
Less than $ 10,000,000 1.75% 3.75%
provided, that, the Applicable Margin shall be calculated and established once
each fiscal quarter (commencing with the fiscal quarter ending on or about March
31, 2003) and shall remain in effect until adjusted thereafter during the next
fiscal quarter.
1.8 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.9 "Borrowing Base" shall mean, at any time, the amount equal to: (a)
fifty (50%) percent of the Net Amount of Eligible Accounts, plus (b) the lesser
of (i) seventy (70%) percent of the Value of Eligible Inventory or (ii) eighty
(80%) percent of the Net Recovery Percentage multiplied by the Value of the
Eligible Inventory or (iii) the Inventory Loan Limit, less (c) any Reserves;
provided, that, the aggregate amount of Eligible Accounts owing by Teva that are
included in the Borrowing Base shall not exceed $8,000,000 at any time. For
purposes only of applying the Inventory Loan Limit, Lender may treat the then
undrawn amounts of outstanding Letter of Credit Accommodations for the purpose
of purchasing Eligible Inventory as Revolving Loans to the extent Lender is in
effect basing the issuance of the Letter of Credit Accommodations on the Value
of the Eligible Inventory being purchased with such Letter of Credit
Accommodations. In determining the actual amounts of such Letter of Credit
Accommodations to be so treated for purposes of the sublimit, the outstanding
Revolving Loans and Reserves shall be attributed first to any components of the
lending formulas set forth above that are not subject to such sublimit, before
being attributed to the components of the lending formulas subject to such
sublimit.
3
1.10 "Bulk Inventory" shall mean all of Borrower's Inventory in the
form of capsules and tablets which are not bottled, packaged or labeled but
which otherwise constitute finished goods held for sale in the ordinary course
of business of Borrower.
1.11 "Bulk Inventory Loan Limit" shall mean at any time the amount
equal to $100,000.
1.12 "Business Day" shall mean any day other than a Saturday, Sunday,
or other day on which commercial banks are authorized or required to close under
the laws of the State of New York or the State of North Carolina, and a day on
which the Reference Bank and Lender are open for the transaction of business,
except that if a determination of a Business Day shall relate to any Eurodollar
Rate Loans, the term Business Day shall also exclude any day on which banks are
closed for dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
1.13 "Capital Expenditures" shall mean, with respect to any Person, all
expenditures for any fixed or capital assets or improvements, or for
replacements, substitutions or additions thereto, which have a useful life of
more than one (1) year, including, but not limited to, the direct or indirect
acquisition of such assets by way of increased product service charges, offset
items or otherwise and shall include payments in respect of Capital Leases.
1.14 "Capital Leases" shall mean, as applied to any Person, any lease
of (or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.15 "Capital Stock" shall mean, with respect to any Person, any and
all shares, interests, participations or other equivalents (however designated)
of such Person's capital stock or partnership, limited liability company or
other equity interests at any time outstanding, and any and all rights, warrants
or options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.16 "Cash Collateral Reserve" shall mean, at any time, the amount
equal to the difference between (a) the Required Cash Collateral Amount (as
defined in the Investment Property Pledge Agreement) at such time, and (b) the
amount of all cash and Cash Equivalents in the Specified Cash Collateral Account
(as defined in the Investment Property Pledge Agreement) at such time.
1.17 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of ninety (90) days or less issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit or
bankers' acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
4
$250,000,000; (c) commercial paper (including variable rate demand notes) with a
maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of Borrower) organized under the laws of any State of the United
States of America or the District of Columbia and rated at least A-1 by Standard
& Poor's Ratings Service, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or at
least P-1 by ▇▇▇▇▇'▇ Investors Service, Inc.; (d) repurchase obligations with a
term of not more than thirty (30) days for underlying securities of the types
described in clause (a) above entered into with any financial institution having
combined capital and surplus and undivided profits of not less than
$250,000,000; (e) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by the United States of America or issued by any governmental agency thereof and
backed by the full faith and credit of the United States of America, in each
case maturing within ninety (90) days or less from the date of acquisition;
provided, that, the terms of such agreements comply with the guidelines set
forth in the Federal Financial Agreements of Depository Institutions with
Securities Dealers and Others, as adopted by the Comptroller of the Currency on
October 31, 1985; and (f) investments in money market funds and mutual funds
which invest substantially all of their assets in securities of the types
described in clauses (a) through (e) above.
1.18 "Change of Control" shall mean (a) the transfer (in one
transaction or a series of transactions) of all or substantially all of the
assets of Borrower to any Person or group (as such term is used in Section
13(d)(3) of the Exchange Act); (b) the liquidation or dissolution of Borrower or
the adoption of a plan by the stockholders of Borrower relating to the
dissolution or liquidation of Borrower; (c) the acquisition by any Person or
group (as such term is used in Section 13(d)(3) of the Exchange Act) of
beneficial ownership, directly or indirectly, of a majority of the voting power
of the total outstanding Voting Stock of Borrower or the Board of Directors of
Borrower; or (d) during any period of two (2) consecutive years, individuals who
at the beginning of such period constituted the Board of Directors of Borrower
(together with any new directors whose nomination for election by the
stockholders of Borrower was approved by a vote of at least sixty-six and
two-thirds (66 2/3%) percent of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of Borrower then still in office.
1.19 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.20 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.21 "Collateral Access Agreement" shall mean an agreement in writing,
in form and substance satisfactory to Lender, from any lessor of premises to
Borrower, or any other person to whom any Collateral (including Inventory,
Equipment, bills of lading or other documents of title) is consigned or who has
custody, control or possession of any such Collateral or is otherwise the owner
or operator of any premises on which any of such Collateral is located, pursuant
to which such lessor, consignee or other person, inter alia, acknowledges the
first priority security interest of Lender in such Collateral, agrees to waive
any and all claims such lessor, consignee or other person may, at any time, have
against such Collateral, whether for processing, storage or otherwise, and
agrees to permit Lender access to, and the right to remain on, the premises of
such lessor, consignee or other person so as to exercise Lender's rights and
remedies and otherwise deal with such Collateral and, in the case of any
consignee or other person who at any time has custody, control or possession of
any Collateral, acknowledges that it holds and will hold possession of the
Collateral for the benefit of Lender and agrees to follow all instructions of
Lender with respect thereto.
5
1.22 "Consolidated Net Income" shall mean, with respect to any Person
for any period, the aggregate of the net income (loss) of such Person and its
Subsidiaries, on a consolidated basis, for such period (excluding to the extent
included therein any extraordinary or non-recurring gains and extraordinary
non-cash charges to property, plant and equipment or goodwill) after deducting
all charges which should be deducted before arriving at the net income (loss)
for such period and, without duplication, after deducting the Provision for
Taxes for such period, all as determined in accordance with GAAP; provided,
that, (a) the net income of any Person that is not a wholly-owned Subsidiary or
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid or payable to
such Person or a wholly-owned Subsidiary of such Person; (b) except to the
extent included pursuant to the foregoing clause, the net income of any Person
accrued prior to the date it becomes a Subsidiary of such Person or is merged
into or consolidated with such Person or any of its Subsidiaries or that
Person's assets are acquired by such Person or by its Subsidiaries shall be
excluded; and (c) the net income (if positive) of any Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by such
Subsidiary to such Person or to any other wholly-owned Subsidiary of such Person
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary shall be excluded. For the purposes of
this definition, net income excludes any gain or non-cash loss, together with
any related Provision for Taxes for such gain or non-cash loss, (x) derived from
any milestone payments or revenue recognition in either case resulting from the
receipt of cash by Borrower as a loan or (y) realized upon the sale or other
disposition of any assets that are not sold in the ordinary course of business
(including, without limitation, dispositions pursuant to sale and leaseback
transactions) or of any Capital Stock of such Person or a Subsidiary of such
Person and any net income realized or loss incurred as a result of changes in
accounting principles or the application thereof to such Person.
1.23 "Default" shall mean an act, condition or event which with notice
or passage of time or both would constitute an Event of Default.
1.24 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Lender, by and among Lender,
Borrower and any bank at which any deposit account of Borrower is at any time
maintained which provides that such bank will comply with instructions
originated by Lender directing disposition of the funds in the deposit account
without further consent by Borrower and such other terms and conditions as
Lender may require, including as to any such agreement with respect to any
Blocked Account, providing that all items received or deposited in the Blocked
Accounts are the property of Lender, that the bank has no lien upon, or right to
setoff against, the Blocked Accounts, the items received for deposit therein, or
the funds from time to time on deposit therein and that the bank will wire, or
otherwise transfer, in immediately available funds, on a daily basis to the
Lender Payment Account all funds received or deposited into the Blocked
Accounts.
6
1.25 "EBITDA" shall mean, as to any Person, with respect to any period,
an amount equal to: (a) the Consolidated Net Income of such Person for such
period, plus (b) depreciation, amortization and other non-cash charges
(including, but not limited to, imputed interest and deferred compensation) for
such period (to the extent deducted in the computation of Consolidated Net
Income of such Person), all in accordance with GAAP, plus (c) Interest Expense
for such period (to the extent deducted in the computation of Consolidated Net
Income of such Person), plus (d) the Provision for Taxes for such period (to the
extent deducted in the computation of Consolidated Net Income of such Person).
1.26 "Eligible Accounts" shall mean Accounts created by Borrower which
are and continue to be acceptable to Lender based on the criteria set forth
below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) (i) for all Accounts owing by any account debtor other than
Teva, such Accounts are not unpaid more than sixty (60) days after the original
due date for them or one hundred twenty (120) days after the date of the
original invoice for them and (ii) for all Accounts owing by Teva, such Accounts
are not unpaid more than thirty (30) days after the original due date for them
or sixty (60) days after the date of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained
in Section 7.2(b) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent (other than the
return of goods in the ordinary course of business and consistent with past and
industry practice);
7
(e) the chief executive office of the account debtor (other than
Teva) with respect to such Accounts is located in the United States of America
or Canada (provided, that, at any time promptly upon Lender's request, Borrower
shall execute and deliver, or cause to be executed and delivered, such other
agreements, documents and instruments as may be required by Lender to perfect
the security interests of Lender in those Accounts of an account debtor with its
chief executive office or principal place of business in Canada in accordance
with the applicable laws of the Province of Canada in which such chief executive
office or principal place of business is located and take or cause to be taken
such other and further actions as Lender may request to enable Lender as secured
party with respect thereto to collect such Accounts under the applicable Federal
or Provincial laws of Canada) or, at Lender's option, if the chief executive
office and principal place of business of the account debtor with respect to
such Accounts is located other than in the United States of America or Canada,
then if either: (i) the account debtor has delivered to Borrower an irrevocable
letter of credit issued or confirmed by a bank satisfactory to Lender and
payable only in the United States of America and in U.S. dollars, sufficient to
cover such Account, in form and substance satisfactory to Lender and if required
by Lender, the original of such letter of credit has been delivered to Lender or
Lender's agent and Borrower has complied with the terms of Section 5.2(f) hereof
with respect to the assignment of the proceeds of such letter of credit to
Lender or naming Lender as transferee beneficiary thereunder, as Lender may
specify, or (ii) such Account is subject to credit insurance payable to Lender
issued by an insurer and on terms and in an amount acceptable to Lender, or
(iii) such Account is otherwise acceptable in all respects to Lender (subject to
such lending formula with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇ (such that
the obligation of the account debtors with respect to such Accounts is
conditioned upon Borrower's satisfactory completion of any further performance
under the agreement giving rise thereto), ▇▇▇▇ and hold invoices or retainage
invoices, except as to ▇▇▇▇ and hold invoices, if Lender shall have received an
agreement in writing from the account debtor, in form and substance satisfactory
to Lender, confirming the unconditional obligation of the account debtor to take
the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to any right of setoff or recoupment
against such Accounts (but the portion of the Accounts of such account debtor in
excess of the amount at any time and from time to time owed by Borrower to such
account debtor or claimed owed by such account debtor may be deemed Eligible
Accounts);
(h) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of such Accounts or reduce the
amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
8
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of Borrower;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which could
reasonably be expected to result in any material adverse change in any such
account debtor's financial condition (including, without limitation, any
bankruptcy, dissolution, liquidation, reorganization or similar proceeding);
(m) such Accounts are not evidenced by or arising under any
instrument or chattel paper;
(n) such Accounts of a single account debtor or its Affiliates
(other than Cardinal Health, Inc., Amerisource Bergen Corp., McKesson Corp.,
Teva, Schering Corporation and Walgreen Co.) do not constitute more than ten
(10%) percent of all otherwise Eligible Accounts, or in the case of Cardinal
Health, Inc., Walgreen Co., Schering Corporation, Amerisource Bergen Corp. or
McKesson Corp., such Accounts of each such Person do not constitute more than
thirty (30%) percent of all otherwise Eligible Accounts, or in the case of Teva,
such Accounts of such Person do not constitute more than the Teva Percentage of
all otherwise Eligible Accounts (but the portion of the Accounts not in excess
of such percentage may be deemed Eligible Accounts); provided, however, that
Lender may reduce the percentages for Cardinal Health, Inc., Amerisource Bergen
Corp., McKesson Corp., Teva, Schering Corporation and/or Walgreen Co. set forth
above to a percentage not less than ten (10%) percent of all otherwise Eligible
Accounts of such Person as determined by Lender in good faith based on either:
(i) an event, condition or other circumstance arising after the date hereof, or
(ii) an event, condition or other circumstance existing on the date hereof to
the extent Lender has no written notice thereof from Borrower prior to the date
hereof, in either case under clause (i) or (ii) which adversely affects or could
reasonably be expected to adversely affect the Accounts in the good faith
determination of Lender;
(o) such Accounts are not owed by an account debtor who has
Accounts unpaid more than sixty (60) days after the original due date for them
or one hundred twenty (120) days after the original invoice date for them, which
constitute more than fifty (50%) percent of the total Accounts of such account
debtor;
(p) the account debtor is not located in a state requiring the
filing of a Notice of Business Activities Report or similar report in order to
permit Borrower to seek judicial enforcement in such State of payment of such
Account, unless Borrower has qualified to do business in such state or has filed
a Notice of Business Activities Report or equivalent report for the then current
year or such failure to file and inability to seek judicial enforcement is
capable of being remedied without any material delay or material cost;
9
(q) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed the credit limit with respect to such
account debtors as determined by Borrower from time to time in the ordinary
course of business consistent with its current practices as of the date hereof
and as is reasonably acceptable to Lender (but the portion of the Accounts not
in excess of such credit limit may be deemed Eligible Accounts);
(r) with respect to all Accounts owing by Teva, Lender shall have
received a No Offset Letter, in form and substance satisfactory to Lender, duly
authorized, executed and delivered by Teva in favor of Lender; and
(s) such Accounts are owed by account debtors (including, without
limitation, Teva) deemed creditworthy at all times by Lender in good faith.
The criteria for Eligible Accounts set forth above may only be changed and any
new criteria for Eligible Accounts may only be established by Lender in good
faith based on either: (i) an event, condition or other circumstance arising
after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Lender has no written notice thereof
from Borrower prior to the date hereof, in either case under clause (i) or (ii)
which adversely affects or could reasonably be expected to adversely affect the
Accounts in the good faith determination of Lender. Any Accounts which are not
Eligible Accounts shall nevertheless be part of the Collateral.
1.27 "Eligible Inventory" shall mean Inventory consisting of finished
goods or Bulk Inventory held for resale in the ordinary course of the business
of Borrower, in each case which are acceptable to Lender based on the criteria
set forth below. In general, Eligible Inventory shall not include (a)
work-in-process; (b) raw materials; (c) components which are not part of
finished goods; (d) spare parts for equipment; (e) packaging and shipping
materials; (f) supplies used or consumed in Borrower's business; (g) Inventory
at premises other than those owned and controlled by Borrower, except any
Inventory which would otherwise be deemed Eligible Inventory that is not located
at premises owned and operated by Borrower may nevertheless be considered
Eligible Inventory: (i) as to locations which are leased by Borrower if Lender
shall have received a Collateral Access Agreement from the owner and lessor of
such location, duly authorized, executed and delivered by such owner and lessor
or if Lender shall not have received such Collateral Access Agreement (or Lender
shall determine to accept a Collateral Access Agreement that does not include
all required provisions or provisions in the form otherwise required by Lender),
Lender may, at its option, nevertheless consider Inventory at such location to
be Eligible Inventory to the extent Lender shall have established such Reserves
in respect of amounts at any time payable by Borrower to the owner and lessor
thereof as Lender shall determine, and (ii) as to locations owned and operated
by a third person, (A) if Lender shall have received a Collateral Access
Agreement from such owner and operator with respect to such location, duly
authorized, executed and delivered by such owner and operator or if Lender shall
not have received such Collateral Access Agreement (or Lender shall determine to
accept a Collateral Access Agreement that does not include all required
provisions or provisions in the form otherwise required by Lender), Lender may,
at its option, nevertheless consider Inventory at such location to be Eligible
Inventory to the extent Lender shall have established such Reserves in respect
of amounts at any time payable by Borrower to the owner and operator thereof as
Lender shall determine, and (B) in addition, as to locations owned and operated
by a third person, Lender shall have received, if required by Lender: (1) UCC
10
financing statements between the owner and operator, as consignee or bailee and
Borrower, as consignor or ▇▇▇▇▇▇, in form and substance satisfactory to Lender,
which are duly assigned to Lender and (2) a written notice to any lender to the
owner and operator of the first priority security interest in such Inventory of
Lender; (h) Inventory subject to a security interest or lien in favor of any
person other than Lender except for Permitted Liens (but without limiting the
right of Lender to establish any Reserves with respect to amounts secured by
such security interest or lien in favor of any Person even if permitted herein);
(i) ▇▇▇▇ and hold goods; (j) unserviceable, obsolete or slow moving Inventory;
(k) Inventory which is not subject to the first priority, valid and perfected
security interest of Lender; (l) returned, damaged and/or defective Inventory;
(m) Inventory purchased or sold on consignment; (n) samples; (o) trial, test,
unapproved or developmental products; (p) Inventory which is not readily
saleable in accordance with, or does not meet all standards imposed by,
applicable law, including without limitation the Federal Food, Drug and Cosmetic
Act and all rules, regulations and orders related thereto; (q) Short dated
Inventory; (r) Inventory which does not conform to or satisfy all standards and
requirements of any Governmental Authority with respect thereto; (s) Inventory
located outside the United States of America; or (t) Inventory which is subject
to a license granted by Borrower to another Person unless such Inventory is
supported by a purchase order executed by such Person with respect thereto. The
criteria for Eligible Inventory set forth above may only be changed and any new
criteria for Eligible Inventory may only be established by Lender in good faith
based on either: (i) an event, condition or other circumstance arising after the
date hereof, or (ii) an event, condition or other circumstance existing on the
date hereof to the extent Lender has no written notice thereof from Borrower
prior to the date hereof, in either case under clause (i) or (ii) which
adversely affects or could reasonably be expected to adversely affect the
Inventory in the good faith determination of Lender. Any Inventory which is not
Eligible Inventory shall nevertheless be part of the Collateral.
1.28 "Eligible New Equipment" shall mean all new Equipment owned by
Borrower which is acquired after the date hereof and is in good order, repair,
running and marketable condition, located at Borrower's premises and acceptable
to Lender in all respects. In general, Eligible New Equipment shall not include:
(a) Equipment at premises other than those owned and controlled by Borrower,
except for Equipment at locations leased by Borrower if either (i) Lender shall
have received a Collateral Access Agreement duly authorized, executed and
delivered by the owner or operator of such premises in form and substance
satisfactory to Lender, or (ii) if Lender shall not have received such an
11
agreement (or Lender shall determine to accept a Collateral Access
Agreement that does not include all required provisions or provisions in the
form otherwise required by Lender), Lender shall have, at its option, either (A)
established a Reserve with respect to amounts at any time payable by Borrower to
the owner and lessor of such premises as Lender shall determine or (B) reduced
the amount of the Equipment Purchase Term Loan based on such Eligible Equipment
by amounts at any time payable by Borrower to the owner and lessor of such
premises by an amount equal to the Reserves that would have been established
under clause (A) above; (b) Equipment subject to a security interest or lien in
favor of any person other than Lender except for Permitted Liens; (c) Equipment
which is not located in the continental United States of America; (d) Equipment
which is not subject to the first priority, valid and perfected security
interest of Lender; (e) worn-out, obsolete, damaged or defective Equipment or
Equipment not used or usable in the ordinary course of Borrower's business as
presently conducted; (f) computer hardware; or (g) Equipment that is or becomes
a fixture to any Real Property unless such Real Property is encumbered by the
Mortgage. General criteria for Eligible New Equipment may be established and
revised from time to time by Lender in good faith based on an event, condition
or other circumstance arising after the date hereof, or existing on the date
hereof to the extent Lender has no written notice thereof from Borrower, which
adversely affects or could reasonably be expected to adversely affect the
Equipment in the good faith determination of Lender. Any Equipment which is not
Eligible New Equipment shall nevertheless be part of the Collateral.
1.29 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws, and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
1.30 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, wherever located, including machinery, data processing and
computer equipment and computer hardware and software, whether owned or
licensed, and including embedded software, vehicles, tools, furniture, fixtures,
all attachments, accessions and property now or hereafter affixed thereto or
used in connection therewith, and substitutions and replacements thereof,
wherever located. 1.31 "Equipment Purchase Term Loans" shall mean the secured
term loans made by Lender to Borrower after the date hereof as provided for in
Section 2.4; such term loans being from time to time referred to herein
individually as an "Equipment Purchase Term Loan".
12
1.32 "Equipment Purchase Term Notes" shall mean, collectively, the
Equipment Purchase Term Notes which may at any time hereafter be issued by
Borrower to Lender pursuant to Section 2.4 hereof to evidence an Equipment
Purchase Term Loan; such notes being from time to time referred to herein
individually as an "Equipment Purchase Term Note".
1.33 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, together with all rules, regulations and interpretations
thereunder or related thereto.
1.34 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.35 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Plan; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412 of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the occurrence of a "prohibited
transaction" with respect to which Borrower or any of its Subsidiaries is a
"disqualified person" (within the meaning of Section 4975 of the Code) or with
respect to which Borrower or any of its Subsidiaries could otherwise be liable;
(f) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from
a Multiemployer Plan or a cessation of operations which is treated as such a
withdrawal or notification that a Multiemployer Plan is in reorganization; (g)
the filing of a notice of intent to terminate, the treatment of a Plan amendment
as a termination under Section 4041 or 4041A of ERISA, or the commencement of
proceedings by the Pension Benefit Guaranty Corporation to terminate a Plan; (h)
an event or condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan; (i) the imposition of any liability under Title
IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due
but not delinquent under Section 4007 of ERISA, upon Borrower or any ERISA
Affiliate in excess of $1,000,000; and (j) any other event or condition with
respect to a Plan including any Plan subject to Title IV of ERISA maintained, or
contributed to, by any ERISA Affiliate that could reasonably be expected to
result in liability of Borrower in excess of $1,000,000.
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1.36 "Eurodollar Rate" shall mean with respect to the Interest Period for
a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrower.
1.37 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.38 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.39 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to: (a) the lesser of: (i) the Borrowing
Base and (ii) the Revolving Loan Limit (in each case under clause (i) or (ii)
after giving effect to any Reserves other than any Reserves in respect of Letter
of Credit Accommodations), minus (b) the sum of: (i) the amount of all then
outstanding and unpaid Obligations (but not including for this purpose the then
outstanding Letter of Credit Accommodations and the then outstanding principal
amount of the Term Loan and the Equipment Purchase Term Loans), plus (ii) the
amount of all Reserves then established in respect of Letter of Credit
Accommodations, plus (iii) the aggregate amount of all then outstanding and
unpaid trade payables and other obligations of Borrower which are more than
sixty (60) days past due as of such time (other than trade payables and other
obligations being contested by Borrower in good faith by appropriate proceedings
for which adequate reserves have been set aside on its books), plus (iv) the
amount of checks issued by Borrower to pay trade payables and other obligations
which are more than sixty (60) days past due as of such time, but not yet sent
(but without duplication of clause (b)(iii) and the book overdraft of Borrower.
1.40 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.41 "Existing Cathay Bank Agreements" shall mean (a) the Business Loan
Agreement dated as of June 22, 2001 between Borrower and Cathay Bank, (b) the
Business Loan Agreement dated as of November 12, 2001 between Borrower and
Cathay Bank, (c) the Promissory Note dated June 22, 2001 by Borrower in favor of
Cathay Bank in the original principal amount of $2,470,000, (d) the Promissory
Note dated November 12, 2001 by Borrower in favor of Cathay Bank in the original
principal amount of $3,300,000 and (e) all documents, agreements and instruments
executed and/or delivered in connection therewith, as the same now exist or may
be amended, modified, supplemented, extended, renewed, restated or replaced.
14
1.42 "Existing Municipal Lender Agreements" shall mean (a) the
Installment Sale Agreement dated April 18, 1994 between Borrower and PIDC
Financing Corporation ("PIDC-FC"), (b) the Subordination of Equitable Owner's
Interest and Amendment to Installment Sale Agreement dated July 29, 1997 between
Borrower and PIDC-FC, (c) the Mortgage Note dated July 29, 1997 by Borrower in
favor of PIDC Local Development Corporation in the original principal amount of
$350,000, and (d) all documents, agreements and instruments executed and/or
delivered in connection therewith, as the same now exist or may be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.43 "Existing Teva Loan Agreements" shall mean (a) the Promissory Note
of Borrower dated June 27, 2001 payable to Teva in the original principal amount
of $22,000,000, (b) the Strategic Alliance Agreement dated June 26, 2001 between
Borrower and Teva, and (c) all documents, agreements and instruments executed
and/or delivered in connection therewith, as the same now exist or may be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.44 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements, deposit account control agreements,
investment property control agreements, intercreditor agreements, and all other
agreements, documents and instruments now or at any time hereafter executed
and/or delivered by Borrower or any Obligor in connection with this Agreement.
1.45 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Sections 9.17, 9.18 and 9.19 hereof, GAAP shall be determined on
the basis of such principles in effect on the date hereof and consistent with
those used in the preparation of the most recent audited financial statements
delivered to Lender prior to the date hereof.
1.46 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
1.47 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
15
1.48 "Indebtedness" shall mean, with respect to any Person, any
liability, whether or not contingent, (a) in respect of borrowed money (whether
or not the recourse of the lender is to the whole of the assets of such Person
or only to a portion thereof) or evidenced by bonds, notes, debentures or
similar instruments; (b) representing the balance deferred and unpaid of the
purchase price of any property or services (except any such balance that
constitutes an account payable to a trade creditor (whether or not an Affiliate)
created, incurred, assumed or guaranteed by such Person in the ordinary course
of business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) representing all obligations as
lessee under leases which have been, or should be, in accordance with GAAP
recorded as Capital Leases; (d) representing any contractual obligation,
contingent or otherwise, of such Person to pay or be liable for the payment of
any indebtedness described in this definition of another Person, including,
without limitation, any such indebtedness, directly or indirectly guaranteed, or
any agreement to purchase, repurchase, or otherwise acquire such indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof, or to maintain solvency, assets, level of income,
or other financial condition; (e) representing all obligations with respect to
redeemable stock and redemption or repurchase obligations under any Capital
Stock or other equity securities issued by such Person; (f) representing all
reimbursement obligations and other liabilities of such Person with respect to
surety bonds (whether bid, performance or otherwise), letters of credit,
banker's acceptances, drafts or similar documents or instruments issued for such
Person's account; (g) representing all indebtedness of such Person in respect of
indebtedness of another Person for borrowed money or indebtedness of another
Person otherwise described in this definition which is secured by any consensual
lien, security interest, collateral assignment, conditional sale, mortgage, deed
of trust, or other encumbrance on any asset of such Person, whether or not such
obligations, liabilities or indebtedness are assumed by or are a personal
liability of such Person, all as of such time; (h) representing all obligations,
liabilities and indebtedness of such Person (marked to market) arising under
swap agreements, cap agreements and collar agreements and other agreements or
arrangements designed to protect such person against fluctuations in interest
rates or currency or commodity values and (i) representing all obligations owed
by such Person under License Agreements with respect to non-refundable, advance
or minimum guarantee royalty payments.
1.49 "Information Certificate" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
16
1.50 "Intellectual Property" shall mean Borrower's now owned and
hereafter arising or acquired: patents, patent rights, patent applications,
copyrights, works which are the subject matter of copyrights, copyright
registrations, trademarks, trade names, trade styles, trademark and service ▇▇▇▇
applications, and licenses and rights to use any of the foregoing; all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to ▇▇▇ for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards; goodwill (including any goodwill
associated with any trademark or the license of any trademark); customer and
other lists in whatever form maintained; and trade secret rights, copyright
rights, rights in works of authorship, domain names and domain name
registrations; software and contract rights relating to software, in whatever
form created or maintained.
1.51 "Interest Expense" shall mean, for any period, as to any Person, as
determined in accordance with GAAP, the total interest expense of such Person,
whether paid or accrued during such period (including the interest component of
Capital Leases for such period), including, without limitation, discounts in
connection with the sale of any Accounts and bank fees, commissions, discounts
and other fees and charges owed with respect to letters of credit, banker's
acceptances or similar instruments.
1.52 "Interest Period" shall mean for any Eurodollar Rate Loan, a period
of approximately one (1), two (2), or three (3) months duration as Borrower may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrower may
not elect an Interest Period which will end after the last day of the
then-current term of this Agreement.
1.53 "Interest Rate" shall mean,
(a) Subject to clauses (b) and (c) of this definition below:
(i) (A) as to Revolving Loans which are Prime Rate Loans, a
rate equal to one (1%) percent per annum in excess of the Prime Rate, and (B) as
to the Term Loan and the Equipment Purchase Term Loans which are Prime Rate
Loans, a rate equal to one and one-half (1 1/2 %) percent per annum in excess of
the Prime Rate;
(ii) (A) as to Revolving Loans which are Eurodollar Rate
Loans, a rate equal to three (3%) percent per annum in excess of the Adjusted
Eurodollar Rate and (B) as to the Term Loan and the Equipment Purchase Term
Loans which are Eurodollar Rate Loans, a rate equal to four (4%) percent per
annum in excess of the Adjusted Eurodollar Rate (in each case, based on the
Eurodollar Rate applicable for the Interest Period selected by Borrower, as in
effect three (3) Business Days after the date of receipt by Lender of the
request of Borrower for such Eurodollar Rate Loans in accordance with the terms
hereof, whether such rate is higher or lower than any rate previously quoted to
Borrower).
17
(b) Subject to clause (c) of this definition below, effective as
of the first (1st) day of the second (2nd) month of each fiscal quarter
(commencing with the fiscal quarter ending on or about March 31, 2003), the
Interest Rate payable by Borrower with respect to Revolving Loans shall be
increased or decreased, as the case may be, (i) as to Revolving Loans which are
Prime Rate Loans, to the rate equal to the Applicable Margin on a per annum
basis in excess of the Prime Rate, and (ii) as to Revolving Loans which are
Eurodollar Rate Loans, to the rate equal to the Applicable Margin on a per annum
basis in excess of the Adjusted Eurodollar Rate.
(c) Notwithstanding anything to the contrary contained herein,
the Interest Rate shall mean the rates set forth above plus (in each case) two
(2%) percent per annum and the Applicable Margin otherwise used to calculate the
Interest Rate for Revolving Loans shall be the highest percentage set forth in
the definition of the term Applicable Margin for each category of Revolving
Loans (without regard to the amount of Quarterly Average Excess Availability)
plus two (2%) percent per annum, at Lender's option, without notice (i) either
(A) for the period on and after the effective date of termination or non-renewal
hereof until such time as all Obligations are indefeasibly paid and satisfied in
full in immediately available funds or (B) for the period from and after the
date of the occurrence of any Event of Default, and for so long as such Event of
Default is continuing as determined by Lender and (ii) on the Revolving Loans at
any time outstanding in excess of the amounts available to Borrower under
Section 2 (whether or not such excess(es) arise or are made with or without
Lender's knowledge or consent and whether made before or after an Event of
Default).
1.54 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired goods, wherever located, which (a) are leased by Borrower
as lessor; (b) are held by Borrower for sale or lease or to be furnished under a
contract of service; (c) are furnished by Borrower under a contract of service;
or (d) consist of raw materials, work in process, finished goods or materials
used or consumed in its business.
1.55 "Inventory Loan Limit" shall mean at any time, the amount equal to
$5,000,000.
1.56 "Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance satisfactory to Lender, by and among Lender,
Borrower and any securities intermediary, commodity intermediary or other person
who has custody, control or possession of any investment property of Borrower
acknowledging that such securities intermediary, commodity intermediary or other
person has custody, control or possession of such investment property on behalf
of Lender, that it will comply with entitlement orders originated by Lender with
respect to such investment property, or other instructions of Lender, or (as the
case may be) apply any value distributed on account of any commodity contract as
directed by Lender, in each case, without the further consent of Borrower and
including such other terms and conditions as Lender may require.
18
1.57 "Investment Property Pledge Agreement" shall mean the Investment
Property Pledge and Security Agreement, dated of even date herewith, by Borrower
in favor of Lender, as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.58 "Lender Payment Account" shall mean account no. 5000000030279 of
Lender at Wachovia Bank, National Association or such other account of Lender as
Lender may from time to time designate to Borrower as the Lender Payment Account
for purposes of this Agreement.
1.59 "Letter of Credit Accommodations" shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from time
to time either (a) issued or opened by Lender for the account of Borrower or any
Obligor or (b) with respect to which Lender has agreed to indemnify the issuer
or guaranteed to the issuer the performance by Borrower of its obligations to
such issuer: sometimes being referred to herein individually as a "Letter of
Credit Accommodation".
1.60 "License Agreements" shall have the meaning set forth in Section
8.11 hereof.
1.61 "Licensee Licensed Inventory" shall mean (a) any Inventory the use
of which by Borrower, or the manufacture or sale thereof by Borrower, involves
the use by Borrower of any Intellectual Property owned by another Person and (b)
any Inventory which is subject to a license granted to Borrower by another
Person; provided, that, any Inventory shall cease to constitute Licensee
Licenced Inventory for purposes of Section 2.1(c)(vi) upon the date (if any) of
receipt by Lender of an agreement, in form and substance satisfactory to Lender,
duly authorized, executed and delivered by the Person that has granted Borrower
the right to sell such Inventory.
1.62 "Licensee Licensed Inventory Loan Limit" shall mean at any time the
amount equal to $1,000,000.
1.63 "Licensor License Agreement" shall have the meaning set forth in
Section 8.11 hereof
1.64 "Licensor Licensed Inventory" shall mean (a) any Inventory the use
of which by any Person, or the manufacture or sale thereof by any Person,
involves the use by such Person of any Intellectual Property owned by Borrower
and (b) any Inventory which is subject to a license granted by Borrower to
another Person.
1.65 "Licensor Licensed Inventory Loan Limit" shall mean at any time the
amount equal to $2,000,000.
1.66 "Loans" shall mean the Revolving Loans, the Term Loan and the
Equipment Purchase Term Loans.
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1.67 "Material Contract" shall mean (a) any contract or other agreement
(other than the Financing Agreements), written or oral, of Borrower involving
monetary liability of or to any Person in an amount in excess of $3,500,000 in
any fiscal year and (b) any other contract or other agreement (other than the
Financing Agreements), whether written or oral, to which Borrower is a party as
to which the breach, nonperformance, cancellation or failure to renew by any
party thereto would have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations of Borrower or the
validity or enforceability of this Agreement, any of the other Financing
Agreements, or any of the rights and remedies of Lender hereunder or thereunder.
1.68 "Maximum Credit" shall mean the amount of $25,000,000.
1.69 "Mortgage" shall mean the Open End Mortgage and Security Agreement,
dated of even date herewith, by Borrower in favor of Lender with respect to the
Real Property and related assets of Borrower located in Philadelphia County,
Pennsylvania, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.70 "Multiemployer Plan" shall mean a "multi-employer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the current
year or the immediately preceding six (6) years contributed to by Borrower or
any ERISA Affiliate.
1.71 "Municipal Lender Financing Reserve" shall mean, at any time, the
aggregate amount equal to three (3) months of principal and interest payments
owing by Borrower to PIDC-FC and PIDC Local Development Corporation (together
with PIDC-FC, the "Municipal Creditors") pursuant to the Existing Municipal
Lender Agreements; provided, that, the amount of the Municipal Lender Financing
Reserve with respect to each Municipal Creditor shall be reduced to zero upon
the Lender's receipt of a mortgagee agreement, in form and substance
satisfactory to the Lender, duly authorized, executed and delivered by such
Municipal Creditor.
1.72 "Municipal Lenders" shall mean, collectively, the Pennsylvania
Industrial Development Authority, PIDC Financing Corporation and the PIDC Local
Development Corporation.
1.73 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns relating thereto.
1.74 "Net Recovery Percentage" shall mean the fraction, expressed as a
percentage, (a) the numerator of which is the amount equal to the amount of the
recovery in respect of the Inventory at such time on a "net orderly liquidation
value" basis as set forth in the most recent acceptable appraisal of Inventory
received by Lender in accordance with Section 7.3 hereof, net of operating
expenses, liquidation expenses and commissions, and (b) the denominator of which
is the applicable original cost of the aggregate amount of the Inventory subject
to such appraisal.
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1.75 "Obligations" shall mean any and all Revolving Loans, the Term Loan,
the Equipment Purchase Term Loans, Letter of Credit Accommodations and all other
obligations, liabilities and indebtedness of every kind, nature and description
owing by Borrower to Lender and/or its affiliates, including principal,
interest, charges, fees, costs and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise arising under or in
connection with this Agreement or the other Financing Agreements, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to Borrower under the United States Bankruptcy Code or any
similar statute (including the payment of interest and other amounts which would
accrue and become due but for the commencement of such case, whether or not such
amounts are allowed or allowable in whole or in part in such case), whether
direct or indirect, absolute or contingent, joint or several, due or not due,
primary or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Lender.
1.76 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.
1.77 "Permitted Liens" shall mean the liens and security interests
permitted under Sections 9.8(a), (b), (c) and (d) of this Agreement.
1.78 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.79 "Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which Borrower sponsors, maintains, or to which it makes, is making, or
is obligated to make contributions, or in the case of a Multiemployer Plan has
made contributions at any time during the immediately preceding six (6) plan
years.
1.80 "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
1.81 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.82 "Provision for Taxes" shall mean an amount equal to all taxes
imposed on or measured by net income, whether Federal, State, Provincial, county
or local, and whether foreign or domestic, that are paid or payable in cash by
any Person in respect of any period in accordance with GAAP.
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1.83 "Qualified Cash Collateral" shall mean the cash or Cash Equivalents
of Borrower which are: (a) held in a deposit account or securities account in
the United States of America in the name of Borrower at Wachovia Bank, National
Association or one of its affiliates (the "Collateral Account") or held by
Lender subject to a cash collateral pledge agreement by Borrower in favor of
Lender, in form and substance satisfactory to Lender; (b) free and clear of any
lien, security interest, claim or other encumbrance or restriction, except in
favor of Lender; (c) subject to the first priority, valid and perfected security
interest and pledge in favor of Lender; (d) if held at Wachovia Bank, National
Association or one of its affiliates, subject to an Investment Property Control
Agreement by and among Wachovia Bank, National Association or one of its
affiliates, Borrower and Lender, in form and substance satisfactory to Lender
and duly authorized, executed and delivered by Wachovia Bank, National
Association or one of its affiliates and Borrower; and (e) available to Borrower
without condition or restriction except those arising pursuant to the pledge in
favor of Lender; provided; that, any cash or Cash Equivalents maintained in or
credited to the Restricted Cash Collateral Account shall not constitute
Qualified Cash Collateral.
1.84 "Quarterly Average Excess Availability" shall mean, at any time, the
daily average Adjusted Excess Availability for the immediately preceding fiscal
quarter as calculated by Lender in good faith.
1.85 "Real Property" shall mean all now owned and hereafter acquired real
property of Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located, including the
real property and related assets more particularly described in the Mortgage.
1.86 "Receivables" shall mean all of the following now owned or hereafter
arising or acquired property of Borrower: (a) all Accounts; (b) all interest,
fees, late charges, penalties, collection fees and other amounts due or to
become due or otherwise payable in connection with any Account; (c) all payment
intangibles of Borrower and other contract rights, chattel paper, instruments,
notes, and other forms of obligations owing to Borrower, whether from the sale
and lease of goods or other property, licensing of any property (including
Intellectual Property or other general intangibles), rendition of services or
from loans or advances by Borrower or to or for the benefit of any third person
(including loans or advances to any Affiliates or Subsidiaries of Borrower) or
otherwise associated with any Accounts, Inventory or general intangibles of
Borrower (including, without limitation, choses in action, causes of action, tax
refunds, tax refund claims, any funds which may become payable to Borrower in
connection with the termination of any Plan or other employee benefit plan and
any other amounts payable to Borrower from any Plan or other employee benefit
plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, casualty
or any similar types of insurance and any proceeds thereof and proceeds of
insurance covering the lives of employees on which Borrower is a beneficiary).
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1.87 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.88 "Reference Bank" shall mean Wachovia Bank, National Association, or
such other bank as Lender may from time to time designate.
1.89 "Refinanced Indebtedness" shall have the meaning set forth in
Section 9.9(k) hereof.
1.90 "Renewal Date" shall have the meaning set forth in Section 12.1
hereof.
1.91 "Reserves" shall mean as of any date of determination, such amounts
as Lender may from time to time establish and revise in good faith reducing the
amount of Revolving Loans and Letter of Credit Accommodations which would
otherwise be available to Borrower under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, adversely affect, or would have a reasonable
likelihood of adversely affecting, either (i) the Collateral or any other
property which is security for the Obligations or its value, (ii) the assets,
business or prospects of Borrower or any Obligor or (iii) the security interests
and other rights of Lender in the Collateral (including the enforceability,
perfection and priority thereof) or (b) to reflect Lender's good faith belief
that any collateral report or financial information furnished by or on behalf of
Borrower or any Obligor to Lender is or may have been incomplete, inaccurate or
misleading in any material respect or (c) to reflect outstanding Letter of
Credit Accommodations as provided in Section 2.2 hereof or (d) to reflect the
Cash Collateral Reserve or (e) to reflect the Municipal Lender Financing Reserve
or (f) in respect of any state of facts which Lender determines in good faith
constitutes a Default or an Event of Default. Without limiting the generality of
the foregoing, Reserves may be established to reflect: (i) that dilution with
respect to the Accounts (based on the ratio of the aggregate amount of non-cash
reductions in Accounts for any period to the aggregate dollar amount of the
sales of Borrower for such period) as calculated by Lender for any period
exceeds the greater of (x) twenty five (25%) percent of the aggregate dollar
amount of the sales of Borrower for such period or (y) the accrued accounts
receivable reserve established by Borrower during such period, (ii) that the
orderly liquidation value of the Equipment or fair market value of any of the
Real Property as set forth in the most recent acceptable appraisals received by
Lender with respect thereto has declined so that the then outstanding principal
amount of the Term Loan or any Equipment Purchase Term Loan is greater than such
percentage with respect to such appraised values as Lender used in establishing
the original principal amount of the Term Loan or such Equipment Purchase Term
Loan (as the case may be) multiplied by such appraised values, (iii) chargebacks
with respect to the Accounts, (iv) discounts, claims, credits and allowances of
any nature with respect to Accounts or (v) amounts due or to become due to
owners and licensors of Intellectual Property used by Borrower. To the extent
Lender may revise (or has already set) the lending formulas used to determine
the Borrowing Base or establish new criteria or revise existing criteria for
Eligible Accounts or Eligible Inventory so as to address any circumstances,
condition, event or contingency in a manner satisfactory to Lender, Lender shall
not establish a Reserve for the same purpose. The amount of any Reserve
established by Lender shall have a reasonable relationship to the event,
condition or other matter which is the basis for such reserve as determined by
Lender in good faith.
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1.92 "Restricted Cash Collateral Account" shall have the meaning set
forth in Section 4.1(j) hereof.
1.93 "Revolving Loan Limit" shall mean $20,500,000.
1.94 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.95 "Short Dated Inventory" shall mean, at any time, Inventory of
Borrower having an expiration date of less than twelve (12) months from such
time.
1.96 "Solvent" shall mean, at any time with respect to any Person, that
at such time such Person (a) is able to pay its debts as they mature and has
(and has a reasonable basis to believe it will continue to have) sufficient
capital (and not unreasonably small capital) to carry on its business consistent
with its practices as of the date hereof, and (b) the assets and properties of
such Person at a fair valuation (and including as assets for this purpose at a
fair valuation all rights of subrogation, contribution or indemnification
arising pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).
1.97 "Specified Amount" shall mean (a) $10,000,000 with respect to each
day during the period from October 1, 2002 through and including December 31,
2002, (b) $1,000,000 with respect to each day during the period from January 1,
2003 through and including March 31, 2003 and (c) $12,500,000 with respect to
each day from and after April 1, 2003.
1.98 "Subsidiary" or "subsidiary" shall mean, with respect to any Person,
any corporation, limited liability company, limited liability partnership or
other limited or general partnership, trust, association or other business
entity of which an aggregate of at least a majority of the outstanding Capital
Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person and/or
one or more subsidiaries of such Person.
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1.99 "Targeted Amount" shall mean (a) $4,000,000 with respect to each day
from the date hereof through and including ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇) $4,500,000 with
respect to each day during the period from May 1, 2003 through and including
October 31, 2003 and (c) $5,000,000 with respect to each day from and after
November 1, 2003.
1.100 "Term Loan" shall mean the term loan made by Lender to Borrower as
provided for in Section 2.3 hereof.
1.101 "Term Promissory Note" shall mean the promissory note, dated on or
about the date hereof, made by Borrower in favor of Lender in connection with
the Term Loan made pursuant to Section 2.3 hereof, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.102 "Teva" shall mean Teva Pharmaceuticals Curacao N.V., a corporation
organized under the laws of the Netherlands Antilles.
1.103 "Teva Debt" shall have the meaning set forth in Section 9.6(e)
hereof.
1.104 "Teva Percentage" shall mean ten (10%) percent; provided, that,
upon the receipt by Lender of evidence satisfactory to it that Teva is
creditworthy and has the financial capability to repay the Accounts owing to
Borrower when due (a) the Teva Percentage may be increased to up to thirty (30%)
percent as determined by Lender in good faith and (b) the Teva Percentage may be
increased in connection with new product launches by Borrower to up to fifty
(50%) percent as determined by Lender in good faith no more than twice per year
for no more than sixty (60) days each time.
1.105 "UCC" shall mean the Uniform Commercial Code as in effect in the
State of New York , and any successor statute, as in effect from time to time
(except that terms used herein which are defined in the Uniform Commercial Code
as in effect in the State of New York on the date hereof shall continue to have
the same meaning notwithstanding any replacement or amendment of such statute
except as Lender may otherwise determine).
1.106 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in first-out
basis in accordance with GAAP or (b) market value provided, that, for purposes
of the calculation of the Borrowing Base, (i) the Value of the Inventory shall
not include: (A) the portion of the value of Inventory equal to the profit
earned by any Affiliate on the sale thereof to Borrower or (B) write-ups or
write-downs in value with respect to currency exchange rates and (ii)
notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Lender prior to the
date hereof, if any.
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1.107 "Voting Stock" shall mean with respect to any Person, (a) one (1)
or more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to Borrower from time to time in
amounts requested by Borrower up to the amount equal to the lesser of: (i) the
Borrowing Base or (ii) the Revolving Loan Limit.
(b) Lender may, in its discretion, from time to time, upon not
less than five (5) days prior notice to Borrower, (i) reduce the lending formula
with respect to Eligible Accounts to the extent that Lender determines that: (A)
the dilution with respect to the Accounts for any period (based on the ratio of
(1) the aggregate amount of reductions in Accounts other than as a result of
payments in cash to (2) the aggregate amount of total sales) has increased or
may be reasonably anticipated to increase above historical levels as determined
by Lender in good faith, or (B) the general creditworthiness of account debtors
has declined, or (ii) reduce the lending formula(s) with respect to Eligible
Inventory to the extent that Lender determines that: (A) the number of days of
the turnover of the Inventory for any period has changed or (B) the liquidation
value of the Eligible Inventory, or any category thereof, has decreased,
including any such decrease attributable to any change in the nature, quality or
mix of the Inventory. The amount of any decrease in the lending formulas shall
have a reasonable relationship to the event, condition or circumstance which is
the basis for such decrease as determined by Lender in good faith. In
determining whether to reduce the lending formula(s), Lender may consider
events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Eligible Inventory or in establishing Reserves.
(c) Except in Lender's discretion, (i) the aggregate amount of
the Revolving Loans and Letter of Credit Accommodations outstanding at any time
shall not exceed the lesser of the Borrowing Base and the Revolving Loan Limit,
(ii) the aggregate amount of the Loans and the Letter of Credit Accommodations
outstanding at any time shall not exceed the Maximum Credit, (iii) the aggregate
amount of Revolving Loans and Letter of Credit Accommodations outstanding at any
time based on Eligible Inventory shall not exceed the Inventory Loan Limit, (iv)
the aggregate amount of Revolving Loans and Letter of Credit Accommodations
outstanding at any time based on Eligible Inventory consisting of Bulk Inventory
shall not exceed the Bulk Inventory Loan Limit, (v) the aggregate amount of
Revolving Loans and Letter of Credit Accommodations outstanding at any time
based on Eligible Inventory consisting of Licensor Licensed Inventory shall not
exceed the Licensor Licensed Inventory Loan Limit, and (vi) the aggregate amount
of Revolving Loans and Letter of Credit Accommodations outstanding at one time
based on Eligible Inventory consisting of Licensee Licensed Inventory shall not
exceed the Licensee Licensed Inventory Loan Limit.
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(d) In the event that the aggregate principal amount of the
Revolving Loans and Letter of Credit Accommodations outstanding exceeds the
Borrowing Base or the Revolving Loan Limit, or the aggregate principal amount of
Revolving Loans and Letter of Credit Accommodations based on Eligible Inventory
exceeds the Inventory Loan Limit, or the aggregate principal amount of Revolving
Loans and Letter of Credit Accommodations based on Eligible Inventory consisting
of Bulk Inventory exceeds the Bulk Inventory Loan Limit, or the aggregate amount
of the outstanding Letter of Credit Accommodations exceeds the sublimit for
Letter of Credit Accommodations set forth in Section 2.2(e) hereof, or the
aggregate amount of the outstanding Loans and Letter of Credit Accommodations
exceed the Maximum Credit, as applicable, such event shall not limit, waive or
otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrower shall, upon demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
(e) Lender may, in its discretion, from time to time, increase
the lending formula with respect to Eligible Accounts to the extent that Lender
determines that: (A) the dilution with respect to the Accounts for any period
(based on the ratio of (1) the aggregate amount of reductions in Accounts other
than as a result of payments in cash to (2) the aggregate amount of total sales)
has decreased or may be reasonably anticipated to decrease below historical
levels as determined by Lender in good faith, or (B) the general
creditworthiness of account debtors has improved. The amount of any increase in
the lending formulas shall have a reasonable relationship to the event,
condition or circumstance which is the basis for such increase as determined by
Lender in good faith.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained
herein, at the request of Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrower pursuant to this Section 2.
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(b) In addition to any charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations, Borrower
shall pay to Lender a letter of credit fee at a rate equal to three (3%) percent
per annum on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month, except that Borrower shall
pay to Lender such letter of credit fee, at Lender's option, without notice, at
a rate equal to five (5%) percent per annum on such daily outstanding balance
for: (i) the period from and after the date of termination or non-renewal hereof
until Lender has received full and final payment of all Obligations
(notwithstanding entry of a judgment against Borrower) and (ii) the period from
and after the date of the occurrence of an Event of Default for so long as such
Event of Default is continuing as determined by Lender. Such letter of credit
fee shall be calculated on the basis of a three hundred sixty (360) day year and
actual days elapsed and the obligation of Borrower to pay such fee shall survive
the termination or non-renewal of this Agreement.
(c) Borrower shall give Lender two (2) Business Days' prior
written notice of Borrower's request for the issuance of a Letter of Credit
Accommodation. Such notice shall be irrevocable and shall specify the original
face amount of the Letter of Credit Accommodation requested, the effective date
(which date shall be a Business Day) of issuance of such requested Letter of
Credit Accommodation, whether such Letter of Credit Accommodations may be drawn
in a single or in partial draws, the date on which such requested Letter of
Credit Accommodation is to expire (which date shall be a Business Day), the
purpose for which such Letter of Credit Accommodation is to be issued, and the
beneficiary of the requested Letter of Credit Accommodation. Borrower shall
attach to such notice the proposed terms of the Letter of Credit Accommodation.
(d) In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations shall
be available unless each of the following conditions precedent have been
satisfied in a manner satisfactory to Lender: (i) Borrower shall have delivered
to the proposed issuer of such Letter of Credit Accommodation at such times and
in such manner as such proposed issuer may require, an application in form and
substance satisfactory to such proposed issuer and Lender for the issuance of
the Letter of Credit Accommodation and such other documents as may be required
pursuant to the terms thereof, and the form and terms of the proposed Letter of
Credit Accommodation shall be satisfactory to Lender and such proposed issuer,
(ii) as of the date of issuance, no order of any court, arbitrator or other
Governmental Authority shall purport by its terms to enjoin or restrain money
center banks generally from issuing letters of credit of the type and in the
amount of the proposed Letter of Credit Accommodation, and no law, rule or
regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over money center banks generally shall prohibit, or
request that the proposed issuer of such Letter of Credit Accommodation refrain
from, the issuance of letters of credit generally or the issuance of such
Letters of Credit Accommodation; and (iii) the Excess Availability, prior to
giving effect to any Reserves with respect to such Letter of Credit
Accommodations, on the date of the proposed issuance of any Letter of Credit
Accommodations, shall be equal to or greater than: (A) if the proposed Letter of
Credit Accommodation is for the purpose of purchasing Eligible Inventory and the
documents of title with respect thereto are consigned to the issuer, the sum of
(1) the percentage equal to one hundred (100%) percent minus the then applicable
percentage with respect to Eligible Inventory set forth in the definition of the
term Borrowing Base multiplied by the Value of such Eligible Inventory, plus (2)
freight, taxes, duty and other amounts which Lender estimates must be paid in
connection with such Inventory upon arrival and for delivery to one of
Borrower's locations for Eligible Inventory within the United States of America
and (B) if the proposed Letter of Credit Accommodation is for any other purpose
or the documents of title are not consigned to the issuer in connection with a
Letter of Credit Accommodation for the purpose of purchasing Inventory, an
amount equal to one hundred (100%) percent of the face amount thereof and all
other commitments and obligations made or incurred by Lender with respect
thereto. Effective on the issuance of each Letter of Credit Accommodation, a
Reserve shall be established in the applicable amount set forth in Section
2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
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(e) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$2,000,000.
(f) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation. Borrower assumes all risks with respect to the acts or
omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
Borrower's agent. Borrower assumes all risks for, and agrees to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder. Borrower hereby releases and holds Lender harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation, except for the gross negligence
or wilful misconduct of Lender as determined pursuant to a final, non-appealable
order of a court of competent jurisdiction. The provisions of this Section
2.2(f) shall survive the payment of Obligations and the termination or
non-renewal of this Agreement.
(g) In connection with Inventory purchased pursuant to Letter of
Credit Accommodations, Borrower shall, at Lender's request, instruct all
suppliers, carriers, forwarders, customs brokers, warehouses or others receiving
or holding cash, checks, Inventory, documents or instruments in which Lender
holds a security interest to deliver them to Lender and/or subject to Lender's
order, and if they shall come into Borrower's possession, to deliver them, upon
Lender's request, to Lender in their original form. Borrower shall also, at
Lender's request, designate Lender as the consignee on all bills of lading and
other negotiable and non-negotiable documents.
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(h) Borrower hereby irrevocably authorizes and directs any issuer
of a Letter of Credit Accommodation to name Borrower as the account party
therein and to deliver to Lender all instruments, documents and other writings
and property received by issuer pursuant to the Letter of Credit Accommodations
and to accept and rely upon Lender's instructions and agreements with respect to
all matters arising in connection with the Letter of Credit Accommodations or
the applications therefor. Nothing contained herein shall be deemed or construed
to grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrower shall not: (i) at any time an Event of Default exists
or has occurred and is continuing, (A) approve or resolve any questions of
non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in Borrower's name.
(i) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrower to Lender and to apply in all
respects to Borrower.
2.3 Term Loan. Lender is making a Term Loan to Borrower in the original
principal amount of $3,150,000. The Term Loan is (a) evidenced by a Term
Promissory Note in such original principal amount duly executed and delivered by
Borrower to Lender concurrently herewith; (b) to be repaid, together with
interest and other amounts, in accordance with this Agreement, the Term
Promissory Note, and the other Financing Agreements and (c) secured by all of
the Collateral. The principal amount of the Term Loan shall be repaid in sixty
(60) consecutive monthly installments (or earlier as provided herein) payable on
the first day of each month commencing December 1, 2002, of which the first
fifty-nine (59) installments shall each be in the amount of $52,500 and the last
installment shall be in the amount of the entire unpaid balance of the Term
Loan.
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2.4 Equipment Purchase Term Loans.
(a) Subject to and upon the terms and conditions contained
herein, Lender shall make Equipment Purchase Term Loans to Borrower, from time
to time on or prior to the date that is the nine (9) months following the date
hereof, at the request of Borrower, of up to eighty (80%) percent of the net
orderly liquidation value of Eligible New Equipment to be purchased by Borrower
after the date hereof with the proceeds of such Equipment Purchase Term Loans.
Each Equipment Purchase Term Loan shall be in an amount of not less than
$500,000 (and in integral multiples of $100,000 greater than such amount). All
of the proceeds of each Equipment Purchase Term Loan shall be used solely for
the payment of the purchase price of the Eligible New Equipment specified in the
notice required to be delivered to Lender pursuant to Section 2.4(d)(i) below.
(b) Except in Lender's discretion, the outstanding aggregate
principal amount of the Equipment Purchase Term Loans shall not exceed, at any
time, the lower of (i) the aggregate amount of the above percentage of the net
orderly liquidation value of all Eligible New Equipment purchased by Borrower
pursuant hereto (as set forth in the most recent acceptable appraisals received
by Lender with respect thereto) or (ii) $1,350,000. If at any time the
outstanding aggregate principal amount of all Equipment Purchase Term Loans
shall exceed eighty (80%) percent of such net orderly liquidation value of all
Eligible New Equipment purchased by Borrower with the proceeds of Equipment
Purchase Term Loans, Borrower shall remain liable therefor, and Lender may, at
its option, create a Reserve against amounts otherwise available to Borrower
pursuant to the formulas set forth in Section 2.1 of this Agreement, in an
amount equal to the entire amount of such excess(es) or Borrower shall, upon the
demand by Lender, which may be made at any time and from time to time, repay to
Lender the entire amount of such excess(es).
(c) Each Equipment Purchase Term Loan shall be (i) evidenced by
an Equipment Purchase Term Note executed and delivered by Borrower to Lender
concurrently with each Equipment Purchase Term Loan, (ii) repaid, together with
interest and other amounts payable thereunder, in accordance with the provisions
of the applicable Equipment Purchase Term Note, this Agreement and the other
Financing Agreements, and (iii) secured by all of the Collateral.
(d) In addition to the other conditions precedent to any Loan or
Letter of Credit Accommodation set forth in this Agreement, the making of each
Equipment Purchase Term Loan shall be subject to the satisfaction of each of the
following additional conditions precedent, as determined by Lender:
(i) Lender shall have received from Borrower not less than
ten (10) Business Days prior written notice of the proposed Equipment Purchase
Term Loan, which notice shall specify the following: (A) the proposed date and
amount of the Equipment Purchase Term Loan, (B) a list and description of the
Eligible New Equipment (by model, make, manufacturer, serial number and/or such
other identifying information as may be requested by Lender), (C) the total
purchase price for the Eligible New Equipment to be purchased with the proceeds
of such Equipment Purchase Term Loan (and the terms of payment of such purchase
price), and (D) such other information and documents as Lender may from time to
time request with respect thereto;
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(ii) upon Borrower acquiring any rights in the Equipment,
Lender shall have a valid and
perfected first priority security interest in and lien upon the Eligible New
Equipment to be purchased with the proceeds of the Equipment Purchase Term Loan
and the Eligible New Equipment shall be free and clear of all other liens,
security interests, claims or other encumbrances (except for Permitted Liens),
and Borrower shall have delivered to Lender such evidence thereof, as Lender may
from time to time require;
(iii) the amount of each Equipment Purchase Term Loan shall
not exceed (80%) percent of the
net orderly liquidation value of the Eligible New Equipment to be purchased by
Borrower with the proceeds of such Equipment Purchase Term Loan;
(iv) Lender shall have received (A) copies, or upon
Lender's request, originals, of all
agreements, documents and instruments relating to the sale of the Eligible New
Equipment to Borrower, including, without limitation, any purchase orders,
invoices, bills of sale or similar documents and (B) evidence reasonably
satisfactory to Lender that the Eligible New Equipment has been received and
installed by Borrower and is in good working order and operating for its
intended purpose;
(v) Borrower shall duly authorize, execute and deliver to
Lender a single original Equipment
Purchase Term Note in the form annexed hereto as Exhibit C, as completed to
reflect the date and amount of each such Equipment Purchase Term Loan and with
the number of monthly installments of principal payable thereunder and the
amount of each such monthly installment completed in accordance with Sections
2.4(e) and 2.4(f) below, as the case may be, which note shall evidence a valid
and legally enforceable indebtedness of Borrower unconditionally owing to
Lender, without offset, defense or counterclaim of any kind, nature or
description whatsoever; and
(vi) no Event of Default, or act, condition or event which
with notice or passage of time or
both would constitute an Event of Default, shall exist or have occurred and be
continuing.
(e) The principal amount of each Equipment Purchase Term Loan
shall be payable (subject to earlier payment as provided herein or in such
Equipment Purchase Term Note) in sixty (60) equal, consecutive monthly
installments of principal, each in an amount calculated in clause (f) below,
commencing on the first day of the second month after the date of the making of
such loan, together with interest and other amounts as provided herein and in
the Equipment Purchase Term Note with respect to such loan.
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(f) The amount of each monthly installment of principal in
respect of each Equipment Purchase Term Loan (other than the last installment
which shall be in an amount equal to the entire unpaid balance of the Equipment
Purchase Term Note) shall equal: (i) the original principal amount of the
proposed Equipment Purchase Term Loan divided by (ii) sixty (60).
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the Loans at the Interest Rate. All interest accruing
hereunder on and after the date of any Event of Default or termination or
non-renewal hereof shall be payable on demand.
(b) Borrower may from time to time request Eurodollar Rate Loans
or may request that Prime Rate Loans be converted to Eurodollar Rate Loans or
that any existing Eurodollar Rate Loans continue for an additional Interest
Period. Such request from Borrower shall specify the amount of the Eurodollar
Rate Loans or the amount of the Prime Rate Loans to be converted to Eurodollar
Rate Loans or the amount of the Eurodollar Rate Loans to be continued (subject
to the limits set forth below) and the Interest Period to be applicable to such
Eurodollar Rate Loans. Subject to the terms and conditions contained herein,
three (3) Business Days after receipt by Lender of such a request from Borrower,
such Eurodollar Rate Loans shall be made or Prime Rate Loans shall be converted
to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the
case may be, provided, that, (i) no Default or Event of Default shall exist or
have occurred and be continuing, (ii) no party hereto shall have sent any notice
of termination or non-renewal of this Agreement, (iii) Borrower shall have
complied with such customary procedures as are established by Lender and
specified by Lender to Borrower from time to time for requests by Borrower for
Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods may be in
effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans
must be in an amount not less than $5,000,000 or an integral multiple of
$1,000,000 in excess thereof, (vi) the maximum amount of the Eurodollar Rate
Loans at any time requested by Borrower shall not exceed the amount equal to (A)
the principal amount of the Term Loan and the Equipment Purchase Term Loans
which it is anticipated will be outstanding as of the last day of the applicable
Interest Period plus (B) eighty (80%) percent of the lowest principal amount of
the Revolving Loans which it is anticipated will be outstanding during the
applicable Interest Period, in each case as determined by Lender (but with no
obligation of Lender to make such Loans), and (vii) Lender shall have determined
that the Interest Period or Adjusted Eurodollar Rate is available to Lender
through the Reference Bank and can be readily determined as of the date of the
request for such Eurodollar Rate Loan by Borrower. Any request by Borrower for
Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar Rate Loans or
to continue any existing Eurodollar Rate Loans shall be irrevocable.
Notwithstanding anything to the contrary contained herein, Lender and Reference
Bank shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if
Lender and Reference Bank had purchased such deposits to fund the Eurodollar
Rate Loans.
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(c) Any Eurodollar Rate Loans shall automatically convert to
Prime Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received and approved a request to continue such Eurodollar Rate Loan
at least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon notice
by Lender to Borrower, convert to Prime Rate Loans in the event that this
Agreement shall terminate or not be renewed. Borrower shall pay to Lender, upon
demand by Lender (or Lender may, at its option, charge any loan account of
Borrower) any amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any loss (including loss of anticipated profits),
cost or expense incurred by such person, as a result of the conversion of
Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrower to Lender exceed the maximum amount or
the rate permitted under any applicable law or regulation, and if any such part
or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee the amount
of $250,000, which shall be fully earned and payable as of the date hereof.
3.3 Facility Fee. Borrower shall pay to Lender monthly a facility fee in
an amount equal to the product of (a) a rate per annum equal to the Interest
Rate applicable to the Revolving Loans during the immediately preceding month
(or part thereof) and (b) the amount by which the Targeted Amount exceeds the
average daily principal balance of the outstanding Revolving Loans during the
immediately preceding month (or part thereof) while this Agreement is in effect
and for so long thereafter as any of the Obligations are outstanding, which fee
shall be payable on the first day of each month in arrears.
3.4 Servicing Fee. Borrower shall pay to Lender monthly a servicing fee
in an amount equal to $3,000 in respect of Lender's services for each month (or
part thereof) while this Agreement remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and payable in advance on the date hereof and on the first day of each month
hereafter.
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3.5 Unused Line Fee. Borrower shall pay to Lender monthly an unused line
fee at a rate equal to one-half (1/2%) percent per annum calculated upon the
amount by which the Revolving Loan Limit exceeds the average daily principal
balance of the outstanding Revolving Loans and Letter of Credit Accommodations
during the immediately preceding month (or part thereof) while this Agreement is
in effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be payable on the first day of each month in arrears.
3.6 Changes in Laws and Increased Costs of Loans.
(a) If after the date hereof, either (i) any change in, or in the
interpretation of, any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to Lender or any
banking or financial institution from whom Lender borrows funds or obtains
credit (a "Funding Bank"), or (ii) a Funding Bank or Lender complies with any
future guideline or request from any central bank or other Governmental
Authority or (iii) a Funding Bank or Lender determines that the adoption of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof has or would have the effect described
below, or a Funding Bank or Lender complies with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, and in the case of any event set
forth in this clause (iii), such adoption, change or compliance has or would
have the direct or indirect effect of reducing the rate of return on Lender's
capital as a consequence of its obligations hereunder to a level below that
which Lender could have achieved but for such adoption, change or compliance
(taking into consideration the Funding Bank's or Lender's policies with respect
to capital adequacy) by an amount deemed by Lender to be material, and the
result of any of the foregoing events described in clauses (i), (ii) or (iii) is
or results in an increase in the cost to Lender of funding or maintaining the
Loans or the Letter of Credit Accommodations, then Borrower shall from time to
time upon demand by Lender pay to Lender additional amounts sufficient to
indemnify Lender against such increased cost on an after-tax basis (after taking
into account applicable deductions and credits in respect of the amount
indemnified). A certificate as to the amount of such increased cost shall be
submitted to Borrower by Lender and shall be conclusive, absent manifest error.
(b) If prior to the first day of any Interest Period, (i) Lender
shall have determined in good faith (which determination shall be conclusive and
binding upon Borrower) that, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, (ii) Lender determines that the
Eurodollar Rate determined or to be determined for such Interest Period will not
adequately and fairly reflect the cost to Lender of making or maintaining
Eurodollar Rate Loans during such Interest Period, or (iii) Dollar deposits in
the principal amounts of the Eurodollar Rate Loans to which such Interest Period
is to be applicable are not generally available in the London interbank market,
Lender shall give telecopy or telephonic notice thereof to Borrower as soon as
practicable thereafter, and will also give prompt written notice to Borrower
when such conditions no longer exist. If such notice is given (A) any Eurodollar
Rate Loans requested to be made on the first day of such Interest Period shall
be made as Prime Rate Loans, (B) any Loans that were to have been converted on
the first day of such Interest Period to or continued as Eurodollar Rate Loans
shall be converted to or continued as Prime Rate Loans and (C) each outstanding
Eurodollar Rate Loan shall be converted, on the last day of the then-current
Interest Period thereof, to Prime Rate Loans. Until such notice has been
withdrawn by Lender, no further Eurodollar Rate Loans shall be made or continued
as such, nor shall Borrower have the right to convert Prime Rate Loans to
Eurodollar Rate Loans.
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(c) Notwithstanding any other provision herein, if the adoption
of or any change in any law, treaty, rule or regulation or final, non-appealable
determination of an arbitrator or a court or other Governmental Authority or in
the interpretation or application thereof occurring after the date hereof shall
make it unlawful for Lender to make or maintain Eurodollar Rate Loans as
contemplated by this Loan Agreement, (i) Lender shall promptly give written
notice of such circumstances to Borrower (which notice shall be withdrawn
whenever such circumstances no longer exist), (ii) the commitment of Lender
hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such
and convert Prime Rate Loans to Eurodollar Rate Loans shall forthwith be
canceled and, until such time as it shall no longer be unlawful for Lender to
make or maintain Eurodollar Rate Loans, Lender shall then have a commitment only
to make a Prime Rate Loan when a Eurodollar Rate Loan is requested and (iii)
Loans then outstanding as Eurodollar Rate Loans, if any, shall be converted
automatically to Prime Rate Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a Eurodollar Rate Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, Borrower shall pay to such Lender such amounts, if any, as
may be required pursuant to Section 3.3(d) below.
(d) Borrower shall indemnify Lender and to hold Lender harmless
from any loss or expense which Lender may sustain or incur as a consequence of
(i) default by Borrower in making a borrowing of, conversion into or extension
of Eurodollar Rate Loans after Borrower has given a notice requesting the same
in accordance with the provisions of this Loan Agreement, (ii) default by
Borrower in making any prepayment of a Eurodollar Rate Loan after Borrower has
given a notice thereof in accordance with the provisions of this Agreement, and
(iii) the making of a prepayment of Eurodollar Rate Loans on a day which is not
the last day of an Interest Period with respect thereto. With respect to
Eurodollar Rate Loans, such indemnification may include an amount equal to the
excess, if any, of (A) the amount of interest which would have accrued on the
amount so prepaid, or not so borrowed, converted or extended, for the period
from the date of such prepayment or of such failure to borrow, convert or extend
to the last day of the applicable Interest Period (or, in the case of a failure
to borrow, convert or extend, the Interest Period that would have commenced on
the date of such failure) in each case at the applicable rate of interest for
such Eurodollar Rate Loans provided for herein over (B) the amount of interest
(as reasonably determined by such Lender) which would have accrued to Lender on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank Eurodollar market. This covenant shall survive
the termination or non-renewal of this Loan Agreement and the payment of the
Obligations.
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SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other documents as
Lender may request to evidence and effectuate the termination by the existing
lenders (if any) to Borrower of their respective financing arrangements with
Borrower and the termination and release by it or them, as the case may be, of
any interest in and to any assets and properties of Borrower and each Obligor,
duly authorized, executed and delivered by it or each of them, including, but
not limited to, (i) UCC termination statements for all UCC financing statements
previously filed by it or any of them or their predecessors, as secured party
and Borrower or any Obligor, as debtor and (ii) satisfactions and discharges of
any mortgages, deeds of trust or deeds to secure debt by Borrower or any Obligor
in favor of such existing lender or lenders, in form acceptable for recording
with the appropriate Governmental Authority;
(b) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or Governmental Authority (and including a copy
of the certificate of incorporation of Borrower certified by the Secretary of
State (or equivalent Governmental Authority) which shall set forth the same
complete corporate name of Borrower as is set forth herein and such document as
shall set forth the organizational identification number of Borrower, if one is
issued in its jurisdiction of incorporation);
(c) no material adverse change shall have occurred in the assets,
business or prospects of Borrower since the date of Lender's latest field
examination (not including for this purpose the field review referred to in
clause (d) below) and no change or event shall have occurred which would impair
the ability of Borrower or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce the Obligations or realize upon the Collateral;
(d) Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require to
determine the amount of Revolving Loans available to Borrower (including,
without limitation, current perpetual inventory records and/or roll-forwards of
Accounts and Inventory through the date of closing and test counts of the
Inventory in a manner satisfactory to Lender, together with such supporting
documentation as may be necessary or appropriate, and other documents and
information that will enable Lender to accurately identify and verify the
Collateral), the results of which each case shall be satisfactory to Lender, not
more than three (3) Business Days prior to the date hereof;
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(e) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements, including, without limitation, Collateral Access
Agreements by owners and lessors of leased premises of Borrower and by
warehouses at which Collateral is located;
(f) the Adjusted Excess Availability as determined by Lender, as
of the date hereof, shall be not less than $16,000,000 after giving effect to
the initial Loans made or to be made and Letter of Credit Accommodations issued
or to be issued in connection with the initial transactions hereunder;
(g) Lender shall have received, in form and substance
satisfactory to Lender, (i) Deposit Account Control Agreements by and among
Lender, Borrower and each bank where Borrower has a deposit account, in each
case, duly authorized, executed and delivered by such bank and Borrower (or
Lender shall be the bank's customer with respect to such deposit account, as
Lender may specify) and (ii) Investment Property Control Agreements by and among
Lender, Borrower and each intermediary where Borrower has a securities account
or commodities account, in each case duly authorized, executed and delivered by
such intermediary and Borrower (or Lender shall be the intermediary's customer
with respect to such securities or commodities account as Lender may specify);
(h) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has a valid perfected first priority
security interest in all of the Collateral (except that Lender's security
interest in the Real Property of Borrower located in Philadelphia, Pennsylvania
shall be a valid perfected third priority security interest);
(i) Lender shall have received and reviewed lien and judgement
search results for the jurisdiction of incorporation or organization of
Borrower, the jurisdiction of the chief executive office of Borrower and all
jurisdictions in which assets of Borrower are located, which search results
shall be in form and substance satisfactory to Lender;
(j) Lender shall have received cash collateral in the amount of
$10,000,000, together with an investment property pledge and security agreement
with respect to such cash and the investment account in which such cash is
maintained (the "Restricted Cash Collateral Account"), in form and substance
satisfactory to Lender, duly authorized, executed and delivered by Borrower;
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(k) Lender shall have received, in form and substance
satisfactory to Lender, a mortgagee waiver, license and agreement, in form and
substance satisfactory to Lender, duly authorized, executed and delivered by
each mortgagee of Real Property owned by Borrower;
(l) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(m) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrower with respect
to the Financing Agreements and such other matters as Lender may request; and
(n) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto, except
to the extent that such representations and warranties expressly relate solely
to an earlier date (in which case such representations and warranties shall have
been true and accurate on and as of such earlier date);
(b) no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or threatened in any court or before
any arbitrator or Governmental Authority, which (i) purports to enjoin,
prohibit, restrain or otherwise affect (A) the making of the Loans or providing
the Letter of Credit Accommodations, or (B) the consummation of the transactions
contemplated pursuant to the terms hereof or the other Financing Agreements or
(ii) has or could reasonably be expected to have a material adverse effect on
the assets, business or prospects of Borrower or would impair the ability of
Borrower to perform its obligations hereunder or under any of the other
Financing Agreements or of Lender to enforce any Obligations or realize upon any
of the Collateral; and
(c) no Default or Event of Default shall exist or have occurred
and be continuing on and as of the date of the making of such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto.
39
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 Grant of Security Interest. To secure payment and performance of all
Obligations, Borrower hereby grants to Lender a continuing security interest in,
a lien upon, and a right of set off against, and hereby assigns to Lender as
security, all personal and real property and fixtures and interests in property
and fixtures of Borrower, whether now owned or hereafter acquired or existing,
and wherever located (together with all other collateral security for the
Obligations at any time granted to or held or acquired by Lender, collectively,
the "Collateral"), including:
(a) all Accounts;
(b) all general intangibles, excluding all Intellectual Property;
(c) all goods, including, without limitation, Inventory and
Equipment;
(d) all Real Property and fixtures (other than the Real Property
and fixtures located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇);
(e) all chattel paper (including all tangible and electronic
chattel paper);
(f) all instruments (including all promissory notes);
(g) all documents;
(h) all deposit accounts;
(i) all letters of credit, banker's acceptances and similar
instruments and including all letter-of-credit rights;
(j) all supporting obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (iii) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (iv) deposits by and property of account debtors or
other persons securing the obligations of account debtors;
40
(k) all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (ii) monies, credit balances,
deposits and other property of Borrower now or hereafter held or received by or
in transit to Lender or its Affiliates or at any other depository or other
institution from or for the account of Borrower, whether for safekeeping,
pledge, custody, transmission, collection or otherwise;
(l) all commercial tort claims, including, without limitation,
those identified in the Information Certificate;
(m) to the extent not otherwise described above, all Receivables;
(n) all Records; and
(o) all products and proceeds of the foregoing, in any form,
including insurance proceeds and all claims against third parties for loss or
damage to or destruction of or other involuntary conversion of any kind or
nature of any or all of the other Collateral.
5.2 Perfection of Security Interests.
(a) Borrower irrevocably and unconditionally authorizes Lender
(or its agent) to file at any time and from time to time such financing
statements with respect to the Collateral naming Lender or its designee as the
secured party and Borrower as debtor, as Lender may require, and including any
other information with respect to Borrower or otherwise required by part 5 of
Article 9 of the Uniform Commercial Code of such jurisdiction as Lender may
determine, together with any amendment and continuations with respect thereto,
which authorization shall apply to all financing statements filed on, prior to
or after the date hereof. Borrower hereby ratifies and approves all financing
statements naming Lender or its designee as secured party and Borrower as debtor
with respect to the Collateral (and any amendments with respect to such
financing statements) filed by or on behalf of Lender prior to the date hereof
and ratifies and confirms the authorization of Lender to file such financing
statements (and amendments, if any). Borrower hereby authorizes Lender to adopt
on behalf of Borrower any symbol required for authenticating any electronic
filing. In the event that the description of the collateral in any financing
statement naming Lender or its designee as the secured party and Borrower as
debtor includes assets and properties of Borrower that do not at any time
constitute Collateral, whether hereunder, under any of the other Financing
Agreements or otherwise, the filing of such financing statement shall
nonetheless be deemed authorized by Borrower to the extent of the Collateral
included in such description and it shall not render the financing statement
ineffective as to any of the Collateral or otherwise affect the financing
statement as it applies to any of the Collateral. In no event shall Borrower at
any time file, or permit or cause to be filed, any correction statement or
termination statement with respect to any financing statement (or amendment or
continuation with respect thereto) naming Lender or its designee as secured
party and Borrower as debtor.
41
(b) Borrower does not have any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except as set forth in the
Information Certificate. In the event that Borrower shall be entitled to or
shall receive any chattel paper or instrument after the date hereof, Borrower
shall promptly notify Lender thereof in writing. Promptly upon the receipt
thereof by or on behalf of Borrower (including by any agent or representative),
Borrower shall deliver, or cause to be delivered to Lender, all tangible chattel
paper and instruments that Borrower or may at any time acquire, accompanied by
such instruments of transfer or assignment duly executed in blank as Lender may
from time to time specify, in each case except as Lender may otherwise agree. At
Lender's option, Borrower shall, or Lender may at any time on behalf of
Borrower, cause the original of any such instrument or chattel paper to be
conspicuously marked in a form and manner acceptable to Lender with the
following legend referring to chattel paper or instruments as applicable: "This
[chattel paper][instrument] is subject to the security interest of Congress
Financial Corporation and any sale, transfer, assignment or encumbrance of this
[chattel paper][instrument] violates the rights of such secured party."
(c) In the event that Borrower shall at any time hold or acquire
an interest in any electronic chattel paper or any "transferable record" (as
such term is defined in Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction), Borrower shall
promptly notify Lender thereof in writing. Promptly upon Lender's request,
Borrower shall take, or cause to be taken, such actions as Lender may reasonably
request to give Lender control of such electronic chattel paper under Section
9-105 of the UCC and control of such transferable record under Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act or, as the
case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect
in such jurisdiction.
(d) Borrower does not have any deposit accounts as of the date
hereof, except as set forth in the Information Certificate. Borrower shall not,
directly or indirectly, after the date hereof open, establish or maintain any
deposit account unless each of the following conditions is satisfied: (i) Lender
shall have received not less than five (5) Business Days prior written notice of
the intention of Borrower to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Lender the name of
the account, the owner of the account, the name and address of the bank at which
such account is to be opened or established, the individual at such bank with
whom Borrower is dealing and the purpose of the account, (ii) the bank where
such account is opened or maintained shall be acceptable to Lender, and (iii) on
or before the opening of such deposit account, Borrower shall as Lender may
specify either (A) deliver to Lender a Deposit Account Control Agreement with
respect to such deposit account duly authorized, executed and delivered by
Borrower and the bank at which such deposit account is opened and maintained or
(B) arrange for Lender to become the customer of the bank with respect to the
deposit account on terms and conditions acceptable to Lender. The terms of this
subsection (d) shall not apply to deposit accounts specifically and exclusively
used for payroll, payroll taxes and other employee wage and benefit payments to
or for the benefit of Borrower's salaried employees.
42
(e) Borrower does not own or hold, directly or indirectly,
beneficially or as record owner or both, any investment property, as of the date
hereof, or have any investment account, securities account, commodity account or
other similar account with any bank or other financial institution or other
securities intermediary or commodity intermediary as of the date hereof, in each
case except as set forth in the Information Certificate.
(i) In the event that Borrower shall be entitled to or
shall at any time after the date hereof hold or acquire any certificated
securities, Borrower shall promptly endorse, assign and deliver the same to
Lender, accompanied by such instruments of transfer or assignment duly executed
in blank as Lender may from time to time specify. If any securities, now or
hereafter acquired by Borrower are uncertificated and are issued to Borrower or
its nominee directly by the issuer thereof, Borrower shall immediately notify
Lender thereof and shall as Lender may specify, either (A) cause the issuer to
agree to comply with instructions from Lender as to such securities, without
further consent of Borrower or such nominee, or (B) arrange for Lender to become
the registered owner of the securities.
(ii) Borrower shall not, directly or indirectly, after the
date hereof open, establish or maintain any investment account, securities
account, commodity account or any other similar account (other than a deposit
account) with any securities intermediary or commodity intermediary unless each
of the following conditions is satisfied: (A) Lender shall have received not
less than five (5) Business Days prior written notice of the intention of
Borrower to open or establish such account which notice shall specify in
reasonable detail and specificity acceptable to Lender the name of the account,
the owner of the account, the name and address of the securities intermediary or
commodity intermediary at which such account is to be opened or established, the
individual at such intermediary with whom Borrower is dealing and the purpose of
the account, (B) the securities intermediary or commodity intermediary (as the
case may be) where such account is opened or maintained shall be acceptable to
Lender, and (C) on or before the opening of such investment account, securities
account or other similar account with a securities intermediary or commodity
intermediary, Borrower shall as Lender may specify either (1) execute and
deliver, and cause to be executed and delivered to Lender, an Investment
Property Control Agreement with respect thereto duly authorized, executed and
delivered by Borrower and such securities intermediary or commodity intermediary
or (2) arrange for Lender to become the entitlement holder with respect to such
investment property on terms and conditions acceptable to Lender.
(f) Borrower is not the beneficiary or otherwise entitled to any
right to payment under any letter of credit, banker's acceptance or similar
instrument as of the date hereof, except as set forth in the Information
Certificate. In the event that Borrower shall be entitled to or shall receive
any right to payment under any letter of credit, banker's acceptance or any
similar instrument, whether as beneficiary thereof or otherwise after the date
hereof, Borrower shall promptly notify Lender thereof in writing. Borrower shall
immediately, as Lender may specify, either (i) deliver, or cause to be delivered
to Lender, with respect to any such letter of credit, banker's acceptance or
similar instrument, the written agreement of the issuer and any other nominated
person obligated to make any payment in respect thereof (including any
confirming or negotiating bank), in form and substance satisfactory to Lender,
consenting to the assignment of the proceeds of the letter of credit to Lender
by Borrower and agreeing to make all payments thereon directly to Lender or as
Lender may otherwise direct or (ii) cause Lender to become, at Borrower's
expense, the transferee beneficiary of the letter of credit, banker's acceptance
or similar instrument (as the case may be).
43
(g) Borrower has no commercial tort claims as of the date hereof,
except as set forth in the Information Certificate. In the event that Borrower
shall at any time after the date hereof have any commercial tort claims,
Borrower shall promptly notify Lender thereof in writing, which notice shall (i)
set forth in reasonable detail the basis for and nature of such commercial tort
claim and (ii) include the express grant by Borrower to Lender of a security
interest in such commercial tort claim (and the proceeds thereof). In the event
that such notice does not include such grant of a security interest, the sending
thereof by Borrower to Lender shall be deemed to constitute such grant to
Lender. Upon the sending of such notice, any commercial tort claim described
therein shall constitute part of the Collateral and shall be deemed included
therein. Without limiting the authorization of Lender provided in Section 5.2(a)
hereof or otherwise arising by the execution by Borrower of this Agreement or
any of the other Financing Agreements, Lender is hereby irrevocably authorized
from time to time and at any time to file such financing statements naming
Lender or its designee as secured party and Borrower as debtor, or any
amendments to any financing statements, covering any such commercial tort claim
as Collateral. In addition, Borrower shall promptly upon Lender's request,
execute and deliver, or cause to be executed and delivered, to Lender such other
agreements, documents and instruments as Lender may require in connection with
such commercial tort claim.
(h) Borrower does not have any goods, documents of title or other
Collateral in the custody, control or possession of a third party as of the date
hereof, except as set forth in the Information Certificate and except for goods
located in the United States in transit to a location of Borrower permitted
herein in the ordinary course of business of Borrower in the possession of the
carrier transporting such goods. In the event that any goods, documents of title
or other Collateral are at any time after the date hereof in the custody,
control or possession of any other person not referred to in the Information
Certificate or such carriers, Borrower shall promptly notify Lender thereof in
writing. Promptly upon Lender's request, Borrower shall deliver to Lender a
Collateral Access Agreement duly authorized, executed and delivered by such
person and Borrower.
(i) Borrower shall take any other actions reasonably requested by
Lender from time to time to cause the attachment, perfection and first priority
of, and the ability of Lender to enforce, the security interest of Lender in any
and all of the Collateral, including, without limitation, (i) executing,
delivering and, where appropriate, filing financing statements and amendments
relating thereto under the UCC or other applicable law, to the extent, if any,
that Borrower's signature thereon is required therefor, (ii) causing Lender's
name to be noted as secured party on any certificate of title for a titled good
if such notation is a condition to attachment, perfection or priority of, or
ability of Lender to enforce, the security interest of Lender in such
Collateral, (iii) complying with any provision of any statute, regulation or
treaty of the United States as to any Collateral if compliance with such
provision is a condition to attachment, perfection or priority of, or ability of
Lender to enforce, the security interest of Lender in such Collateral, (iv)
obtaining the consents and approvals of any Governmental Authority or third
party, including, without limitation, any consent of any licensor, lessor or
other person obligated on Collateral, and taking all actions required by any
earlier versions of the UCC or by other law, as applicable in any relevant
jurisdiction.
44
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may specify, with such banks as are acceptable to
Lender into which Borrower shall promptly deposit and direct its account debtors
to directly remit all payments on Receivables and all payments constituting
proceeds of Inventory or other Collateral in the identical form in which such
payments are made, whether by cash, check or other manner. Borrower shall
deliver, or cause to be delivered to Lender, a Depository Account Control
Agreement duly authorized, executed and delivered by each bank where a Blocked
Account is maintained as provided in Section 5.2 hereof or at any time and from
time to time Lender may become bank's customer with respect to the Blocked
Accounts and promptly upon Lender's request, Borrower shall execute and deliver
such agreements or documents as Lender may require in connection therewith.
Borrower agrees that all payments made to such Blocked Accounts or other funds
received and collected by Lender, whether in respect of the Receivables, as
proceeds of Inventory or other Collateral or otherwise shall be treated as
payments to Lender in respect of the Obligations and therefore shall constitute
the property of Lender to the extent of the then outstanding Obligations.
45
(b) For purposes of calculating the amount of the Loans available
to Borrower, such payments will be applied (conditional upon final collection)
to the Obligations on the Business Day of receipt by Lender of immediately
available funds in the Lender Payment Account provided such payments and notice
thereof are received in accordance with Lender's usual and customary practices
as in effect from time to time and within sufficient time to credit Borrower's
loan account on such day, and if not, then on the next Business Day. For the
purposes of calculating interest on the Obligations, such payments or other
funds received will be applied (conditional upon final collection) to the
Obligations one (1) Business Day following the date of receipt of immediately
available funds by Lender in the Lender Payment Account provided such payments
or other funds and notice thereof are received in accordance with Lender's usual
and customary practices as in effect from time to time and within sufficient
time to credit Borrower's loan account on such day, and if not, then on the next
Business Day. In the event that at any time or from time to time there are no
Revolving Loans outstanding, Lender shall be entitled to an administrative fee
in an amount equivalent to the Interest Rate for Prime Rate Loans (on a per
annum basis) multiplied by the amount of the funds received in the Blocked
Account for such day as calculated by Lender in accordance with its customary
practice.
(c) Borrower and its shareholders, directors, employees, agents,
Subsidiaries or other Affiliates shall, acting as trustee for Lender, receive,
as the property of Lender, any monies, checks, notes, drafts or any other
payment relating to and/or proceeds of Accounts or other Collateral which come
into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrower's own funds.
Borrower agrees to reimburse Lender on demand for any amounts owed or paid to
any bank at which a Blocked Account is established or any other bank or person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Lender's payments to or indemnification of such bank or person. The obligation
of Borrower to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
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6.4 Payments.
(a) All Obligations shall be payable to the Lender Payment
Account as provided in Section 6.3 or such other place as Lender may designate
from time to time. Lender shall apply payments received or collected from
Borrower or for the account of Borrower (including the monetary proceeds of
collections or of realization upon any Collateral) as follows: first, to pay any
fees, indemnities or expense reimbursements then due to Lender from Borrower;
second, to pay interest due in respect of any Loans; third, to pay principal due
in respect of the Loans; fourth, to pay or prepay any other Obligations whether
or not then due, in such order and manner as Lender determines, provided, that,
unless an Event of Default exists or has occurred and is continuing, Lender
shall not apply amounts it receives from the Blocked Accounts to prepay the Term
Loan or the Equipment Purchase Term Loans unless such prepayment is required to
be made pursuant to the other provisions of this Agreement. Notwithstanding
anything to the contrary contained in this Agreement, (i) unless so directed by
Borrower, or unless a Default or an Event of Default shall exist or have
occurred and be continuing, Lender shall not apply any payments which it
receives to any Eurodollar Rate Loans, except (A) on the expiration date of the
Interest Period applicable to any such Eurodollar Rate Loans, or (B) in the
event that there are no outstanding Prime Rate Loans and (ii) to the extent
Borrower uses any proceeds of the Loans or Letter of Credit Accommodations to
acquire rights in or the use of any Collateral or to repay any Indebtedness used
to acquire rights in or the use of any Collateral, payments in respect of the
obligations shall be deemed applied first to the Obligations arising from Loans
and Letter of Credit Accommodations that were not used for such purposes and
second to the Obligations arising from Loans and Letter of Credit Accommodations
the proceeds of which were used to acquire rights in or the use of any
Collateral in the chronological order in which Borrower acquired such rights or
use. Any amounts paid in respect of the Term Loan or any Equipment Purchase Term
Loans may not thereafter be reborrowed.
(b) At Lender's option, all principal, interest, fees, costs,
expenses and other charges provided for in this Agreement or the other Financing
Agreements may be charged directly to the loan account(s) of Borrower. Borrower
shall make all payments to Lender on the Obligations free and clear of, and
without deduction or withholding for or on account of, any setoff, counterclaim,
defense, duties, taxes, levies, imposts, fees, deductions, withholding,
restrictions or conditions of any kind. If after receipt of any payment of, or
proceeds of Collateral applied to the payment of, any of the Obligations, Lender
is required to surrender or return such payment or proceeds to any Person for
any reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue in
full force and effect as if such payment or proceeds had not been received by
Lender. Borrower shall be liable to pay to Lender, and does hereby indemnify and
hold Lender harmless for the amount of any payments or proceeds surrendered or
returned. This Section 6.4 shall remain effective notwithstanding any contrary
action which may be taken by Lender in reliance upon such payment or proceeds.
This Section 6.4 shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a Business Day) and the amount of the requested Loan. Requests received after
11:00 a.m. New York City time on any day shall be deemed to have been made as of
the opening of business on the immediately following Business Day.
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All Loans and Letter of Credit Accommodations under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for the
benefit of, Borrower when deposited to the credit of Borrower or otherwise
disbursed or established in accordance with the instructions of Borrower or in
accordance with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the Loans
provided by Lender to Borrower hereunder only for: (a) payments to each of the
persons listed in the disbursement direction letter furnished by Borrower to
Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrower pursuant to the provisions
hereof shall be used by Borrower only for general operating, working capital and
other proper corporate purposes of Borrower not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COLLATERAL COVENANTS
7.1 Collateral Reporting.
(a) Borrower shall provide Lender with the following documents in
a form satisfactory to Lender:
(i) on a regular basis as required by Lender, a schedule of
sales made, credits issued (including, without limitation, source pricing
chargeback credits), Qualified Cash Collateral and cash received;
(ii) as soon as possible after the end of each month (but
in any event within ten (10) days after the end thereof), on a monthly basis or
more frequently as Lender may request, (A) perpetual inventory reports, (B)
inventory reports by location and category (including identifying Licensor
Licensed Inventory, Licensee Licensed Inventory and Bulk Inventory and
identifying Inventory at locations owned and operated by third parties or on
consignment), (C) inventory reports with respect to Short Dated Inventory
(identifying Inventory with an expiration date of less than twelve (12) months),
(D) agings of accounts payable (including identifying amounts payable to
licensors and including information indicating the status of payments to owners
and lessors of the leased premises of Borrower), (E) agings of accounts
receivable (including accrued accounts receivable) together with a
reconciliation to the previous month's aging and general ledger, (F) reports
summarizing the status of any and all pending or threatened investigations,
actions, suits, proceedings or claims by or against Borrower relating to (1)
products liability and (2) any patents, patent rights, patent applications or
any approved or pending new drug applications or ANDAs, (G) reports with respect
to Borrower's rebate and incentive program with any of its customers, (H)
reports with respect to Qualified Cash Collateral and the cash on deposit in the
Restricted Cash Collateral Account and (I) reports with respect to the accrued
accounts receivable reserve established by Borrower, together with a certificate
of Borrower stating that the amount of such reserve has been established by
Borrower in good faith and consistent with past practice;
48
(iii) upon Lender's request, (A) copies of customer
statements and credit memos, remittance advices and reports, and copies of
deposit slips and bank statements, (B) copies of shipping and delivery
documents, and (C) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by Borrower;
(iv) such other reports as to the Collateral as Lender
shall request from time to time; and
(b) If any of Borrower's records or reports of the Collateral are
prepared or maintained by an accounting service, contractor, shipper or other
agent, Borrower hereby irrevocably authorizes such service, contractor, shipper
or agent to deliver such records, reports, and related documents to Lender and
to follow Lender's instructions with respect to further services at any time
that an Event of Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrower shall notify Lender promptly of: (i) any material
delay in Borrower's performance of any of its obligations to any account debtor
or the assertion of any material claims, offsets, defenses or counterclaims by
any account debtor, or any material disputes with account debtors, or any
settlement, adjustment or compromise thereof, (ii) all material adverse
information relating to the financial condition of any account debtor and (iii)
any event or circumstance which, to Borrower's knowledge would cause Lender to
consider any then existing Accounts as no longer constituting Eligible Accounts.
No credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor without Lender's consent,
except in the ordinary course of Borrower's business in accordance with
practices and policies previously disclosed in writing to Lender and except as
set forth in the schedules delivered to Lender pursuant to Section 7.1(a) above.
So long as no Event of Default exists or has occurred and is continuing,
Borrower shall settle, adjust or compromise any claim, offset, counterclaim or
dispute with any account debtor. At any time that an Event of Default exists or
has occurred and is continuing, Lender shall, at its option, have the exclusive
right to settle, adjust or compromise any claim, offset, counterclaim or dispute
with account debtors or grant any credits, discounts or allowances.
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(b) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of Borrower's business in
accordance with practices and policies previously disclosed to Lender, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement, (v) none of the transactions
giving rise thereto will violate any applicable foreign, Federal, State or local
laws or regulations, all documentation relating thereto will be legally
sufficient under such laws and regulations and all such documentation will be
legally enforceable in accordance with its terms.
(c) Lender shall have the right at any time or times, in Lender's
name (at any time during which an Event of Default exists or has occurred and is
continuing) or in the name of a nominee of Lender (at all other times), to
verify the validity, amount or any other matter relating to any Account or other
Collateral, by mail, telephone, facsimile transmission or otherwise.
7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and promptly
following such physical inventory shall supply Lender with a report in the form
and with such specificity as may be reasonably satisfactory to Lender concerning
such physical count; (c) Borrower shall not remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Lender, except for sales of Inventory in the ordinary course of Borrower's
business and except to move Inventory directly from one location set forth or
permitted herein to another such location and except for Inventory shipped from
the manufacturer thereof to Borrower which is in transit to the locations set
forth or permitted herein; (d) upon Lender's request, Borrower shall, at its
expense, no more than four (4) times in any twelve (12) month period, but at any
time or times as Lender may request on or after an Event of Default, deliver or
cause to be delivered to Lender written appraisals as to the Inventory in form,
scope and methodology acceptable to Lender and by an appraiser acceptable to
Lender, addressed to Lender and upon which Lender is expressly permitted to
rely; provided, that, so long as no Event of Default exists or has occurred and
is continuing, any such appraisals delivered or caused to be delivered by
Borrower more than two (2) times in any twelve (12) month period shall be desk
top appraisals; (e) Borrower shall produce, use, store and maintain the
Inventory with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with applicable laws (including the
requirements of the Federal Fair Labor Standards Act of 1938, as amended, the
Federal Food, Drug and Cosmetic Act, and all rules, regulations and orders
related thereto); (f) none of the Inventory or other Collateral constitutes farm
products or the proceeds thereof; (g) Borrower assumes all responsibility and
liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (h) Borrower shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate Borrower to repurchase such Inventory (except for the return of
goods in the ordinary course of business and consistent with past and industry
practice); (i) Borrower shall keep the Inventory in good and marketable
condition; and (j) Borrower shall not, without prior written notice to Lender or
the specific identification of such Inventory with respect thereto provided by
Borrower to Lender pursuant to Section 7.1(a) hereof, acquire or accept any
Inventory on consignment or approval.
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7.4 Equipment and Real Property Covenants. With respect to the Equipment
and Real Property: (a) upon Lender's request, Borrower shall, at its expense, no
more than one (1) time in any twelve (12) month period, but at any time or times
as Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written appraisals as to the Equipment and/or the Real
Property in form, scope and methodology acceptable to Lender and by an appraiser
acceptable to Lender, addressed to Lender and upon which Lender is expressly
permitted to rely; (b) Borrower shall keep the Equipment in good order, repair,
running and marketable condition (ordinary wear and tear excepted); (c) Borrower
shall use the Equipment and Real Property with all reasonable care and caution
and in accordance with applicable standards of any insurance and in conformity
with all applicable laws; (d) the Equipment is and shall be used in Borrower's
business and not for personal, family, household or farming use; (e) Borrower
shall not remove any Equipment from the locations set forth or permitted herein,
except to the extent necessary to have any Equipment repaired or maintained in
the ordinary course of the business of Borrower or to move Equipment directly
from one location set forth or permitted herein to another such location and
except for the movement of motor vehicles used by or for the benefit of Borrower
in the ordinary course of business; (f) the Equipment is now and shall remain
personal property and Borrower shall not permit any of the Equipment to be or
become a part of or affixed to real property; and (g) Borrower assumes all
responsibility and liability arising from the use of the Equipment and Real
Property.
7.5 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default exists or has occurred and is continuing
(i) demand payment on Receivables or other Collateral, (ii) enforce payment of
Receivables by legal proceedings or otherwise, (iii) exercise all of Borrower's
rights and remedies to collect any Receivable or other Collateral, (iv) sell or
assign any Receivable upon such terms, for such amount and at such time or times
as the Lender deems advisable, (v) settle, adjust, compromise, extend or renew
an Account, (vi) discharge and release any Receivable, (vii) prepare, file and
sign Borrower's name on any proof of claim in bankruptcy or other similar
document against an account debtor or other obligor in respect of any
Receivables or other Collateral, (viii) notify the post office authorities to
change the address for delivery of remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral to an address
designated by Lender, and open and dispose of all mail addressed to Borrower and
handle and store all mail relating to the Collateral; and (ix) do all acts and
things which are necessary, in Lender's determination, to fulfill Borrower's
obligations under this Agreement and the other Financing Agreements and (b) at
any time to (i) take control in any manner of any item of payment in respect of
Receivables or constituting Collateral or otherwise received in or for deposit
in the Blocked Accounts or otherwise received by Lender, (ii) have access to any
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lockbox or postal box into which remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral are sent or
received, (iii) endorse Borrower's name upon any items of payment in respect of
Receivables or constituting Collateral or otherwise received by Lender and
deposit the same in Lender's account for application to the Obligations, (iv)
endorse Borrower's name upon any chattel paper, document, instrument, invoice,
or similar document or agreement relating to any Receivable or any goods
pertaining thereto or any other Collateral, including any warehouse or other
receipts, or bills of lading and other negotiable or non-negotiable documents,
(v) clear Inventory the purchase of which was financed with Letter of Credit
Accommodations through U.S. Customs or foreign export control authorities in
Borrower's name, Lender's name or the name of Lender's designee, and to sign and
deliver to customs officials powers of attorney in Borrower's name for such
purpose, and to complete in Borrower's or Lender's name, any order, sale or
transaction, obtain the necessary documents in connection therewith and collect
the proceeds thereof, (vi) sign Borrower's name on any verification of
Receivables and notices thereof to account debtors or any secondary obligors or
other obligors in respect thereof. Borrower hereby releases Lender and its
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Lender's own gross negligence or
wilful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, (a) upon notice to
Borrower, cure any default by Borrower under any material agreement with a third
party that affects the Collateral, its value or the ability of Lender to
collect, sell or otherwise dispose of the Collateral or the rights and remedies
of Lender therein or the ability of Borrower to perform its obligations
hereunder or under the other Financing Agreements, (b) pay or bond on appeal any
judgment entered against Borrower, (c) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (d) pay any amount, incur any expense or perform any act
which, in Lender's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Lender with respect thereto.
Lender may add any amounts so expended to the Obligations and charge Borrower's
account therefor, such amounts to be repayable by Borrower on demand. Lender
shall be under no obligation to effect such cure, payment or bonding and shall
not, by doing so, be deemed to have assumed any obligation or liability of
Borrower. Any payment made or other action taken by Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
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7.7 Access to Premises. From time to time as requested by Lender, at the
cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
reasonable notice to Borrower, or at any time and without notice to Borrower if
an Event of Default exists or has occurred and is continuing, for the purposes
of inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request in good faith, and (c) Lender or its designee may use during normal
business hours such of Borrower's personnel, equipment, supplies and premises as
may be reasonably necessary for the foregoing and if an Event of Default exists
or has occurred and is continuing for the collection of Receivables and
realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence; Power and Authority. Borrower is a corporation
duly organized and in good standing under the laws of its state of incorporation
and is duly qualified as a foreign corporation and in good standing in all
states or other jurisdictions where the nature and extent of the business
transacted by it or the ownership of assets makes such qualification necessary,
except for those jurisdictions in which the failure to so qualify would not have
a material adverse effect on Borrower's financial condition, results of
operation or business or the rights of Lender in or to any of the Collateral.
The execution, delivery and performance of this Agreement, the other Financing
Agreements and the transactions contemplated hereunder and thereunder (a) are
all within Borrower's corporate powers, (b) have been duly authorized, (c) are
not in contravention of law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its property is bound and (d) will not result in the creation or imposition of,
or require or give rise to any obligation to grant, any lien, security interest,
charge or other encumbrance upon any property of Borrower. This Agreement and
the other Financing Agreements constitute legal, valid and binding obligations
of Borrower enforceable in accordance with their respective terms.
8.2 Name; State of Organization; Chief Executive Office; Collateral
Locations.
(a) The exact legal name of Borrower is as set forth on the
signature page of this Agreement and in the Information Certificate. Borrower
has not, during the past five years, been known by or used any other corporate
or fictitious name or been a party to any merger or consolidation, or acquired
all or substantially all of the assets of any Person, or acquired any of its
property or assets out of the ordinary course of business, except as set forth
in the Information Certificate.
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(b) Borrower is an organization of the type and organized in the
jurisdiction set forth in the Information Certificate. The Information
Certificate accurately sets forth the organizational identification number of
Borrower or accurately states that Borrower has none and accurately sets forth
the federal employer identification number of Borrower.
(c) The chief executive office and mailing address of Borrower
and Borrower's Records concerning Accounts are located only at the address
identified as such in Schedule 8.2 to the Information Certificate and its only
other places of business and the only other locations of Collateral, if any, are
the addresses set forth in Schedule 8.2 to the Information Certificate, subject
to the right of Borrower to establish new locations in accordance with Section
9.2 below. The Information Certificate correctly identifies any of such
locations which are not owned by Borrower and sets forth the owners and/or
operators thereof.
8.3 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be delivered by
Borrower to Lender have been prepared in accordance with GAAP (except as to any
interim financial statements, to the extent such statements are subject to
normal year-end adjustments and do not include any notes) and fairly present the
financial condition and the results of operation of Borrower as at the dates and
for the periods set forth therein. Except as disclosed in any interim financial
statements furnished by Borrower to Lender prior to the date of this Agreement,
there has been no material adverse change in the assets, liabilities, properties
and condition, financial or otherwise, of Borrower, since the date of the most
recent audited financial statements furnished by Borrower to Lender prior to the
date of this Agreement. As of the date hereof, Teva owns 1,462,083 shares of
Capital Stock of Borrower which represents approximately three (3%) percent of
all of the issued and outstanding shares of Capital Stock of Borrower.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to Permitted Liens and the other liens
permitted under Section 9.8 hereof (except that Lender's security interest in
the Real Property of Borrower located in Philadelphia, Pennsylvania shall be a
valid and perfected third priority security interest). Borrower has good and
marketable fee simple title to or valid leasehold interests in all of its Real
Property and good, valid and merchantable title to all of its other properties
and assets subject to no liens, mortgages, pledges, security interests,
encumbrances or charges of any kind, except those granted to Lender and such
others as are specifically listed on Schedule 8.4 to the Information Certificate
or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it. All information in such tax returns, reports and declarations is complete
and accurate in all material respects. Borrower has paid or caused to be paid
all taxes due and payable or claimed due and payable in any assessment received
by it, except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of all accrued and unpaid Federal,
State, county, local, foreign and other taxes whether or not yet due and payable
and whether or not disputed.
54
8.6 Litigation. Except as set forth in Schedule 8.6 to the Information
Certificate, there is no present investigation by any Governmental Authority
pending, or to the best of Borrower's knowledge threatened, against or affecting
Borrower, its assets or business and there is no action, suit, proceeding or
claim by any Person pending, or to the best of Borrower's knowledge threatened,
against Borrower or its assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, which if adversely determined
against Borrower would result in any material adverse change in the assets,
business or prospects of Borrower or would impair the ability of Borrower to
perform its obligations hereunder or under any of the other Financing Agreements
to which it is a party or of Lender to enforce any Obligations or realize upon
any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Borrower is not
in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and Borrower is in compliance in all material respects with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and orders
of any foreign, Federal, State or local Governmental Authority.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrower and any Subsidiary have not generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off its premises (whether or not owned by it) in any
manner which at any time violates any applicable Environmental Law or any
license, permit, certificate, approval or similar authorization thereunder and
the operations of Borrower and any Subsidiary complies in all material respects
with all Environmental Laws and all licenses, permits, certificates, approvals
and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.8 to the Information
Certificate, there has been no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any Governmental Authority or any other
person nor is any pending or to the best of Borrower's knowledge threatened,
with respect to any non-compliance with or violation of the requirements of any
Environmental Law by Borrower and any Subsidiary or the release, spill or
discharge, threatened or actual, of any Hazardous Material or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or safety
matter, which affects Borrower or its business, operations or assets or any
properties at which Borrower has transported, stored or disposed of any
Hazardous Materials.
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(c) Borrower and its Subsidiaries have no material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(d) Borrower and its Subsidiaries have all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrower under any Environmental Law
and all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect.
8.9 Employee Benefits.
(a) Each Plan is in compliance with the applicable provisions of
ERISA, the Code and other federal or state law. Each Plan which is intended to
qualify under Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service and to the best of Borrower's
knowledge, nothing has occurred which would cause the loss of such
qualification. Borrower and its ERISA Affiliates have made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or to the best of Borrower's knowledge,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan. There has been no prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan.
(c)(i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) the current value of each Plan's assets (determined in accordance
with the assumptions used for funding such Plan pursuant to Section 412 of the
Code) are not less than such Plan's liabilities under Section 4001(a)(16) of
ERISA; (iii) Borrower and its ERISA Affiliates have not incurred and do not
reasonably expect to incur, any liability under Title IV of ERISA with respect
to any Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) Borrower and its ERISA Affiliates have not incurred and do not
reasonably expect to incur, any liability (and no event has occurred which, with
the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) Borrower and its ERISA Affiliates have not engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth in Schedule 8.10 to the Information
Certificate, subject to the right of Borrower to establish new accounts in
accordance with Section 5.2 hereof.
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8.11 Intellectual Property. Borrower owns or licenses or otherwise has
the right to use all Intellectual Property necessary for the operation of its
business as presently conducted or proposed to be conducted. As of the date
hereof, Borrower does not have any Intellectual Property registered in the
United States Patent and Trademark Office or any similar office or agency in the
United States, any State thereof, any political subdivision thereof or in any
other country, other than those described in Schedule 8.11 to the Information
Certificate hereto. Borrower has not granted any licenses with respect any
Intellectual Property registered or subject to pending applications in the
United States Patent and Trademark Office or any similar office or agency in the
United States, any State thereof, any political subdivision thereof or in any
other country, other than as set forth in Schedule 8.11 to the Information
Certificate. No event has occurred which permits or would permit after notice or
passage of time or both, the revocation, suspension or termination of such
rights. To the best of Borrower's knowledge, no slogan or other advertising
device, product, process, method, substance or other Intellectual Property or
goods bearing or using any Intellectual Property presently contemplated to be
sold by or employed by Borrower infringes any patent, trademark, servicemark,
tradename, copyright, license or other Intellectual Property owned by any other
Person presently and no claim or litigation is pending or threatened against or
affecting Borrower contesting its right to sell or use any such Intellectual
Property. Schedule 8.11 to the Information Certificate sets forth all of the
agreements or other arrangements of Borrower pursuant to which Borrower has a
license or other right to use any patents, trademarks, logos, designs,
representations or other Intellectual Property owned by another person as in
effect on the date hereof and the dates of the expiration of such agreements or
other arrangements of Borrower as in effect on the date hereof (collectively,
together with such agreements or other arrangements as may be entered into by
Borrower after the date hereof, collectively, the "License Agreements" and
individually, a "License Agreement"). Schedule 8.11 to the Information
Certificate sets forth all of the agreements or other arrangements of Borrower
pursuant to which Borrower has granted a license or other right to use any
patents, trademarks, logos, designs, representations or other Intellectual
Property owned by Borrower as in effect on the date hereof and the dates of the
expiration of such agreements or other arrangements of Borrower as in effect on
the date hereof (collectively, together with such agreements or other
arrangements as may be entered into by Borrower after the date hereof,
collectively, the "Licensor License Agreements" and individually, a "Licensor
License Agreement"). No trademark, servicemark or other Intellectual Property at
any time used by Borrower which is owned by another person, or owned by Borrower
subject to any security interest, lien, collateral assignment, pledge or other
encumbrance in favor of any person other than Lender, is affixed to or used in
the production or sale of any Eligible Inventory, except to the extent permitted
under the term of the License Agreements listed on Schedule 8.11 to the
Information Certificate.
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8.12 Subsidiaries; Affiliates; Capitalization; Solvency.
(a) Borrower does not have any direct or indirect Subsidiaries or
Affiliates and is not engaged in any joint venture or partnership except as set
forth in Schedule 8.12 to the Information Certificate, subject to the right of
Borrower to form or acquire Subsidiaries in accordance with Section 9.10 hereof.
(b) Borrower is the record and beneficial owner of all of the
issued and outstanding shares of Capital Stock of each of the Subsidiaries
listed on Schedule 8.12 to the Information Certificate as being owned by
Borrower and there are no proxies, irrevocable or otherwise, with respect to
such shares and no equity securities of any of the Subsidiaries are or may
become required to be issued by reason of any options, warrants, rights to
subscribe to, calls or commitments of any kind or nature and there are no
contracts, commitments, understandings or arrangements by which any Subsidiary
is or may become bound to issue additional shares of it Capital Stock or
securities convertible into or exchangeable for such shares.
(c) Borrower is Solvent and will continue to be Solvent after the
creation of the Obligations, the security interests of Lender and the other
transaction contemplated hereunder.
8.13 Labor Disputes.
(a) Set forth on Schedule 8.13 to the Information Certificate is
a list (including dates of termination) of all collective bargaining or similar
agreements between or applicable to Borrower and any union, labor organization
or other bargaining agent in respect of the employees of Borrower on the date
hereof.
(b) There is (i) no significant unfair labor practice complaint
pending against Borrower or, to the best of Borrower's knowledge, threatened
against it, before the National Labor Relations Board, and no significant
grievance or significant arbitration proceeding arising out of or under any
collective bargaining agreement is pending on the date hereof against Borrower
or, to best of Borrower's knowledge, threatened against it, and (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against
Borrower or, to the best of Borrower's knowledge, threatened against Borrower.
8.14 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of Borrower
permitted hereunder as in effect on the date hereof, there are no contractual or
consensual restrictions on Borrower or any of its Subsidiaries which prohibit or
otherwise restrict (a) the transfer of cash or other assets (i) between Borrower
and any of its Subsidiaries or (ii) between any Subsidiaries of Borrower or (b)
the ability of Borrower or any of its Subsidiaries to incur Indebtedness or
grant security interests to Lender in the Collateral.
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8.15 Material Contracts. Schedule 8.15 to the Information Certificate
sets forth all Material Contracts to which Borrower is a party or is bound as of
the date hereof. Borrower has delivered true, correct and complete copies of
such Material Contracts to Lender on or before the date hereof. Borrower is not
in breach of or in default under any Material Contract in any material respect
and has not received any notice of the intention of any other party thereto to
terminate any Material Contract.
8.16 Payable Practices. Borrower has not made any material change in the
historical accounts payable practices from those in effect immediately prior to
the date hereof.
8.17 Accuracy and Completeness of Information. All information furnished
by or on behalf of Borrower in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate is true and correct in all material respects on the date as of which
such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to have
a material adverse affect on the business, assets or prospects of Borrower,
which has not been fully and accurately disclosed to Lender in writing prior to
the date hereof.
8.18 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence.
(a) Borrower shall at all times preserve, renew and keep in full
force and effect its corporate existence and rights and franchises with respect
thereto and maintain in full force and effect all permits, licenses, trademarks,
tradenames, approvals, authorizations, leases and contracts necessary to carry
on the business as presently or proposed to be conducted.
(b) Borrower shall not change its name unless each of the
following conditions is satisfied: (i) Lender shall have received not less than
thirty (30) days prior written notice from Borrower of such proposed change in
its corporate name, which notice shall accurately set forth the new name; and
(ii) Lender shall have received a copy of the amendment to the Certificate of
Incorporation of Borrower providing for the name change certified by the
Secretary of State of the jurisdiction of incorporation or organization of
Borrower as soon as it is available.
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(c) Borrower shall not change its chief executive office or its
mailing address or organizational identification number (or if it does not have
one, shall not acquire one) unless Lender shall have received not less than
thirty (30) days' prior written notice from Borrower of such proposed change,
which notice shall set forth such information with respect thereto as Lender may
require and Lender shall have received such agreements as Lender may reasonably
require in connection therewith. Borrower shall not change its type of
organization, jurisdiction of organization or other legal structure.
9.2 New Collateral Locations. Borrower may only open any new location
within the continental United States provided Borrower (a) gives Lender thirty
(30) days prior written notice from Borrower of the intended opening of any such
new location and (b) executes and delivers, or causes to be executed and
delivered, to Lender such agreements, documents, and instruments as Lender may
deem necessary or desirable to protect its interests in the Collateral at such
location.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower shall, and shall cause any Subsidiary to, at all
times, comply in all material respects with all laws, rules, regulations,
licenses, permits, approvals and orders applicable to it and duly observe all
requirements of any foreign, Federal, State or local Governmental Authority,
including ERISA, the Code, the Occupational Safety and Health Act of 1970, as
amended, the Fair Labor Standards Act of 1938, as amended, the Federal Food,
Drug and Cosmetic Act, and all statutes, rules, regulations, orders, permits and
stipulations relating to environmental pollution and employee health and safety,
including all of the Environmental Laws.
(b) Borrower shall give written notice to Lender immediately upon
Borrower's receipt of any notice of, or Borrower's otherwise obtaining knowledge
of, (i) the occurrence of any event involving the release, spill or discharge,
threatened or actual, of any Hazardous Material or (ii) any investigation,
proceeding, complaint, order, directive, claims, citation or notice with respect
to: (A) any non-compliance with or violation of any applicable Environmental Law
by Borrower or (B) the release, spill or discharge, threatened or actual, of any
Hazardous Material other than in the ordinary course of business and other than
as permitted under any applicable Environmental Law. Copies of all environmental
surveys, audits, assessments, feasibility studies and results of remedial
investigations shall be promptly furnished, or caused to be furnished, by
Borrower to Lender. Borrower shall take prompt and appropriate action to respond
to any non-compliance with any of the Environmental Laws and shall regularly
report to Lender on such response.
(c) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is non-compliance, or any condition
which requires any action by or on behalf of Borrower in order to avoid any
material non-compliance, with any Environmental Law, Borrower shall, at Lender's
request and Borrower's expense: (i) cause an independent environmental engineer
acceptable to Lender to conduct such tests of the site where Borrower's
non-compliance or alleged non-compliance with such Environmental Laws has
occurred as to such non-compliance and prepare and deliver to Lender a report as
to such non-compliance setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof and (ii) provide to Lender a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrower's response
thereto or the estimated costs thereof, shall change in any material respect.
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(d) Borrower shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property of
Borrower and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall, and shall cause any
Subsidiary to, duly pay and discharge all taxes, assessments, contributions and
governmental charges upon or against it or its properties or assets, except for
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower or such Subsidiary, as
the case may be, and with respect to which adequate reserves have been set aside
on its books. Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
9.5 Insurance.
(a) Borrower shall, and shall cause any Subsidiary to, at all
times, maintain with financially sound and reputable insurers insurance with
respect to the Collateral against loss or damage and all other insurance of the
kinds and in the amounts customarily insured against or carried by corporations
of established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be satisfactory to Lender
as to form, amount and insurer. Borrower shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if Borrower fails to do so, Lender is authorized, but not required, to obtain
such insurance at the expense of Borrower. All policies shall provide for at
least thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for Borrower in
obtaining, and at any time an Event of Default exists or has occurred and is
continuing, adjusting, settling, amending and canceling such insurance. Borrower
shall cause Lender to be named as a loss payee and an additional insured (but
without any liability for any premiums) under such insurance policies and
Borrower shall obtain non-contributory lender's loss payable endorsements to all
insurance policies in form and substance satisfactory to Lender. Such lender's
loss payable endorsements shall specify that the proceeds of such insurance
shall be payable to Lender as its interests may appear and further specify that
Lender shall be paid regardless of any act or omission by Borrower or any of its
Affiliates.
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(b) At its option, Lender may apply any insurance proceeds
received by Lender at any time to the cost of repairs or replacement of
Collateral and/or to payment of the Obligations, whether or not then due, in any
order and in such manner as Lender may determine or hold such proceeds as cash
collateral for the Obligations, except that notwithstanding anything to the
contrary contained herein, if any Equipment is physically damaged or destroyed,
upon the written request of Borrower, Lender shall release the net cash proceeds
from insurance received by Lender pursuant to this Section 9.5 to Borrower as a
result of such damage or destruction to the extent necessary for the repair,
refurbishing or replacement of such Equipment, provided, that, each of the
following conditions is satisfied: (i) no Event of Default shall exist or have
occurred and be continuing at the time immediately before or after giving effect
to such release, (ii) such proceeds shall be used solely to repair, refurbish or
replace the property so damaged or destroyed (free and clear of any security
interests, liens, claims or other encumbrances), (iii) the repair, refurbishing
or replacement of the property so damaged or destroyed shall be commenced as
soon as reasonably practicable and shall be diligently pursued to satisfactory
completion, (iv) the proceeds shall be held by Lender as cash collateral for the
Obligations and shall be disbursed from such cash collateral from time to time
as needed and/or, at Lender's option, released by Lender directly to the
contractor, subcontractor, materialmen, laborers, engineers, architects and
other Persons rendering services or materials to repair, refurbish or replace
the property so damaged or destroyed, (v) the amount of the insurance proceeds
and Borrower's unrestricted cash available for such purposes are sufficient in
Lender's reasonable determination, to allow Borrower to effect such repair,
refurbishing or replacement in a satisfactory manner, (vi) the repair,
refurbishing or replacement to which the proceeds are applied shall cause the
Equipment so damaged or destroyed to be of at least equal value and
substantially the same character as prior to such damage or destruction, (vii)
the casualty shall have resulted in payment of $100,000 in insurance proceeds or
less, and (viii) such repair, refurbishing or replacement can, in the good faith
estimate of Lender, be completed prior to the end of the then current term of
this Agreement. Upon completion of the work and payment in full therefor, or
upon the failure to commence, or diligently to continue the work or the
replacement of the Collateral, Lender may, at Lender's option and after prior
notice to Borrower, either apply the amount of any such proceeds then or
thereafter in the possession of Lender to the payment of the Obligations or hold
such proceeds as cash collateral for the Obligations, provided, that, nothing
contained herein shall limit the right of Lender to apply any or all of such
proceeds to the Obligations at any time an Event of Default shall exist or have
occurred and be continuing.
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9.6 Financial Statements and Other Information.
(a) Borrower shall, and shall cause any Subsidiary to, keep
proper books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business of
Borrower and its Subsidiaries in accordance with GAAP. Borrower shall promptly
furnish to Lender all such financial and other information as Lender shall
reasonably request relating to the Collateral and the assets, business and
operations of Borrower, and to notify the auditors and accountants of Borrower
that Lender is authorized to obtain such information directly from them. Without
limiting the foregoing, Borrower shall furnish or cause to be furnished to
Lender, the following: (i) within thirty (30) days after the end of each fiscal
month, monthly unaudited consolidated financial statements and unaudited
consolidating financial statements (including in each case balance sheets,
statements of income and loss, statements of cash flow, and statements of
shareholders' equity), all in reasonable detail, fairly presenting the financial
position and the results of the operations of Borrower and its Subsidiaries as
of the end of and through such fiscal month, certified to be correct by the
chief financial officer of Borrower, subject to normal year-end adjustments and
accompanied by a compliance certificate substantially in the form of Exhibit B
hereto, along with a schedule in form reasonably satisfactory to Lender of the
calculations used in determining, as of the end of such month, whether Borrower
was in compliance with the covenants set forth in Sections 9.17, 9.18 and 9.19
of this Agreement for such month and (ii) within ninety (90) days after the end
of each fiscal year, audited consolidated financial statements and unaudited
consolidating financial statements of Borrower and its Subsidiaries (including
in each case balance sheets, statements of income and loss, statements of cash
flow and statements of shareholders' equity), and the accompanying notes
thereto, all in reasonable detail, fairly presenting the financial position and
the results of the operations of Borrower and its Subsidiaries as of the end of
and for such fiscal year, together with the unqualified opinion of independent
certified public accountants, which accountants shall be an independent
accounting firm selected by Borrower and reasonably acceptable to Lender, that
such financial statements have been prepared in accordance with GAAP, and
present fairly the results of operations and financial condition of Borrower and
its Subsidiaries as of the end of and for the fiscal year then ended.
(b) Borrower shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in Borrower's
business, properties, assets, goodwill or condition, financial or otherwise,
(ii) any Material Contract of Borrower being terminated or amended or any new
Material Contract entered into (in which event Borrower shall provide Lender
with a copy of such Material Contract), (iii) any order, judgment or decree in
excess of $100,000 shall have been entered against Borrower or any of its
properties or assets, (iv) any notification of violation of laws or regulations
received by Borrower, (v) any ERISA Event, (vi) any action, suit, proceeding or
claim by or against Borrower relating to (A) any patents, patent rights, patent
applications or any approved or pending new drug applications or ANDAs or (B)
products liability and (vii) the occurrence of any Default or Event of Default.
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(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrower
sends to its stockholders generally and copies of all reports and registration
statements which Borrower files with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(d) Borrower shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to Borrower to any court
or other Governmental Authority, to any Affiliate of Lender or to any
participant or assignee or prospective participant or assignee. Borrower hereby
irrevocably authorizes and directs all accountants or auditors to deliver to
Lender, at Borrower's expense, copies of the financial statements of Borrower
and any reports or management letters prepared by such accountants or auditors
on behalf of Borrower and to disclose to Lender such information as they may
have regarding the business of Borrower. Any documents, schedules, invoices or
other papers delivered to Lender may be destroyed or otherwise disposed of by
Lender one (1) year after the same are delivered to Lender, except as otherwise
designated by Borrower to Lender in writing.
(e) Unless all of the Indebtedness evidenced by the Existing Teva
Loan Agreements (the "Teva Debt") has theretofore been forgiven or converted
into shares of Capital Stock of Borrower, Borrower shall deliver to Lender (i)
on or before July 31, 2003, a report (in reasonable detail) describing the
status of the Teva Debt and Borrower's plan of action with respect to the
pending maturity of the Teva Debt, (ii) on or before October 31, 2003, either
(A) a commitment letter, in form and substance satisfactory to Lender, for
subordinated Indebtedness to be used to repay all amounts owing in connection
with the Teva Debt, which Indebtedness (including the terms of subordination)
shall be in form and substance satisfactory to Lender, or (B) evidence
satisfactory to Lender that (1) Borrower will have sufficient financial
resources (as determined by Lender in good faith) to repay all of the Teva Debt
at maturity or (2) Borrower will be able to convert all of the Teva Debt into
shares of Capital Stock of Borrower (as determined by Lender in good faith) at
maturity, (iii) on or before December 15, 2003, evidence satisfactory to Lender
that either (A) all of the Teva Debt has been either forgiven, converted into
shares of Capital Stock of Borrower or repaid with the proceeds of subordinated
Indebtedness described in clause (ii) above, or (B) (1) Borrower will have
sufficient financial resources (as determined by Lender in good faith) to repay
the Teva Debt at maturity or (2) Borrower will be able to convert all of the
Teva Debt into shares of Capital Stock of Borrower (as determined by Lender in
good faith) at maturity, and (iv) promptly upon Lender's request, such other
information with respect to the Teva Debt as Lender may from time to time
request.
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9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, and shall not permit any Subsidiary to (and Lender does not authorize
Borrower to), directly or indirectly,
(a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it; or
(b) sell, issue, assign, lease, license, transfer, abandon or
otherwise dispose of any Capital Stock or Indebtedness to any other Person or
any of its assets to any other Person, except for (i) sales of Inventory in the
ordinary course of business, (ii) the disposition of worn-out or obsolete
Equipment so long as (A) any proceeds are paid to Lender and (B) such sales do
not involve Equipment having an aggregate fair market value in excess of
$250,000 for all such Equipment disposed of in any fiscal year of Borrower,
(iii) exclusive and non-exclusive licenses of Intellectual Property granted by
Borrower to Persons in the ordinary course of business; provided, that, in the
case of each exclusive license granted by Borrower to any Person, (A) Lender
shall have received not less than ten (10) Business Days prior written notice of
such license, which notice shall specify the name of the licensee and the terms
of such License, (B) Lender shall have received true, correct and complete
copies of all agreements, documents and instruments evidencing or otherwise
related to such license and (C) no Default or Event of Default shall exist or
have occurred and be continuing, and (iv) the issuance and sale by Borrower of
Capital Stock of Borrower after the date hereof; provided, that, (A) Lender
shall have received not less than three (3) Business Days prior written notice
of such issuance and sale by Borrower, which notice shall specify the parties to
whom such shares are to be sold, the terms of such sale, the total amount which
it is anticipated will be realized from the issuance and sale of such stock and
the net cash proceeds which it is anticipated will be received by Borrower from
such sale, (B) Borrower shall not be required to pay any cash dividends or
repurchase or redeem such Capital Stock or make any other payments in respect
thereof, (C) the terms of such Capital Stock, and the terms and conditions of
the purchase and sale thereof, shall not include any terms that include any
limitation on the right of Borrower to request or receive Loans or Letter of
Credit Accommodations or the right of Borrower to amend or modify any of the
terms and conditions of this Agreement or any of the other Financing Agreements
or otherwise in any way relate to or affect the arrangements of Borrower with
Lender, (D) except as Lender may otherwise agree in writing, all of the proceeds
from such sale and issuance shall be paid to Lender for application to the
Revolving Loans (but Borrower shall be entitled to reborrow the principal amount
of the Revolving Loans so repaid subject to the terms of this Agreement) and (E)
Borrower shall not issue or sell any Capital Stock of Borrower to Teva after the
date hereof unless and until all of the Teva Debt shall have been either fully
and finally repaid or converted into shares of Capital Stock of Borrower;
(c) wind up, liquidate or dissolve; or
(d) agree to do any of the foregoing.
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9.8 Encumbrances. Borrower shall not, and shall not permit any Subsidiary
to, create, incur, assume, suffer or permit to exist any security interest,
mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on
any of its assets or properties, including the Collateral, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any security interest or lien with respect to any such assets
or properties, except:
(a) the security interests and liens of Lender;
(b) liens securing the payment of taxes, either not yet overdue
or the validity or amount of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower or such
Subsidiary, as the case may be and with respect to which adequate reserves have
been set aside on its books;
(c) non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of Borrower's or such
Subsidiary's business to the extent: (i) such liens secure Indebtedness which is
not overdue or (ii) such liens secure Indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower or such
Subsidiary, in each case prior to the commencement of foreclosure or other
similar proceedings and with respect to which adequate reserves have been set
aside on its books;
(d) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of Real Property which do not interfere in any
material respect with the use of such Real Property or ordinary conduct of the
business of Borrower or such Subsidiary as presently conducted thereon or
materially impair the value of the Real Property which may be subject thereto;
(e) purchase money security interests in Equipment (including
Capital Leases) and purchase money mortgages on Real Property to secure
Indebtedness permitted under Section 9.9(b) hereof;
(f) the liens of Cathay Bank on the Real Property and fixtures
located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ to secure the Indebtedness permitted under Section
9.9(e) hereof;
(g) the liens of the Municipal Lenders on the Real Property and
fixtures located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ to secure the
Indebtedness permitted under Section 9.9(f) hereof;
(h) the liens of Teva on the Real Property and fixtures located
at ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ to secure the Indebtedness
permitted under Sections 9.9(g) and 9.9(h) hereof;
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(i) the replacement of any lien permitted by Section 9.8(f), (g)
or (h) hereof on the same assets subject to the lien so replaced without any
increase in the amount of the Indebtedness secured thereby; provided, that, any
such replacement lien shall only secure the Indebtedness permitted under Section
9.9(k) hereof that refinances the Refinanced Indebtedness that was secured by
the lien so replaced; and
(j) the other security interests and liens set forth on Schedule
8.4 to the Information Certificate.
9.9 Indebtedness. Borrower shall not, and shall not permit any Subsidiary
to, incur, create, assume, become or be liable in any manner with respect to,
suffer or permit to exist, any Indebtedness or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the performance,
dividends or other obligations of any Person, except:
(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases)
arising after the date hereof to the extent secured by purchase money security
interests in Equipment (including Capital Leases) and purchase money mortgages
on Real Property not to exceed $1,500,000 in the aggregate at any time
outstanding so long as such security interests and mortgages do not apply to any
property of Borrower or any Subsidiary other than the Equipment or Real Property
so acquired, and the Indebtedness secured thereby does not exceed the cost of
the Equipment or Real Property so acquired, as the case may be;
(c) guarantees by any Subsidiaries of Borrower of the Obligations
in favor of Lender;
(d) Indebtedness of Borrower under interest swap agreements,
interest rate cap agreements, interest rate collar agreements, interest rate
exchange agreements and similar contractual agreements entered into for the
purpose of protecting a Person against fluctuations in interest rates; provided,
that, such arrangements are with banks or other financial institutions that have
combined capital and surplus and undivided profits of not less than $250,000,000
and are not for speculative purposes and such Indebtedness shall be unsecured;
(e) Indebtedness of Borrower to Cathay Bank evidenced by the
Existing Cathay Bank Agreements, provided, that:
(i) the principal amount of such Indebtedness shall not in
the aggregate exceed $5,691,578, less the aggregate amount of all reductions,
repayments or repurchases, optional or mandatory, of principal in respect
thereof, plus interest thereon at the rate provided for in the Existing Cathay
Bank Agreements (as in effect on the date hereof);
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(ii) Borrower shall not, directly or indirectly, make any
payments in respect of such Indebtedness, except (A) Borrower may make regularly
scheduled payments of principal and interest in respect of such Indebtedness in
accordance with the terms of such Indebtedness as in effect on the date hereof
and (B) Borrower may repay such Indebtedness in full with the proceeds of
Indebtedness permitted under Section 9.9(k) hereof;
(iii) such Indebtedness shall not be secured by any assets
of Borrower other than the Real Property and fixtures located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇;
(iv) Borrower shall not, directly or indirectly (A) amend,
modify, alter or change any terms of such Indebtedness or any agreement,
document or instrument entered into in connection therewith in any manner
adverse to the interests of Borrower or Lender, or (B) redeem, retire, defease,
purchase or otherwise acquire such Indebtedness or set aside or otherwise
deposit or invest any sums for such purpose; and
(v) Borrower shall furnish to Lender all material notices
and demands in connection with such Indebtedness either received by Borrower or
on its behalf, promptly after receipt thereof, or sent by Borrower or on its
behalf to the holders of such Indebtedness or their representatives or agents,
concurrently with the sending thereof, as the case may be.
(f) Indebtedness of Borrower to the Municipal Lenders evidenced
by the Existing Municipal Lender Agreements, provided, that:
(i) the principal amount of such Indebtedness shall not in
the aggregate exceed $1,235,075, less the aggregate amount of all repayments or
repurchases, optional or mandatory, of principal in respect thereof, plus
interest thereon at the rate provided for in such Existing Municipal Lender
Agreements (as in effect on the date hereof);
(ii) Borrower shall not, directly or indirectly, make any
payments in respect of such Indebtedness, except (A) Borrower may make regularly
scheduled payments of principal and interest on an unaccelerated basis in
respect of such Indebtedness in accordance with the terms of such Indebtedness
as in effect on the date hereof and (B) Borrower may repay such Indebtedness in
full with the proceeds of Indebtedness permitted under Section 9.9(k) hereof;
(iii) such Indebtedness shall not be secured by any assets
of Borrower other than (A) the Real Property and fixtures of Borrower located at
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ and (B) certificates of deposit
issued by Mellon Bank in the aggregate amount not to exceed $472,188;
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(iv) Borrower shall not, directly or indirectly (A) amend,
modify, alter or change any terms of such Indebtedness or any agreement,
document or instrument entered into in connection therewith in any manner
adverse to the interests of Borrower or Lender, or (B) redeem, retire, defease,
purchase or otherwise acquire such Indebtedness or set aside or otherwise
deposit or invest any sums for such purpose; and
(v) Borrower shall furnish to Lender all material notices
and demands in connection with such Indebtedness either received by Borrower or
on its behalf, promptly after receipt thereof, or sent by Borrower or on its
behalf to the holders of such Indebtedness or their representatives or agents,
concurrently with the sending thereof, as the case may be;
(g) Indebtedness of Borrower to Teva evidenced by the Existing
Teva Loan Agreements, provided, that:
(i) the principal amount of such Indebtedness shall not in
the aggregate exceed $22,000,000 (plus accrued and unpaid interest thereon of
approximately $2,200,000 as of the date hereof), less the aggregate amount of
all reductions, repayments or repurchases, optional or mandatory, of principal
in respect thereof, plus interest thereon at the rate provided for in the
Existing Teva Loan Agreements (as in effect on the date hereof);
(ii) Borrower shall not, directly or indirectly, make any
payments in respect of such Indebtedness except (A) on January 15, 2004 Borrower
may make payments of principal and interest in respect of such Indebtedness in
accordance with the terms of such Indebtedness as in effect on the date hereof;
provided, that, payments in respect of such Indebtedness shall be made in the
form of shares of Capital Stock of Borrower to the fullest extent allowed by the
terms of such Indebtedness as in effect on the date hereof, (B) Borrower may
repay such Indebtedness in full with the proceeds of Indebtedness permitted
under Section 9.9(k) hereof and (C) Borrower may, upon not less than five days
prior written notice to Lender, convert such Indebtedness into shares of Capital
Stock of Borrower;
(iii) such Indebtedness shall not be secured by any assets
of Borrower other than the Real Property and fixtures of Borrower located at
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇;
(iv) Borrower shall not, directly or indirectly (A) amend,
modify, alter or change any terms of such Indebtedness or any agreement,
document or instrument entered into in connection therewith in any manner
adverse to the interests of Borrower or Lender, or (B) redeem, retire, defease,
purchase or otherwise acquire such Indebtedness or set aside or otherwise
deposit or invest any sums for such purpose; and
(v) Borrower shall furnish to Lender all material notices
and demands in connection with such Indebtedness either received by Borrower or
on its behalf, promptly after receipt thereof, or sent by Borrower or on its
behalf to the holders of such Indebtedness or their representatives or agents,
concurrently with the sending thereof, as the case may be;
69
(h) Indebtedness of Borrower arising after the date hereof to
Teva (other than Indebtedness otherwise permitted under this Section 9.9,
provided, that, each of the following conditions is satisfied as determined by
Lender: (i) such Indebtedness shall not be secured by any assets of Borrower
other than the Real Property and fixtures located at ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, (ii) the
aggregate principal amount of such Indebtedness shall not exceed $16,000,000,
(iii) Borrower shall not be required to make, and shall not make, any payments
of principal, interest and fees in respect of such Indebtedness on or prior to
February 1, 2006, (iv) such Indebtedness shall contain representations,
warranties, covenants and defaults that are no more onerous to Borrower and no
more adverse to the interests of Borrower or Lender than those contained in the
Existing Teva Loan Agreement (as in effect on the date hereof) and shall
otherwise be on terms and conditions satisfactory to Lender as determined by
Lender in good faith, (v) Lender shall have received not less than ten (10) days
prior written notice of the intention of Borrower to incur such Indebtedness,
which notice shall set forth in reasonable detail satisfactory to Lender the
amount of such Indebtedness, the interest rate, the schedule of repayments and
maturity date with respect thereto and such other information as Lender may
reasonably request with respect thereto, Lender shall have received true,
correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness, (vi) except as Lender may
otherwise agree in writing, all of the proceeds of the loans or other
accommodations giving rise to such Indebtedness shall be paid to Lender for
application to the Revolving Loans (but Borrower shall be entitled to reborrow
the principal amount of the Revolving Loans so repaid subject to the terms of
this Agreement), (vii) Borrower shall not, directly or indirectly, (A) amend,
modify, alter or change the terms of such Indebtedness or any agreement,
document or instrument related thereto in any manner adverse to the interests of
Borrower or Lender, or (B) redeem, retire, defease, purchase or otherwise
acquire such Indebtedness (except pursuant to regularly scheduled payments
permitted herein), or set aside or otherwise deposit or invest any sums for such
purpose, (viii) Borrower shall furnish to Lender all material notices or demands
in connection with such Indebtedness either received by Borrower or on its
behalf promptly after the receipt thereof, or sent by Borrower or on its behalf
concurrently with the sending thereof, as the case may be, and (ix) to the
extent such Indebtedness is secured by any of the Real Property and fixtures
located at ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, Lender shall have
received a mortgagee waiver, license and agreement, in form and substance
satisfactory to Lender, duly authorized, executed and delivered by Teva with
respect to such Real Property and fixtures;
(i) unsecured Indebtedness of Borrower arising after the date
hereof to any third person (other than Indebtedness otherwise permitted under
this Section 9.9), provided, that, each of the following conditions is satisfied
as determined by Lender: (i) such Indebtedness shall be on terms and conditions
acceptable to Lender and shall be subject and subordinate in right of payment to
the right of Lender to receive the prior indefeasible payment and satisfaction
in full payment of all of the Obligations pursuant to the terms of an
intercreditor agreement between Lender and such third party, in form and
substance satisfactory to Lender, (ii) Lender shall have received not less than
70
ten (10) days prior written notice of the intention of Borrower to incur such
Indebtedness, which notice shall set forth in reasonable detail satisfactory to
Lender the amount of such Indebtedness, the person or persons to whom such
Indebtedness will be owed, the interest rate, the schedule of repayments and
maturity date with respect thereto and such other information as Lender may
reasonably request with respect thereto, (iii) Lender shall have received true,
correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness, (iv) except as Lender may
otherwise agree in writing, all of the proceeds of the loans or other
accommodations giving rise to such Indebtedness shall be paid to Lender for
application to the Obligations in such order and manner as Lender may determine,
(v) on and before the date of incurring such Indebtedness and after giving
effect thereto, no Default or Event of Default shall exist or have occurred,
(vi) Borrower shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such Indebtedness or any agreement, document or instrument
related thereto, except, that, Borrower may, after prior written notice to
Lender, amend, modify, alter or change the terms thereof so as to extend the
maturity thereof, or defer the timing of any payments in respect thereof, or to
forgive or cancel any portion of such Indebtedness (other than pursuant to
payments thereof), or to reduce the interest rate or any fees in connection
therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such
Indebtedness (except pursuant to regularly scheduled payments permitted herein),
or set aside or otherwise deposit or invest any sums for such purpose, and (vii)
Borrower shall furnish to Lender all notices or demands in connection with such
Indebtedness either received by Borrower or on its behalf promptly after the
receipt thereof, or sent by Borrower or on its behalf concurrently with the
sending thereof, as the case may be;
(j) the Indebtedness set forth on Schedule 9.9 to the Information
Certificate; provided, that, (i) Borrower may only make regularly scheduled
payments of principal and interest in respect of such Indebtedness in accordance
with the terms of the agreement or instrument evidencing or giving rise to such
Indebtedness as in effect on the date hereof, (ii) Borrower shall not, directly
or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness
or any agreement, document or instrument related thereto as in effect on the
date hereof except, that, Borrower may, after prior written notice to Lender,
amend, modify, alter or change the terms thereof so as to extend the maturity
thereof, or defer the timing of any payments in respect thereof, or to forgive
or cancel any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith, or
(B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or
set aside or otherwise deposit or invest any sums for such purpose, and (iii)
Borrower shall furnish to Lender all notices or demands in connection with such
Indebtedness either received by Borrower or on its behalf, promptly after the
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be; and
(k) Indebtedness of Borrower which refinances the Indebtedness
permitted under Sections 9.9(e), (f), (g) or (h) hereof (the "Refinanced
Indebtedness"), provided, that, each of the following conditions are satisfied
as determined by Lender: (i) the aggregate principal amount of such Indebtedness
shall not exceed the outstanding principal amount of the Refinanced Indebtedness
so refinanced, (ii) the terms and conditions of such Indebtedness shall not be
more restrictive or onerous than those contained in the agreements relating to
the Refinanced Indebtedness so refinanced (as in effect on the date hereof),
(iii) Lender shall have received not less than ten (10) days prior written
notice of the intention of Borrower to incur such Indebtedness, which notice
shall set forth in reasonable detail satisfactory to Lender the amount of such
Indebtedness, the person or persons to whom such Indebtedness will be owed, the
interest rate, the schedule of repayments and maturity date with respect thereto
and such other information as Lender may request with respect thereto, (iv)
71
Lender shall have received true, correct and complete copies of all agreements,
documents and instruments evidencing or otherwise related to such Indebtedness,
(v) all of the net proceeds of the loans or other accommodations giving rise to
such Indebtedness remaining after the repayment of the Refinanced Indebtedness
shall be paid to Agent for application to the Obligations in such order as Agent
may determine, (vi) Borrower shall not, directly or indirectly, amend, modify,
alter or change the terms of such Indebtedness or any agreement, document or
instrument related thereto in any manner adverse to the interests of Borrower or
Lender, and (vii) Borrower shall furnish to Lender all material notices or
demands in connection with such Indebtedness either received by Borrower or on
its behalf promptly after the receipt thereof, or sent by Borrower or on its
behalf concurrently with the sending thereof, as the case may be.
9.10 Loans, Investments, Etc. Borrower shall not, and shall not permit
any Subsidiary to, directly or indirectly, make, or suffer or permit to exist,
any loans or advance money or property to any person, or any investment in (by
capital contribution, dividend or otherwise) or purchase or repurchase the
Capital Stock or Indebtedness or all or a substantial part of the assets or
property of any person, or form or acquire any Subsidiaries, or agree to do any
of the foregoing, except:
(a) the endorsement of instruments for collection or deposit in
the ordinary course of business;
(b) investments in cash or Cash Equivalents, provided, that, the
terms and conditions of Section 5.2 hereof shall have been satisfied with
respect to the deposit account or investment account in which such cash or Cash
Equivalents are held;
(c) the existing equity investments of Borrower as of the date
hereof in its Subsidiaries, provided, that, Borrower shall have no obligation to
make any other investment in, or loans to, or other payments in respect of, any
such Subsidiaries;
(d) stock or obligations issued to Borrower by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing
to Borrower in connection with the insolvency, bankruptcy, receivership or
reorganization of such Person or a composition or readjustment of the debts of
such Person; provided, that, the original of any such stock or instrument
evidencing such obligations shall be promptly delivered to Lender, upon Lender's
request, together with such stock power, assignment or endorsement by Borrower
as Lender may request;
72
(e) obligations of account debtors to Borrower arising from
Accounts which are past due evidenced by a promissory note made by such account
debtor payable to Borrower; provided, that, promptly upon the receipt of the
original of any such promissory note by Borrower, such promissory note shall be
endorsed to the order of Lender by Borrower and promptly delivered to Lender as
so endorsed;
(f) the loans and advances set forth on Schedule 9.10 to the
Information Certificate; provided, that, as to such loans and advances, (i)
Borrower shall not, directly or indirectly, amend, modify, alter or change the
terms of such loans and advances or any agreement, document or instrument
related thereto and (ii) Borrower shall furnish to Lender all notices or demands
in connection with such loans and advances either received by Borrower or on its
behalf, promptly after the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
Capital Stock of Borrower or such Subsidiary now or hereafter outstanding, or
set aside or otherwise deposit or invest any sums for such purpose, or redeem,
retire, defease, purchase or otherwise acquire any shares of any class of
Capital Stock (or set aside or otherwise deposit or invest any sums for such
purpose) for any consideration or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing, except (a) in any case in the form
of shares of Capital Stock consisting of common stock and (b) any Subsidiary of
Borrower may pay any dividends to Borrower.
9.12 Transactions with Affiliates. Borrower shall not, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director, agent or other person
affiliated with Borrower, except in the ordinary course of and pursuant to the
reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to the Borrower than Borrower would obtain in a
comparable arm's length transaction with an unaffiliated person or (b) make any
payments of management, consulting or other fees for management or similar
services, or of any Indebtedness owing to any officer, employee, shareholder,
director or other Affiliate of Borrower except reasonable compensation to
officers, employees and directors for services rendered to Borrower in the
ordinary course of business.
9.13 Compliance with ERISA. Borrower shall and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan (other than a Multiemployer Plan) in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other Federal and State law; (b) cause each Plan which is qualified
under Section 401(a) of the Code to maintain such qualification; (c) not
terminate any of such Plans so as to incur any liability to the Pension Benefit
Guaranty Corporation; (d) not allow or suffer to exist any prohibited
transaction involving any of such Plans or any trust created thereunder which
would subject Borrower or such ERISA Affiliate to a tax or penalty or other
liability on prohibited transactions imposed under Section 4975 of the Code or
ERISA; (e) make all required contributions to any Plan which it is obligated to
pay under Section 302 of ERISA, Section 412 of the Code or the terms of such
Plan; (f) not allow or suffer to exist any accumulated funding deficiency,
whether or not waived, with respect to any such Plan; or (g) not allow or suffer
to exist any occurrence of a reportable event or any other event or condition
which presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any such Plan that is a single employer plan, which termination
could result in any liability to the Pension Benefit Guaranty Corporation.
73
9.14 End of Fiscal Years; Fiscal Quarters. Borrower shall, for financial
reporting purposes, cause its, and each of its Subsidiaries' (a) fiscal years to
end on December 31 of each year and (b) fiscal quarters to end on March 31, June
30, September 30 and December 31 of each year.
9.15 Change in Business. Borrower shall not engage in any business other
than the business of Borrower on the date hereof and any business reasonably
related, ancillary or complimentary to the business in which Borrower is engaged
on the date hereof.
9.16 Limitation of Restrictions Affecting Subsidiaries. Borrower shall
not, directly, or indirectly, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or limits the ability of any
Subsidiary of Borrower to (a) pay dividends or make other distributions or pay
any Indebtedness owed to Borrower or any Subsidiary of Borrower; (b) make loans
or advances to Borrower or any Subsidiary of Borrower, (c) transfer any of its
properties or assets to Borrower or any Subsidiary of Borrower; or (d) create,
incur, assume or suffer to exist any lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, other than encumbrances and
restrictions arising under (i) applicable law, (ii) this Agreement, (iii)
customary provisions restricting subletting or assignment of any lease governing
a leasehold interest of Borrower or any of its Subsidiaries, (iv) customary
restrictions on dispositions of real property interests found in reciprocal
easement agreements of Borrower or its Subsidiary, (v) any agreement relating to
permitted Indebtedness incurred by a Subsidiary of Borrower prior to the date on
which such Subsidiary was acquired by Borrower and outstanding on such
acquisition date, and (vi) the extension or continuation of contractual
obligations in existence on the date hereof; provided, that, any such
encumbrances or restrictions contained in such extension or continuation are no
less favorable to Lender than those encumbrances and restrictions under or
pursuant to the contractual obligations so extended or continued.
9.17 Adjusted Tangible Net Worth. Borrower shall, on the last day of each
month included in any period set forth below, maintain Adjusted Tangible Net
Worth of not less than the amount set forth below opposite such period:
74
--------------------------------------------------------------------------------
Period Minimum Adjusted Tangible Net Worth
------ -----------------------------------
--------------------------------------------------------------------------------
10/1/02 - 3/31/03 $2,500,000
--------------------------------------------------------------------------------
4/1/03 - 6/30/03 $10,000,000
--------------------------------------------------------------------------------
7/1/03 - 9/30/03 $14,000,000
--------------------------------------------------------------------------------
10/1/03 and thereafter $17,500,000
--------------------------------------------------------------------------------
9.18 Minimum EBITDA. Borrower shall not, for any period set forth below
(each, a "Test Period") permit EBITDA of Borrower to be less than the amount set
forth below opposite such Test Period; provided, that, if the average daily
Adjusted Excess Availability for the thirty (30) day period immediately
preceding the last day of such Test Period was equal to or greater than the
Specified Amount, then Borrower shall not be required to comply with the terms
of this Section 9.18 for such Test Period:
--------------------------------------------------------------------------------
Period Minimum EBITDA
------ --------------
--------------------------------------------------------------------------------
10/1/02 - 12/31/02 $(6,500,000)
--------------------------------------------------------------------------------
1/1/03 - 3/31/03 $(5,300,000)
--------------------------------------------------------------------------------
1/1/03 - 6/30/03 $(8,100,000)
--------------------------------------------------------------------------------
1/1/03 - 9/30/03 $(4,100,000)
--------------------------------------------------------------------------------
1/1/03 - 12/31/03 $(800,000)
--------------------------------------------------------------------------------
4/1/03 - 3/31/04 $1,500,000
--------------------------------------------------------------------------------
7/1/03 - 6/30/04 $2,000,000
--------------------------------------------------------------------------------
10/1/03 - 9/30/04 $2,000,000
--------------------------------------------------------------------------------
1/1/04 - 12/31/04 $2,000,000
--------------------------------------------------------------------------------
4/1/04 - 3/31/05 $2,000,000
--------------------------------------------------------------------------------
7/1/04 - 6/30/05 $2,000,000
--------------------------------------------------------------------------------
Each twelve-month period ending on the $2,000,000
last day of each fiscal quarter thereafter
--------------------------------------------------------------------------------
9.19 Capital Expenditures. Borrower shall not, directly or indirectly, in
the aggregate make Capital Expenditures during any fiscal year in an amount in
excess of $8,000,000, as such amount may be increased by fifty (50%) percent of
the amount of cash equity contributions made to Borrower after the date hereof
during such year for the purpose of funding capital expenditures (and not for
any other purpose).
75
9.20 License Agreements.
(a) Borrower shall (i) promptly and faithfully observe and
perform all of the material terms, covenants, conditions and provisions of the
material License Agreements to be observed and performed by it, at the times set
forth therein, if any, (ii) not do, permit, suffer or refrain from doing
anything that could reasonably be expected to result in a default under or
breach of any of the terms of any material License Agreement, (iii) not cancel,
surrender, modify, amend, waive or release any material License Agreement in any
material respect or any term, provision or right of the licensee thereunder in
any material respect, or consent to or permit to occur any of the foregoing;
except, that, subject to Section 9.20(b) below, Borrower may amend, wave,
cancel, surrender or release any material License Agreement in the ordinary
course of the business of Borrower; provided, that, Borrower shall give Lender
not less than thirty (30) days prior written notice of its intention to so
cancel, surrender and release any such material License Agreement, (iv) give
Lender prompt written notice of any material License Agreement entered into by
Borrower after the date hereof, together with a true, correct and complete copy
thereof and such other information with respect thereto as Lender may request,
(v) give Lender prompt written notice of any material breach of any obligation,
or any default, by any party under any material License Agreement, and deliver
to Lender (promptly upon the receipt thereof by Borrower in the case of a notice
to Borrower, and concurrently with the sending thereof in the case of a notice
from Borrower) a copy of each notice of default and every other notice and other
communication received or delivered by Borrower in connection with any material
License Agreement which relates to the right of Borrower to continue to use the
property subject to such License Agreement, and (vi) furnish to Lender, promptly
upon the request of Lender, such information and evidence as Lender may require
from time to time concerning the observance, performance and compliance by
Borrower or the other party or parties thereto with the terms, covenants or
provisions of any material License Agreement.
(b) Borrower will either exercise any option to renew or extend
the term of each material License Agreement in such manner as will cause the
term of such material License Agreement to be effectively renewed or extended
for the period provided by such option and give prompt written notice thereof to
Lender or give Lender prior written notice that Borrower does not intend to
renew or extend the term of any such material License Agreement or that the term
thereof shall otherwise be expiring, not less than thirty (30) days prior to the
date of any such non-renewal or expiration. In the event of the failure of
Borrower to extend or renew any material License Agreement, Lender shall have,
and is hereby granted, the irrevocable right and authority, at its option, to
renew or extend the term of such material License Agreement, whether in its own
name and behalf, or in the name and behalf of a designee or nominee of Lender or
in the name and behalf of Borrower, as Lender shall determine at any time that
an Event of Default shall exist or have occurred and be continuing. Lender may,
but shall not be required to, perform any or all of such obligations of Borrower
under any of the License Agreements, including, but not limited to, the payment
of any or all sums due from Borrower thereunder. Any sums so paid by Lender
shall constitute part of the Obligations.
76
(c) Borrower shall (i) promptly and faithfully observe and
perform all of the material terms, covenants, conditions and provisions of the
material Licensor License Agreements to be observed and performed by it, at the
times set forth therein, if any, (ii) not do, permit, suffer or refrain from
doing anything that could reasonably be expected to result in a default under or
breach of any of the terms of any material Licensor License Agreement, (iii)
give Lender prompt written notice of any material Licensor License Agreement
entered into by Borrower after the date hereof, together with a true, correct
and complete copy thereof and such other information with respect thereto as
Lender may request, (iv) give Lender prompt written notice of any material
breach of any obligation, or any default, by any party under any material
Licensor License Agreement, and deliver to Lender (promptly upon the receipt
thereof by Borrower in the case of a notice to Borrower, and concurrently with
the sending thereof in the case of a notice from Borrower) a copy of each notice
of default and every other notice and other communication received or delivered
by Borrower in connection with any material Licensor License Agreement, and (v)
furnish to Lender, promptly upon the request of Lender, such information and
evidence as Lender may require from time to time concerning the observance,
performance and compliance by Borrower or the other party or parties thereto
with the terms, covenants or provisions of any material Licensor License
Agreement.
9.21 After Acquired Real Property. If Borrower hereafter acquires any
Real Property, fixtures or any other property that is of the kind or nature
described in the Mortgage and such Real Property, fixtures or other property at
any one location has a fair market value in an amount equal to or greater than
$500,000 (or if a Default or Event of Default exists, then regardless of the
fair market value of such assets), without limiting any other rights of Lender,
or duties or obligations of Borrower, upon Lender's request, Borrower shall
execute and deliver to Lender a mortgage, deed of trust or deed to secure debt,
as Lender may determine, in form and substance substantially similar to the
Mortgage and as to any provisions relating to specific state laws satisfactory
to Lender and in form appropriate for recording in the real estate records of
the jurisdiction in which such Real Property or other property is located
granting to Lender a first and only lien and mortgage on and security interest
in such Real Property, fixtures or other property (except as Borrower would
otherwise be permitted to incur hereunder or under the Mortgage or as otherwise
consented to in writing by Lender) and such other agreements, documents and
instruments as Lender may require in connection therewith.
9.22 Costs and Expenses. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) costs and expenses and
fees for insurance premiums, environmental audits, surveys, assessments,
77
engineering reports and inspections, appraisal fees and search fees, costs and
expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together with
Lender's customary charges and fees with respect thereto; (c) charges, fees or
expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (d) costs and expenses of preserving and protecting the
Collateral; (e) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of
Lender, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Lender arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); (f) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrower's
operations, plus a per diem charge at the then standard rate of Lender per
person per day for Lender's examiners in the field and office (which rate is
currently $750), provided, that, so long as no Event of Default exists or has
occurred and is continuing, Borrower shall not be liable for such charge per day
for Lender's examiners to the extent such charges exceed $25,000 during any
fiscal year of Borrower and (g) the reasonable fees and disbursements of counsel
(including legal assistants) to Lender in connection with any of the foregoing.
9.23 Further Assurances. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such request by Lender, Lender may, at its option, cease to make any
further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
78
(a) Borrower fails to pay when due any of the Obligations or
fails to perform any of the terms, covenants, conditions or provisions contained
in this Agreement or any of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) any Obligor revokes or terminates, or purports to revoke or
terminate, or fails to perform any of the terms, covenants, conditions or
provisions of, any guarantee, endorsement or other agreement of such party in
favor of Lender;
(d) any judgment for the payment of money is rendered against
Borrower or any Obligor in excess of $500,000 in any one case or in excess of
$1,000,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against Borrower or
any Obligor or any of their assets;
(e) Borrower or any Obligor, which is a partnership, limited
liability company, limited liability partnership or a corporation, dissolves or
suspends or discontinues doing business;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Obligor or all or any part of its
properties and such petition or application is not dismissed within thirty (30)
days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or any Obligor or for all or any part of its
property; or
(i) (A) any default in respect of any Indebtedness of Borrower or
any Obligor (other than Indebtedness owing to Lender), which default continues
for more than the applicable cure period, if any, with respect thereto and which
results in the right of the holder or holders of such Indebtedness (or another
person on behalf of such holder or holders) to accelerate Indebtedness of
Borrower or any Obligor in an amount in excess of $1,000,000, or (B) any default
by Borrower or any Obligor under any Material Contract, which default continues
for more than the applicable cure period, if any, with respect thereto and which
results in the right of any party thereto to terminate such Material Contract or
cease performing under such Material Contract;
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(j) any material provision hereof or of any of the other
Financing Agreements shall for any reason cease to be valid, binding and
enforceable with respect to any party hereto or thereto (other than Lender) in
accordance with its terms, or any such party shall challenge the enforceability
hereof or thereof, or shall assert in writing, or take any action or fail to
take any action based on the assertion that any provision hereof or of any of
the other Financing Agreements has ceased to be or is otherwise not valid,
binding or enforceable in accordance with its terms, or any security interest
provided for herein or in any of the other Financing Agreements shall cease to
be a valid and perfected first priority security interest in any of the
Collateral purported to be subject thereto (except as otherwise permitted herein
or therein);
(k) an ERISA Event shall occur which results in or could
reasonably be expected to result in liability of Borrower in an aggregate amount
in excess of $1,000,000;
(l) any Change of Control;
(m) the indictment by any Governmental Authority, or as Lender
may reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of Borrower or any Obligor of which Borrower, any Obligor
or Lender receives notice, in either case, as to which there is a reasonable
possibility of an adverse determination, in the good faith determination of
Lender, under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against Borrower pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
(i) any of the Collateral having a value in excess of $1,000,000 or (ii) any
other property of Borrower which is necessary or material to the conduct of its
business;
(n) there shall be a material adverse change in the business,
assets or condition (financial or otherwise) of Borrower or any Obligor after
the date hereof;
(o) any bank at which any deposit account of Borrower is
maintained shall fail to comply with any of the material terms of any Deposit
Account Control Agreement to which such bank is a party or any securities
intermediary, commodity intermediary or other financial institution at any time
in custody, control or possession of any investment property of Borrower shall
fail to comply with any of the material terms of any Investment Property Control
Agreement to which such person is a party; or
(p) there shall be an event of default under any of the other
Financing Agreements.
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10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the UCC and other applicable law, all
of which rights and remedies may be exercised without notice to or consent by
Borrower or any Obligor, except as such notice or consent is expressly provided
for hereunder or required by applicable law. All rights, remedies and powers
granted to Lender hereunder, under any of the other Financing Agreements, the
UCC or other applicable law, are cumulative, not exclusive and enforceable, in
Lender's discretion, alternatively, successively, or concurrently on any one or
more occasions, and shall include, without limitation, the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach by
Borrower of this Agreement or any of the other Financing Agreements. Lender may,
at any time or times, proceed directly against Borrower or any Obligor to
collect the Obligations without prior recourse to any Obligor or any of the
Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and, without limitation, (i) accelerate the payment of all Obligations and
demand immediate payment thereof to Lender (provided, that, upon the occurrence
of any Event of Default described in Sections 10.1(g) and 10.1(h), all
Obligations shall automatically become immediately due and payable), (ii) with
or without judicial process or the aid or assistance of others, enter upon any
premises on or in which any of the Collateral may be located and take possession
of the Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Lender to Borrower designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any bond
which might otherwise be required. At any time an Event of Default exists or has
occurred and is continuing, upon Lender's request, Borrower will either, as
Lender shall specify, furnish cash collateral to the issuer to be used to secure
and fund Lender's reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations. Such cash collateral shall be in the amount
equal to one hundred ten (110%) percent of the amount of the Letter of Credit
Accommodations plus the amount of any fees and expenses payable in connection
therewith through the end of the expiration of such Letter of Credit
Accommodations.
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(c) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, enforce Borrower's rights against any
account debtor, secondary obligor or other obligor in respect of any of the
Accounts or other Receivables. Without limiting the generality of the foregoing,
Lender may at such time or times (i) notify any or all account debtors,
secondary obligors or other obligors in respect thereof that the Receivables
have been assigned to Lender and that Lender has a security interest therein and
Lender may direct any or all account debtors, secondary obligors and other
obligors to make payment of Receivables directly to Lender, (ii) extend the time
of payment of, compromise, settle or adjust for cash, credit, return of
merchandise or otherwise, and upon any terms or conditions, any and all
Receivables or other obligations included in the Collateral and thereby
discharge or release the account debtor or any secondary obligors or other
obligors in respect thereof without affecting any of the Obligations, (iii)
demand, collect or enforce payment of any Receivables or such other obligations,
but without any duty to do so, and Lender shall not be liable for its failure to
collect or enforce the payment thereof nor for the negligence of its agents or
attorneys with respect thereto and (iv) take whatever other action Lender may
deem necessary or desirable for the protection of its interests. At any time
that an Event of Default exists or has occurred and is continuing, at Lender's
request, all invoices and statements sent to any account debtor shall state that
the Accounts and such other obligations have been assigned to Lender and are
payable directly and only to Lender and Borrower shall deliver to Lender such
originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Lender may require. In
the event any account debtor returns Inventory when an Event of Default exists
or has occurred and is continuing, Borrower shall, upon Lender's request, hold
the returned Inventory in trust for Lender, segregate all returned Inventory
from all of its other property, dispose of the returned Inventory solely
according to Lender's instructions, and not issue any credits, discounts or
allowances with respect thereto without Lender's prior written consent.
(d) To the extent that applicable law imposes duties on Lender to
exercise remedies in a commercially reasonable manner (which duties cannot be
waived under such law), Borrower acknowledges and agrees that it is not
commercially unreasonable for Lender (i) to fail to incur expenses reasonably
deemed significant by Lender to prepare Collateral for disposition or otherwise
to complete raw material or work in process into finished goods or other
finished products for disposition, (ii) to fail to obtain third party consents
for access to Collateral to be disposed of, or to obtain or, if not required by
other law, to fail to obtain consents of any Governmental Authority or other
third party for the collection or disposition of Collateral to be collected or
disposed of, (iii) to fail to exercise collection remedies against account
debtors, secondary obligors or other persons obligated on Collateral or to
remove liens or encumbrances on or any adverse claims against Collateral, (iv)
to exercise collection remedies against account debtors and other persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (v) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other persons, whether or
not in the same business as Borrower for expressions of interest in acquiring
all or any portion of the Collateral, (vii) to hire one or more professional
auctioneers to assist in the disposition of Collateral, whether or not the
collateral is of a specialized nature, (viii) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
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included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (ix) to dispose of assets in
wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Lender against risks
of loss, collection or disposition of Collateral or to provide to Lender a
guaranteed return from the collection or disposition of Collateral, or (xii) to
the extent deemed appropriate by Lender, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist
Lender in the collection or disposition of any of the Collateral. Borrower
acknowledges that the purpose of this Section is to provide non-exhaustive
indications of what actions or omissions by Lender would not be commercially
unreasonable in Lender's exercise of remedies against the Collateral and that
other actions or omissions by Lender shall not be deemed commercially
unreasonable solely on account of not being indicated in this Section. Without
limitation of the foregoing, nothing contained in this Section shall be
construed to grant any rights to Borrower or to impose any duties on Lender that
would not have been granted or imposed by this Agreement or by applicable law in
the absence of this Section.
(e) For the purpose of enabling Lender to exercise the rights and
remedies hereunder, Borrower hereby grants to Lender, to the extent such grant
does not contravene the terms of any agreement between Borrower and any Person
not an Affiliate of Borrower, an irrevocable, non-exclusive license (exercisable
without payment of royalty or other compensation to Borrower) to use, assign,
license or sublicense any of the patents, patent rights, trademarks,
service-marks, trade names, business names, trade styles, designs, logos and
other source of business identifiers and other Intellectual Property and general
intangibles now owned or hereafter acquired by Borrower, wherever the same may
be located, including in such license reasonable access to all media in which
any of the licensed items may be recorded or stored and to all computer programs
used for the compilation or printout thereof. Borrower represents and warrants
to Lender that the license granted in this clause (e) does not and will not
contravene any law or any indenture, agreement or undertaking to which Borrower
is a party or by which Borrower or its property is bound.
(f) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrower shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
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(g) Without limiting the foregoing, upon the occurrence of a
Default or Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrower (ii) terminate any provision of this
Agreement providing for any future Loans or Letter of Credit Accommodations to
be made by Lender to Borrower and/or (iii) establish such Reserves as Lender
determines without limitation or restriction, notwithstanding anything to the
contrary contained herein.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements (other than the Mortgage to the
extent provided therein) and any dispute arising out of the relationship between
the parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the internal laws of the State of New York but excluding any
principles of conflicts of law or other rule of law that would cause the
application of the law of any jurisdiction other than the laws of the State of
New York.
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Supreme Court of the State of New York in New
York County and the United States District Court for the Southern District of
New York, whichever Lender may elect, and waive any objection based on venue or
forum non conveniens with respect to any action instituted therein arising under
this Agreement or any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties hereto in respect
of this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against Borrower or its property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Borrower or its
property).
(c) Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth
herein and service so made shall be deemed to be completed five (5) days after
the same shall have been so deposited in the U.S. mails, or, at Lender's option,
by service upon Borrower in any other manner provided under the rules of any
such courts. Within thirty (30) days after such service, Borrower shall appear
in answer to such process, failing which Borrower shall be deemed in default and
judgment may be entered by Lender against Borrower for the amount of the claim
and other relief requested.
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(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER
EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR
LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct of Lender. In any such litigation, Lender shall be entitled to the
benefit of the rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of this
Agreement. Except as prohibited by law, Borrower waives any right which it may
have to claim or recover in any litigation with Lender any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. Borrower: (i) certifies that neither Lender nor any
representative, agent or attorney acting for or on behalf of Lender has
represented, expressly or otherwise, that Lender would not, in the event of
litigation, seek to enforce any of the waivers provided for in this Agreement or
any of the other Financing Agreements and (ii) acknowledges that in entering
into this Agreement and the other Financing Agreements, Lender is relying upon,
among other things, the waivers and certifications set forth in this Section
11.1 and elsewhere herein and therein.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and chattel paper, included in or evidencing any of
the Obligations or the Collateral, and any and all other demands and notices of
any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
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11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel (each such person being referred to as
an "Indemnitee"), harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses imposed on, incurred by or asserted against any
of them in connection with any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement, any
other Financing Agreements, or any undertaking or proceeding related to any of
the transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including amounts paid in settlement, court costs,
and the fees and expenses of counsel, except that Borrower shall not have any
obligation under this Section 11.5 to indemnify an Indemnitee with respect to a
matter covered hereby resulting from the gross negligence or wilful misconduct
of such Indemnitee as determined pursuant to a final, non-appealable order of a
court of competent jurisdiction (but without limiting the obligations of
Borrower as to any other Indemnitee). To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section may be unenforceable
because it violates any law or public policy, Borrower shall pay the maximum
portion which it is permitted to pay under applicable law to Lender in
satisfaction of indemnified matters under this Section. To the extent permitted
by applicable law, Borrower shall not assert, and Borrower hereby waives, any
claim against Lender, on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, this Agreement, any of
the other Financing Agreements or any undertaking or transaction contemplated
hereby. The foregoing indemnity shall survive the payment of the Obligations and
the termination or non-renewal of this Agreement.
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SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three (3) years
from the date hereof (the "Renewal Date"), and from year to year thereafter,
unless sooner terminated pursuant to the terms hereof. Lender or Borrower may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other party at least sixty (60) days prior written notice; provided, that,
this Agreement and all other Financing Agreements must be terminated
simultaneously. In addition, Borrower may terminate this Agreement at any time
upon ten (10) days prior written notice to Lender (which notice shall be
irrevocable) and Lender may terminate this Agreement at any time on or after an
Event of Default. Upon the effective date of termination or non-renewal of this
Agreement, Borrower shall pay to Lender, in full, all outstanding and unpaid
Obligations and shall furnish cash collateral to Lender (or at Lender's option,
a letter of credit issued for the account of Borrower and at Borrower's expense,
in form and substance satisfactory to Lender, by an issuer acceptable to Lender
and payable to Lender as beneficiary) in such amounts as Lender determines are
reasonably necessary to secure (or reimburse) Lender from loss, cost, damage or
expense, including attorneys' fees and legal expenses, in connection with any
contingent Obligations, including issued and outstanding Letter of Credit
Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrower to the bank account designated
by Lender are received in such bank account later than 12:00 noon, New York City
time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid. Accordingly, Borrower waives any rights
which it may have under the UCC to demand the filing of termination statements
with respect to the Collateral, and Lender shall not be required to send such
termination statements to Borrower, or to file them with any filing office,
unless and until this Agreement is terminated in accordance with its terms and
all of the Obligations are paid and satisfied in full in immediately available
funds.
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(c) If for any reason this Agreement is terminated prior to the
end of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
Amount Period
------ ------
(i) three (3%) percent of From the date hereof to and excluding
the Maximum Credit the first anniversary of the date hereof
(ii) one and one-half (1 1/2%) From and after the first anniversary of
percent of the Maximum Credit the date hereof to and excluding the
second anniversary of the date hereof
(iii) three-quarters (3/4%) percent of From and after the second anniversary of
the Maximum Credit the date hereof to but not including the
third anniversary of the date hereof or
if the term of this Agreement is
extended, at any time prior to the end
of the then current term.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrower or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
(d) Notwithstanding anything to contrary contained in Section
12.1(c) above, in the event of the termination of this Agreement by Borrower
prior to the end of the then current term or renewal term of this Agreement and
the full and final repayment of all of the Obligations and the receipt by Lender
of cash collateral all as provided in Section 12.1(a) above, if such repayments
are made with the proceeds of initial loans and advances to Borrower pursuant to
a revolving credit facility provided by Wachovia Bank, National Association or
its Affiliates (or for which Wachovia Bank, National Association or one of its
Affiliates is acting as agent) to Borrower to replace the financing arrangements
provided for herein, Borrower shall not be required to pay the early termination
fee provided for in Section 12.1(c) above.
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12.2 Interpretative Provisions.
(a) All terms used herein which are defined in Article 1 or
Article 9 of the UCC shall have the meanings given therein unless otherwise
defined in this Agreement.
(b) All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires.
(c) All references to Borrower and Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall mean
"including, without limitation".
(f) All references to the term "good faith" used herein when
applicable to Lender shall mean, notwithstanding anything to the contrary
contained herein or in the UCC, honesty in fact in the conduct or transaction
concerned. Borrower shall have the burden of proving any lack of good faith on
the part of Lender alleged by Borrower at any time.
(g) An Event of Default shall exist or continue or be continuing
until such Event of Default is waived in accordance with Section 11.3 or is
cured in a manner satisfactory to Lender, if such Event of Default is capable of
being cured as determined by Lender.
(h) Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Borrower most recently
received by Lender prior to the date hereof.
(i) In the computation of periods of time from a specified date
to a later specified date, the word "from" means "from and including", the words
"to" and "until" each mean "to but excluding" and the word "through" means "to
and including".
(j) Unless otherwise expressly provided herein, (i) references
herein to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
89
(k) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(l) This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(m) This Agreement and the other Financing Agreements are the
result of negotiations among and have been reviewed by counsel to Lender and the
other parties, and are the products of all parties. Accordingly, this Agreement
and the other Financing Agreements shall not be construed against Lender merely
because of Lender's involvement in their preparation.
12.3 Notices. All notices, requests and demands hereunder shall be in
writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing. All notices, requests and
demands upon the parties are to be given to the following addresses (or to such
other address as any party may designate by notice in accordance with this
Section):
If to Borrower: Impax Laboratories, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP
3200 Mellon Bank Center
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
90
If to Lender: Congress Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Portfolio Manager
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
12.4 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.5 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.6 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
12.7 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile shall have the same force and effect
as the delivery of an original executed counterpart of this Agreement or any of
such other Financing Agreements. Any party delivering an executed counterpart of
any such agreement by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.
91
12.8 Confidentiality.
(a) Lender shall keep confidential, in accordance with its
customary procedures for handling confidential information and safe and sound
lending practices, any non-public information supplied to it by Borrower
pursuant to this Agreement, provided, that, nothing contained herein shall limit
the disclosure of any such information: (i) to the extent required by statute,
rule, regulation, subpoena or court order, (ii) to bank examiners and other
regulators, auditors and/or accountants, (iii) in connection with any litigation
to which Lender is a party relating to this Agreement, (iv) to Lender or any
Affiliate of Lender or to any participant (or prospective participant) so long
as Lender or such participant (or such prospective participant) shall have been
instructed to treat such information as confidential in accordance with this
Section 12.8, or (v) to counsel for any participant (or prospective participant
so long as clause (iv) of this Section is satisfied as to such person).
(b) In the event that Lender receives a request or demand to
disclose any confidential information pursuant to any subpoena or court order,
Lender agrees (i) to the extent permitted by applicable law or if permitted by
applicable law, statute, rule or regulation to the extent Lender determines in
good faith that it will not create any risk of liability to Lender, that Lender
will promptly notify Borrower so that Borrower may seek a protective order or
other appropriate relief or remedy and (ii) if disclosure of such information is
required, disclose such information and, subject to reimbursement by Borrower of
Lender's reasonable expenses, cooperate with Borrower in reasonable efforts to
obtain an order or other reliable assurance that confidential treatment will be
accorded to such portion of the disclosed information which Borrower so
designates, to the extent permitted by applicable law or if permitted by
applicable law, to the extent Lender determines in good faith that it will not
create any risk of liability to Lender.
(c) In no event shall this Section 12.8 or any other provision of
this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by Borrower or any
third party, (ii) to apply to or restrict disclosure of information that was or
becomes available to Lender from a person other than Borrower, (iii) require
Lender to return any materials furnished by Borrower to Lender or (iv) prevent
Lender from responding to routine informational requests in accordance with the
Code of Ethics for the Exchange of Credit Information promulgated by The ▇▇▇▇▇▇
▇▇▇▇▇▇ Associates or other applicable industry standards relating to the
exchange of credit information. The obligations of Lender under this Section
12.8 shall supersede and replace the obligations of Lender under any
confidentiality letter signed prior to the date hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
92
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
LENDER BORROWER
------ --------
CONGRESS FINANCIAL CORPORATION IMPAX LABORATORIES, INC.
By:____________________________________ By:____________________________________
Title:_________________________________ Title:_________________________________
Address: Address:
-------- --------
1133 Avenue of the Americas ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
EXHIBIT A
TO
LOAN AND SECURITY AGREEMENT
Information Certificate
See attached
A-1
EXHIBIT B
TO
LOAN AND SECURITY AGREEMENT
Compliance Certificate
To: Congress Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I hereby certify to you pursuant to Section 9.6 of the Loan Agreement (as
defined below) as follows:
1. I am the duly elected Chief Financial Officer of Impax Laboratories,
Inc., a Delaware corporation ("Borrower"). Capitalized terms used herein without
definition shall have the meanings given to such terms in the Loan and Security
Agreement, dated October __, 2002, by and between Congress Financial Corporation
("Lender") and Borrower (as such Loan and Security Agreement is amended,
modified or supplemented, from time to time, the "Loan Agreement").
2. I have reviewed the terms of the Loan Agreement, and have made, or
have caused to be made under my supervision, a review in reasonable detail of
the transactions and the financial condition of Borrower and each of its
Subsidiaries, during the immediately preceding fiscal month.
3. The review described in Section 2 above did not disclose the
existence during or at the end of such fiscal month, and I have no knowledge of
the existence and continuance on the date hereof, of any condition or event
which constitutes a Default or an Event of Default, except as set forth on
Schedule I attached hereto. Described on Schedule I attached hereto are the
exceptions, if any, to this Section 3 listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Borrower or any Obligor has taken, is taking, or proposes to take with respect
to such condition or event.
4. I further certify that, based on the review described in Section 2
above, Borrower and Obligors have not at any time during or at the end of such
fiscal month, except as specifically described on Schedule II attached hereto or
as permitted by the Loan Agreement, done any of the following:
B-1
(a) Changed its respective corporate name, or transacted business under any
trade name, style, or fictitious name, other than those previously
described to you and set forth in the Financing Agreements.
(b) Changed the location of its chief executive office, changed its
jurisdiction of incorporation, changed its type of organization or
changed the location of or disposed of any of its properties or assets
(other than pursuant to the sale of Inventory in the ordinary course of
its business or as otherwise permitted by Section 9.7 of the Loan
Agreement), or established any new asset locations.
(c) Materially changed the terms upon which it sells goods (including sales
on consignment) or provides services, nor has any vendor or trade
supplier to Borrower or any Obligor during or at the end of such period
materially adversely changed the terms upon which it supplies goods to
Borrower or such Obligor.
(d) Permitted or suffered to exist any security interest in or liens on any
of its properties, whether real or personal, other than as specifically
permitted in the Financing Agreements.
(e) Received any notice of, or obtained knowledge of any of the following
not previously disclosed to Lender: (i) the occurrence of any event
involving the release, spill or discharge of any Hazardous Material in
violation of applicable Environmental Law in a material respect or (ii)
any investigation, proceeding, complaint, order, directive, claims,
citation or notice with respect to: (A) any non-compliance with or
violation of any applicable Environmental Law by Borrower or any
Obligor in any material respect or (B) the release, spill or discharge
of any Hazardous Material in violation of applicable Environmental Law
in a material respect or (C) the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any
Hazardous Materials in violation of applicable Environmental Laws in a
material respect or (D) any other environmental, health or safety
matter, which has a material adverse effect on Borrower or any Obligor
or its business, operations or assets or any properties at which
Borrower or such Obligor transported, stored or disposed of any
Hazardous Materials.
(f) Become aware of, obtained knowledge of, or received notification of,
any breach or violation of any material covenant contained in any
instrument or agreement in respect of Indebtedness for money borrowed
by Borrower or any Obligor.
B-2
5. Attached hereto as Schedule III are the calculations used in
determining, as of the end of such fiscal month whether Borrower is in
compliance with the covenants set forth in Section 9.17, 9.18 and Section 9.19
of the Loan Agreement for such fiscal month.
The foregoing certifications are made and delivered this day of
___________, 20__.
Very truly yours,
IMPAX LABORATORIES, INC.
By:_______________________
Title:____________________
B-3
EXHIBIT C
TO
LOAN AND SECURITY AGREEMENT
---------------------------
Form of Equipment Purchase Term Note
------------------------------------
$__________ New York, New York
____________, 200__
FOR VALUE RECEIVED, IMPAX LABORATORIES, INC., a Delaware corporation
("Debtor"), hereby unconditionally promises to pay to the order of CONGRESS
FINANCIAL CORPORATION, a Delaware corporation ("Payee"), at the offices of Payee
at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other place
as the Payee or any holder hereof may from time to time designate, the principal
sum of ___________ DOLLARS ($___________) in lawful money of the United States
of America and in immediately available funds, in sixty (60) consecutive monthly
installments (or earlier as hereinafter provided) on the first day of each month
commencing ___________ , ____ of which the first fifty-nine (59) installments
shall each be in the amount of ______________ DOLLARS ($_________), and the last
installment shall be in the amount of the entire unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee on
the unpaid principal balance hereof at the Interest Rate. Such interest shall be
paid in like money at said office or place from the date hereof, commencing
____________, _____ and on the first day of each month thereafter until the
indebtedness evidenced by this Note is paid in full. Interest payable upon and
after an Event of Default or termination or non-renewal of the Loan Agreement
shall be payable upon demand.
For purposes hereof, (1) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one and one-half (1 1/2%) percent per annum in
excess of the Prime Rate, and as to Eurodollar Rate Loans, a rate of four (4%)
percent per annum in excess of the Adjusted Eurodollar Rate; provided, that,
upon and after an Event of Default or termination or non-renewal of the Loan
Agreement, at Payee's option, the Interest Rate shall mean a rate of three and
one-half (3 1/2%) percent per annum in excess of the Prime Rate as to Prime Rate
Loans and a rate of six (6%) percent per annum in excess of the Adjusted
Eurodollar Rate as to Eurodollar Rate Loans upon and after an Event of Default
or termination or non-renewal of the Loan Agreement, (2) the term "Prime Rate"
shall mean the rate from time to time publicly announced by Wachovia Bank,
National Association, or its successors, as its prime rate, whether or not such
announced rate is the best rate available at such bank, (3) the term "Event of
Default" shall mean an Event of Default as such term is defined in the Loan
Agreement, and (4) the term "Loan Agreement" shall mean the Loan and Security
Agreement, dated October __, 2002, between Debtor and Payee, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced. Unless otherwise defined herein, all capitalized terms
used herein shall have the meaning assigned thereto in the Loan Agreement.
C-1
The Interest Rate applicable to Prime Rate Loans payable hereunder
shall increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in the Prime Rate is announced. The increase or decrease shall be
based on the Prime Rate in effect on the last day of the month in which any such
change occurs. Interest shall be calculated on the basis of a three hundred
sixty (360) day year and actual days elapsed. In no event shall the interest
charged hereunder exceed the maximum permitted under the laws of the State of
New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the Loan
Agreement to evidence an Equipment Purchase Term Loan by Payee to Debtor. This
Note is secured by the Collateral described in the Loan Agreement and all notes,
guarantees, security agreements and other agreements, documents and instrument
now or at any time hereafter executed and/or delivered by Debtor or any other
party in connection therewith (all of the foregoing, together with the Loan
Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, renewed, extended, restated or replaced, being collectively
referred to herein as the "Financing Agreements"), and is entitled to all of the
benefits and rights thereof and of the other Financing Agreements. At the time
any payment is due hereunder, at its option, Payee may charge the amount thereof
to any account of Debtor maintained by Payee.
If any payment of principal or interest is not made when due hereunder,
or if any other Event of Default shall occur for any reason, or if the Loan
Agreement shall be terminated or not renewed for any reason whatsoever, then and
in any such event, in addition to all other rights and remedies of Payee under
the other Financing Agreements, applicable law or otherwise, all such rights and
remedies being cumulative, not exclusive and enforceable alternatively,
successively and concurrently, Payee may, at its option, declare any or all of
Debtor's obligations, liabilities and indebtedness owing to Payee under the Loan
Agreement and the other Financing Agreements (the "Obligations"), including,
without limitation, all amounts owing under this Note, to be due and payable,
whereupon the then unpaid balance hereof, together with all interest accrued
thereon, shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable Interest Rate stated above until the
indebtedness evidenced by this Note is paid in full in immediately available
funds, plus the costs and expenses of collection hereof, including, but not
limited to, attorneys' fees and legal expenses.
Debtor (i) waives diligence, demand, presentment, protest and notice of
any kind, (ii) agrees that it will not be necessary for Payee to first institute
suit in order to enforce payment of this Note and (iii) consents to any one or
more extensions or postponements of time of payment, release, surrender or
substitution of collateral security, or forbearance or other indulgence, without
notice or consent. The pleading of any statute of limitations as a defense to
any demand against Debtor is expressly hereby waived by Debtor. Upon any Event
of Default or termination or non-renewal of the Loan Agreement, Payee shall have
the right, but not the obligation to setoff against this Note all money owed by
Payee to Debtor.
C-2
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
The validity, interpretation and enforcement of this Note and any
dispute arising in connection herewith or therewith shall be governed by the
internal laws of the State of New York but excluding any principles of conflicts
of law or other rule of law that would result in the application of the law of
any jurisdiction other than the laws of the State of New York.
Debtor irrevocably consents and submits to the non-exclusive
jurisdiction of the Supreme Court of the State of New York in New York County
and the United States District Court for the Southern District of New York,
whichever Payee may elect, and waives any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this Note
or any of the other Financing Agreements or in any way connected with or related
or incidental to the dealings of Debtor and Payee in respect of this Note or any
of the other Financing Agreements or the transactions related hereto or thereto,
in each case whether now existing or hereafter arising, and whether in contract,
tort, equity or otherwise, and agrees that any dispute arising out of the
relationship between Debtor and Payee or the conduct of such persons in
connection with this Note or otherwise shall be heard only in the courts
described above (except that Payee shall have the right to bring any action or
proceeding against Debtor or its property in the courts of any other
jurisdiction which Payee deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Debtor or its
property).
Debtor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to it and service so made shall be deemed to
be completed five (5) days after the same shall have been so deposited in the
U.S. mails, or, at Payee's option, by service upon Debtor in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, Debtor shall appear in answer to such process, failing which Debtor
shall be deemed in default and judgment may be entered by Payee against Debtor
for the amount of the claim and other relief requested.
DEBTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS NOTE OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS BETWEEN DEBTOR AND PAYEE
IN RESPECT OF THIS NOTE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. DEBTOR
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY.
C-3
The execution and delivery of this Note has been authorized by the
Board of Directors and by any necessary vote or consent of the stockholders of
Debtor. Debtor hereby authorizes Payee to complete this Note in any particulars
according to the terms of the loan evidenced hereby.
This Note shall be binding upon the successors and assigns of Debtor
and inure to the benefit of Payee and its successors, endorsees and assigns.
Whenever used herein, the term "Debtor" shall be deemed to include its
successors and assigns and the term "Payee" shall be deemed to include its
successors, endorsees and assigns. If any term or provision of this Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
IMPAX LABORATORIES, INC.
By:____________________________
Title:_________________________
C-4
