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EXHIBIT 10.39
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SECOND AMENDED AND RESTATED
CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
HESKA CORPORATION,
DIAMOND ANIMAL HEALTH, INC.,
CENTER LABORATORIES, INC.
AND
XXXXX FARGO BUSINESS CREDIT, INC.
Dated as of: JUNE 14, 2000
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SECOND AMENDED AND RESTATED
CREDIT AND SECURITY AGREEMENT
Dated as of June 14, 2000
HESKA CORPORATION, a Delaware corporation ("Heska"), DIAMOND
ANIMAL HEALTH, INC., an Iowa corporation ("Diamond"), and CENTER LABORATORIES,
INC., a Delaware corporation ("Center") (each of Heska, Diamond, and Center may
be referred to herein individually as a "Borrower" and collectively as the
"Borrowers") and XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation
formerly known as Norwest Business Credit, Inc. (the "Lender"), hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular; and
(b) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP.
"Accounts" for a Borrower means all of such Borrower's
accounts, as such term is defined in the UCC, including without
limitation the aggregate unpaid obligations of customers and other
account debtors to such Borrower arising out of the sale or lease of
goods or rendition of services by such Borrower on an open account or
deferred payment basis.
"Advance" means a Revolving Advance, a Term Loan A Advance, or
a Term Loan B Advance.
"Affiliate" or "Affiliates", for any Borrower, means any
Person controlled by, controlling or under common control with such
Borrower, including (without limitation) any Subsidiary of such
Borrower. For purposes of this definition, "control," when used with
respect to any specified Person, means the power to direct
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the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise.
"Aggregate Borrowing Base" means at any time the lesser of (a)
the Maximum Line or (b) the sum of each Borrower's Borrowing Base.
"Agreement" means this Second Amended and Restated Credit and
Security Agreement, as amended, supplemented or restated from time to
time.
"Availability" for a Borrower means the difference of (i) such
Borrower's Borrowing Base and (ii) the sum of (A) the outstanding
principal balance of such Borrower's Revolving Note and (B) such
Borrower's L/C Amount.
"Banking Day" means a day other than a Saturday, Sunday or
other day on which banks are generally not open for business in Denver,
Colorado and Minneapolis, Minnesota.
"Book Net Worth" of a Borrower means the aggregate of the
common and preferred stockholders' equity in such Borrower, determined
in accordance with GAAP.
"Borrowing Base" for a Borrower means, at any time the lesser
of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's sole
discretion:
(i) 85% of Eligible Accounts of such Borrower,
plus
(ii) the lesser of (A) the sum of (1) 30% of
Eligible Inventory of such Borrower
consisting of raw materials plus (2) 50% of
Eligible Inventory of such Borrower
consisting of finished goods, or (B) the
difference of (1) $6,000,000 less (2) the
aggregate amount of Advances made to all
Borrowers other than such Borrower in
reliance on Eligible Inventory, less
(iii) for any Borrower other than Heska, the
principal sum of all outstanding Advances
made to Heska in reliance on such Borrower's
Borrowing Base.
"Capital Expenditures" for any Borrower for a period means any
expenditure of money for the purchase or construction of assets, or for
improvements or additions thereto during such period, which are
capitalized on such Borrower's balance sheet, whether financed or
unfinanced.
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"Cash" means instantly available cash and cash equivalents
(including, without limitation, investments permitted by Section
7.4(a)(i) and the investments identified at item (i) on Schedule 7.4).
"Center Revolving Note" means the revolving promissory note of
Center and Heska of even date herewith, in the form attached as Exhibit
C.
"Collateral" means all of each Borrower's Equipment, General
Intangibles, Inventory, Receivables, Investment Property, all sums on
deposit in any Collateral Account, and any items in any Lockbox;
together with (i) all substitutions and replacements for and products
of any of the foregoing; (ii) proceeds of any and all of the foregoing;
(iii) in the case of all tangible goods, all accessions; (iv) all
accessories, attachments, parts, equipment and repairs now or hereafter
attached or affixed to or used in connection with any tangible goods;
(v) all warehouse receipts, bills of lading and other documents of
title now or hereafter covering such goods; and (vi) all amounts on
deposit in any Special Account. Notwithstanding the foregoing, except
to the extent necessary for the Lender to fully exercise its rights and
remedies hereunder with respect to Inventory and other tangible
collateral of the Borrowers, the term "Collateral" shall not include
any Intellectual Property License to the extent granting a security
interest therein is prohibited by or would constitute a default under
any such license (but only to the extent such prohibition is
enforceable under applicable law).
"Collateral Account" for Diamond has the meaning given in such
Borrower's Collateral Account Agreement and for Heska and Center has
the same meaning as the "Lender Account" in the Lockbox Agreement of
each such Borrower.
"Collateral Account Agreement" for Diamond means the
Collateral Account Agreement dated as of October 16, 1997, by and among
such Borrower, Norwest Bank Iowa, NA, and the Lender.
"Commitment" means the Lender's commitment to make Advances to
or for the Borrowers' account pursuant to Article II.
"Credit Facility" means the credit facility being made
available to the Borrowers by the Lender pursuant to Article II.
"Debt" of any Person means all items of indebtedness or
liability which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a
balance sheet of that Person as at the date as of which Debt is to be
determined. For purposes of determining a Person's aggregate Debt at
any time,
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"Debt" shall also include the aggregate payments required to be made by
such Person at any time under any lease that is considered a
capitalized lease under GAAP.
"Default" means an event that, with giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the day
on which a Default or Event of Default has occurred and ending on the
date the Lender notifies the Borrowers in writing that such Default or
Event of Default has been cured or waived.
"Default Rate" means, (i) with respect to the Revolving
Advances, an annual rate equal to three percent (3.0%) over the
Revolving Floating Rate, which rate shall change when and as the
Revolving Floating Rate changes, and (ii) with respect to the Term
Advances, an annual rate equal to three percent (3.0%) over the Term
Floating Rate, which rate shall change when and as the Term Floating
Rate changes.
"Diamond Revolving Note" means the revolving promissory note
of Diamond and Heska of even date herewith, in the form attached as
Exhibit B.
"Discretionary Reduction" means any of the following that is
unilaterally adopted by the Lender through the exercise of its sole
discretion: (a) a reduction (in accordance with subsection (b) of the
definition of Borrowing Base) in any advance rate under any Borrower's
Borrowing Base; (b) disqualification (in accordance with subsection
(xiv) of the definition of Eligible Accounts) of any Account that would
otherwise have been an Eligible Account; or (c) disqualification (in
accordance with subsection (x) of the definition of Eligible Inventory)
of any Inventory that would otherwise have been Eligible Inventory.
"Discretionary Reduction Date" means any date on which the
Aggregate Borrowing Base is at least $3,000,000 less than it would have
been had no Discretionary Reductions been adopted.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Eligible Accounts" for a Borrower means all unpaid Accounts
of such Borrower, net of any credits, except the following shall not in
any event be deemed Eligible Accounts:
(i) That portion of Accounts with terms of 60 days or
less that are over 60 days past due, and all other Accounts
over 90 days past invoice date;
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(ii) That portion of Accounts that is disputed or
subject to a claim of offset or a contra account (up to the
amount of such dispute), including that portion of Accounts
due from customers who have made prepayments, up to the amount
of the prepayment;
(iii) That portion of Accounts not yet earned by the
final delivery of goods or rendition of services, as
applicable, by the Borrower to the customer;
(iv) Accounts owed by any unit of government, whether
foreign or domestic (provided, however, that there shall be
included in Eligible Accounts that portion of Accounts owed by
such units of government for which the Borrower has provided
evidence satisfactory to the Lender that (A) the Lender has a
first priority perfected security interest and (B) such
Accounts may be enforced by the Lender directly against such
unit of government under all applicable laws);
(v) Accounts owed by an account debtor located
outside the United States and Canada which are not (A) backed
by a bank letter of credit naming the Lender as beneficiary or
assigned to the Lender, in the Lender's possession and
acceptable to the Lender in all respects, in its reasonable
discretion, or (B) covered by a foreign receivables insurance
policy acceptable to the Lender in its sole discretion;
(vi) Accounts owed by an account debtor that the
Borrower has learned or has determined to be insolvent, is the
subject of bankruptcy proceedings or has gone out of business;
(vii) Accounts owed by a shareholder, Subsidiary,
Affiliate, officer or employee of the Borrower;
(viii) Accounts not subject to a duly perfected
security interest in the Lender's favor or which are subject
to any lien, security interest or claim in favor of any
Person, other than Permitted Liens;
(ix) That portion of Accounts that has been
restructured, extended, amended or modified;
(x) That portion of Accounts that constitutes
advertising, finance charges, service charges or sales or
excise taxes;
(xi) Accounts owed by an account debtor, regardless
of whether otherwise eligible, if 10% or more of the total
amount due under Accounts from such debtor is ineligible under
clauses (i), (ii) or (ix) above;
(xii) That portion of the aggregate Accounts of a
single customer owed to all Borrowers in the aggregate that
exceeds 15% of all Accounts of all Borrowers in the aggregate;
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(xiii) That portion of Accounts that arises from
research contracts;
(xiv) Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion.
"Eligible Inventory" for a Borrower means all Inventory of
such Borrower, at the lower of cost or market value as determined in
accordance with GAAP; provided, however, that the following shall not
in any event be deemed Eligible Inventory:
(i) Inventory that is: in-transit; located at any
warehouse, job site or other premises not approved by the
Lender in writing; located outside of the states, or
localities, as applicable, in which the Lender has filed
financing statements to perfect a first priority security
interest in such Inventory; covered by any negotiable or
non-negotiable warehouse receipt, xxxx of lading or other
document of title; on consignment from or to any Person or
subject to any bailment unless such consignee or bailee has
executed an agreement with the Lender;
(ii) Supplies, packaging or parts Inventory;
(iii) Work-in-process Inventory;
(iv) Inventory that is damaged, obsolete, or not
currently saleable in the normal course of the Borrower's
operations;
(v) Inventory that the Borrower has returned, has
attempted to return, is in the process of returning or intends
to return to the vendor thereof;
(vi) Inventory that is perishable or live; provided,
however, that Inventory with an expiration date shall be
deemed Eligible Inventory, up to 90 days before the expiration
date of such Inventory;
(vii) Inventory that is subject to a security
interest in favor of any Person other than the Lender, except
for Permitted Liens;
(vii) Inventory manufactured by any Borrower pursuant
to a license that (A) prohibits the Lender from exercising its
rights against such Inventory or (B) restricts such Borrower's
ability to grant the Lender the right to sell such Inventory,
in either case unless the applicable licensor has agreed in
writing to permit the Lender to exercise its rights and
remedies against such Inventory;
(viii) Sample Inventory; and
(ix) Inventory otherwise deemed ineligible by the
Lender in its sole discretion.
"Environmental Laws" has the meaning specified in Section
5.12.
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"Equipment" of a Borrower means all of such Borrower's
equipment, as such term is defined in the UCC, whether now owned or
hereafter acquired, including but not limited to all present and future
machinery, vehicles, furniture, fixtures, manufacturing equipment, shop
equipment, office and recordkeeping equipment, parts, tools, supplies,
and including specifically (without limitation) the goods described in
any equipment schedule or list herewith or hereafter furnished to the
Lender by any Borrower.
"Event of Default" has the meaning specified in Section 8.1.
"Existing Revolving Advances" has the meaning specified in
Section 2.1.
"Excess Collateral Base" for a Borrower means the difference
of (i) such Borrower's Borrowing Base calculated without taking into
account the limitation imposed by the Maximum Line, and (ii) the sum of
(A) the outstanding principal balance of such Borrower's Revolving Note
and (B) such Borrower's L/C Amount.
"Expanded Heska Borrowing Base" on a given date means the
lesser of (a) the Maximum Line or (b) subject to change from time to
time in the Lender's sole discretion, the sum of (i) Heska's Borrowing
Base, plus (ii) for each Borrower other than Heska, the lesser of (A)
such Borrower's Availability as of such date or (B) the amount by which
the Tangible Net Worth of such Borrower on such date exceeds
$2,000,000.
"Factory Mortgage" means the Combination Mortgage, Assignment
of Rents and Fixture Financing Statement, executed by the Borrower for
the benefit of the Lender, dated as of September 8, 1998, concerning
the Factory Mortgaged Property, as amended by a First Amendment to
Combination Mortgage, Assignment of Rents and Fixture Financing
Statement of even date herewith.
"Factory Mortgaged Property" means Mortgaged Property as
defined in the Factory Mortgage.
"Farm Mortgage" means the Combination Mortgage, Assignment of
Rents and Fixture Financing Statement, executed by the Borrower for the
benefit of the Lender, dated as of September 8, 1998, concerning the
Farm Mortgaged Property, as amended by a First Amendment to Combination
Mortgage, Assignment of Rents and Fixture Financing Statement of even
date herewith.
"Farm Mortgaged Property" means Mortgaged Property as defined
in the Farm Mortgage.
"Funding Date" has the meaning given in Section 2.2.
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"GAAP" means generally accepted accounting principles, applied
on a basis consistent with the accounting practices applied in the
financial statements described in Section 5.5.
"General Intangibles" of a Borrower means all of such
Borrower's general intangibles, as such term is defined in the UCC,
whether now owned or hereafter acquired, including (without limitation)
all present and future patents, patent applications, copyrights,
trademarks, trade names, trade secrets, customer or supplier lists and
contracts, manuals, operating instructions, permits, franchises, the
right to use the Borrower's name, and the goodwill of the Borrower's
business.
"Guarantors" shall mean Diamond, Center, and any other Person
who executes a guaranty of all or any part of the Obligations for the
benefit of the Lender.
"Hazardous Substance" has the meaning given in Section 5.12.
"Heska Revolving Note" means Heska's revolving promissory note
of even date herewith, in the form attached as Exhibit A.
"Inactive Period" means a period beginning on the date of this
Agreement and ending on the date that the Lender gives notice to the
Borrower that an audit has been completed and all outstanding audit
issues with respect to the Borrowers' Collateral have been resolved to
the Lender's satisfaction; provided, however, that the Lender shall use
commercially reasonable efforts to cooperate with the Borrowers in
resolving such issues in an efficient manner.
"Intellectual Property License" means a license owned by any
Borrower, which license allows such Borrower the use of any patent,
trademark, trade name, or copyrighted material owned by a Person that
is not a Borrower.
"Inventory" of a Borrower means all of such Borrower's
inventory, as such term is defined in the UCC, whether now owned or
hereafter acquired, whether consisting of whole goods, spare parts or
components, supplies or materials, whether acquired, held or furnished
for sale, for lease or under service contracts or for manufacture or
processing, and wherever located.
"Investment Property" of a Borrower means all of such
Borrower's investment property, as such term is defined in the UCC,
whether now owned or hereafter acquired, including but not limited to
all securities, security entitlements, securities accounts, commodity
contracts, commodity accounts, stocks, bonds, mutual fund shares, money
market shares and U.S. Government securities.
"Issuer" means the issuer of any Letter of Credit.
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"L/C Amount" for a Borrower means the sum of (i) the Aggregate
Face Amount of any issued and outstanding Letters of Credit for which
the Borrower is the account party and (ii) the unpaid amount of the
Obligation of Reimbursement with respect to such Letters of Credit.
"L/C Application" means an application and agreement for
Letters of Credit in a form acceptable to the Issuer and the Lender.
"Letter of Credit" has the meaning given it in Section 2.18.
"Liquidity" means the sum of Cash plus Excess Collateral Base.
"Loan Documents" means this Agreement, the Notes and the
Security Documents.
"Lockbox" for any Borrower has the meaning given in such
Borrower's Lockbox Agreement.
"Lockbox Agreement" for Diamond means the Agreement as to
Lockbox Service by and among such Borrower, Norwest Bank Iowa, NA, and
the Lender, dated as of October 16, 1997, and for Heska and Center
means the Lockbox and Collection Account Agreement among such Borrower,
Regulus West LLC ("Regulus"), Xxxxx Fargo Bank, NA, and Lender, dated
as of the date hereof.
"Maturity Date" means May 31, 2002.
"Maximum Line" means $10,000,000, unless said amount is
reduced pursuant to Section 2.12, in which event it means the amount to
which said amount is reduced.
"Minimum Interest Charge" has the meaning given in Section
2.8(d).
"Net Income" for a Borrower means, for any period, after-tax
net income from continuing operations (that is, not including
extraordinary items, or gains or losses from unusual items or
discontinued operations), in each case for such Borrower for such
period, as determined in accordance with GAAP.
"Note" means the Revolving Note, the Term Loan A Note, or the
Term Loan B Note and "Notes" means the Revolving Note, the Term Loan A
Note, and the Term Loan B Note.
"Obligation of Reimbursement" has the meaning given in Section
2.19.
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"Obligations" means each and every debt, liability and
obligation of every type and description which any Borrower may now or
at any time hereafter owe to the Lender, related to the indebtedness
arising under this Agreement, the Notes or any other agreement between
any such Borrower and the Lender, entered into in connection with the
Credit Facility, including without limitation the Obligation of
Reimbursement.
"Old Credit Documents" means that certain Amended and Restated
Credit and Security Agreement dated as of September 8, 1998 by and
between Diamond and the Lender, as amended by a First Amendment to
Credit and Security Agreement, dated as of August 26, 1999.
"Old Revolving Note" means Diamond's revolving promissory note
dated as of September 8, 1998, payable to the order of the Lender in
the original principal amount of $2,500,000.
"Old Term Loan A Note" means Diamond's promissory note dated
as of September 8, 1998, payable to the order of the Lender in the
original principal amount of $1,600,000.
"Old Term Loan B Note" means Diamond's promissory note dated
as of September 8, 1998, payable to the order of the Lender in the
original principal amount of $2,570,000.
"Other Lender" means a lender who is providing equipment
financing to the Borrower, where a condition of such financing is that
no other security interests can be granted in such equipment (other
than nonconsensual liens) while the underlying debt is still
outstanding.
"Permitted Lien" has the meaning given in Section 7.1.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company,
trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan or other plan maintained
for the Borrower's employees and covered by Title IV of ERISA.
"Premises" means all premises where any Borrower conducts its
business and has any rights of possession, including (without
limitation) the premises legally described in Exhibit F attached
hereto.
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"Prime Rate" means the rate publicly announced from time to
time by Xxxxx Fargo Bank, N.A. as its "prime rate" or, if such bank
ceases to announce a rate so designated, any similar successor rate
designated by the Lender.
"Receivables" of a Borrower means each and every right of such
Borrower to the payment of money, whether such right to payment now
exists or hereafter arises, whether such right to payment arises out of
a sale, lease or other disposition of goods or other property, out of a
rendering of services, out of a loan, out of the overpayment of taxes
or other liabilities, or otherwise arises under any contract or
agreement, whether such right to payment is created, generated or
earned by such Borrower or by some other person who subsequently
transfers such person's interest to such Borrower, whether such right
to payment is or is not already earned by performance, and howsoever
such right to payment may be evidenced, together with all other rights
and interests (including all liens and security interests) which such
Borrower may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against
any property of such account debtor or other obligor; all including but
not limited to all present and future accounts, contract rights, loans
and obligations receivable, chattel papers, bonds, notes and other debt
instruments, tax refunds and rights to payment in the nature of general
intangibles.
"Reportable Event" shall have the meaning assigned to that
term in Title IV of ERISA.
"Revolving Advance" has the meaning given in Section 2.2.
"Revolving Floating Rate" means an annual rate equal to the
sum of the Prime Rate plus the Spread, which annual rate shall change
when and as the Prime Rate changes.
"Revolving Note" means the Heska Revolving Note, the Diamond
Revolving Note, and the Center Revolving Note.
"Security Documents" means this Agreement, each Collateral
Account Agreement, each Lockbox Agreement, the Factory Mortgage, the
Farm Mortgage, and any other document delivered to the Lender from time
to time to secure the Obligations, as the same may hereafter be
amended, supplemented or restated from time to time.
"Security Interest" has the meaning given in Section 3.1.
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"Special Account" means a specified cash collateral account
maintained by a financial institution acceptable to the Lender in
connection with Letters of Credit, as contemplated by Sections 2.20 and
3.8.
"Spread" has the meaning given in Section 2.7.
"Subsidiary" of any Borrower means any corporation of which
more than 50% of the outstanding shares of capital stock having general
voting power under ordinary circumstances to elect a majority of the
board of directors of such corporation, irrespective of whether or not
at the time stock of any other class or classes shall have or might
have voting power by reason of the happening of any contingency, is at
the time directly or indirectly owned by such Borrower, by such
Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"Tangible Net Worth" of a Borrower means the difference
between (i) the tangible assets of such Borrower, which, in accordance
with GAAP are tangible assets, after deducting adequate reserves in
each case where, in accordance with GAAP, a reserve is proper and (ii)
all Debt of such Borrower; provided, however, that notwithstanding the
foregoing in no event shall there be included as such tangible assets
patents, trademarks, trade names, copyrights, licenses, goodwill,
receivables from Affiliates, directors, officers or employees, prepaid
expenses, deposits, deferred charges or treasury stock or any
securities or Debt of such Borrower or any other securities unless the
same are readily marketable in the United States of America or entitled
to be used as a credit against federal income tax liabilities, and any
other assets designated from time to time by the Lender, in its
reasonable discretion.
"Tax Expense" for a Borrower as of any date means state and
federal income taxes recorded by such Borrower for the year-to-date
period ending on such date.
"Term Advances" means the Term Loan A Advance and the Term
Loan B Advances.
"Term Floating Rate" means an annual rate equal to the sum of
the Prime Rate plus the Spread, which annual rate shall change when and
as the Prime Rate changes.
"Term Loan A Advance" has the meaning specified in Section
2.3.
"Term Loan A Note" means the promissory note, payable to the
order of the Lender in substantially the form of Exhibit D hereto and
any note or notes issued in substitution therefor, as the same may
hereafter be amended, supplemented or restated from time to time.
"Term Loan B Advance" has the meaning specified in Section
2.5.
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"Term Loan B Note" means the promissory note, payable to the
order of the Lender in substantially the form of Exhibit E hereto and
any note or notes issued in substitution therefor, as the same may
hereafter be amended, supplemented or restated from time to time.
"Termination Date" means the earliest of (i) the Maturity
Date, (ii) the date the Borrower terminates the Credit Facility, or
(iii) the date the Lender demands payment of the Obligations after an
Event of Default pursuant to Section 8.2
"UCC" means the Uniform Commercial Code as in effect from time
to time in the state designated in Section 9.15 as the state whose laws
shall govern this Agreement, or in any other state whose laws are held
to govern this Agreement or any portion hereof.
"Xxxxx Fargo Bank" means Xxxxx Fargo Bank West, National
Association.
Section 1.2 Cross References. All references in this Agreement
to Articles, Sections and subsections, shall be to Articles, Sections and
subsections of this Agreement unless otherwise explicitly specified.
ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1 Existing Advances.
(a) EXISTING REVOLVING ADVANCES. The Lender has made various
revolving advances to Diamond (the "Existing Revolving Advances") as evidenced
by the Old Credit Documents. As of June 13, 2000, the outstanding principal
balance of the Existing Revolving Advances was $1,240,034.96. Upon execution and
delivery of this Agreement, the Existing Revolving Advances shall be deemed to
be Revolving Advances pursuant to Section 2.2 and repayable in accordance with
the Diamond Revolving Note. To the extent the Diamond Revolving Note evidences
the Existing Revolving Advances, the Diamond Revolving Note shall be issued in
substitution for and replacement of but not in payment of the Old Revolving
Note.
(b) EXISTING TERM ADVANCES. In addition to the foregoing, the
Lender has made a Term Loan A Advance to Diamond in the amount of $1,600,000 and
a Term Loan B Advance to Diamond in the amount of $2,250,000, each as evidenced
by the Old Credit Documents. As of June 13, 2000, the outstanding principal
balance of the Term Loan A Advance was $1,040,000.14, and the outstanding
principal balance of the Term Loan B Advance was $2,062,500. The Term Loan A
Note shall be issued in substitution for and
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replacement of, but not in payment of, the Old Term Loan A Note, and the Term
Loan B Note shall be issued in substitution for and replacement of, but not in
payment of, the Old Term Loan B Note.
Section 2.2 Revolving Advances. The Lender agrees, on the
terms and subject to the conditions herein set forth, to make advances (the
"Revolving Advances") to any Borrower from time to time from the date the
Inactive Period ends (the "Funding Date") to the Termination Date, on the terms
and subject to the conditions herein set forth. The Lender shall have no
obligation to make a Revolving Advance to a Borrower if, after giving effect to
such requested Revolving Advance, (a) the sum of the outstanding and unpaid
Revolving Advances would exceed the Aggregate Borrowing Base, (b) the sum of the
outstanding and unpaid Revolving Advances to any Borrower other than Heska would
exceed such Borrower's Borrowing Base, (c) the sum of the outstanding and unpaid
Revolving Advances to Heska would exceed the Expanded Heska Borrowing Base, or
(d) during any Default Period, the sum of the outstanding and unpaid Revolving
Advances to Heska would exceed Heska's Borrowing Base. Each Borrower's
obligation to pay the Revolving Advances shall be evidenced by such Borrower's
Revolving Note and shall be secured by the Collateral as provided in Article III
and the Mortgaged Property as defined in each of the Factory Mortgage and the
Farm Mortgage. Within the limits set forth in this Section 2.2, each Borrower
may borrow, prepay pursuant to Section 2.12 and reborrow. Each Borrower agrees
to comply with the following procedures in requesting Revolving Advances under
this Section 2.2:
(a) Such Borrower shall make each request for a Revolving
Advance to the Lender before 11:00 a.m. (Denver time) of the day of the
requested Revolving Advance. Requests may be made in writing or by
telephone, specifying the date of the requested Revolving Advance and
the amount thereof. Each request shall be by (i) any officer of such
Borrower; or (ii) any person designated as such Borrower's agent by any
officer of such Borrower in a writing delivered to the Lender; or (iii)
any person whom the Lender reasonably believes to be an officer of such
Borrower or such a designated agent.
(b) Upon fulfillment of the applicable conditions set forth in
Article IV, the Lender shall disburse the proceeds of the requested
Revolving Advance by crediting the same to such Borrower's demand
deposit account maintained with Xxxxx Fargo Bank unless the Lender and
the Borrower shall agree in writing to another manner of disbursement.
Upon the Lender's request, such Borrower shall promptly confirm each
telephonic request for an Advance by executing and delivering an
appropriate confirmation certificate to the Lender. Each Borrower shall
repay all such Advances even if the Lender does not receive such
confirmation and even if the person requesting such Advance was not in
fact authorized to do so. Any request for an Advance by a Borrower,
whether written or telephonic, shall be deemed to be a
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representation by such Borrower that the conditions set forth in
Section 4.2 have been satisfied as of the time of the request.
Section 2.3 Term Loan A Advance. The Lender has previously
made an advance to Diamond in the amount of $1,600,000 (the "Term Loan A
Advance"). The Borrowers' obligation to pay the Term Loan A Advance shall be
evidenced by the Term Loan A Note and shall be secured by the Collateral as
provided in Article III and the Mortgaged Property as defined in each of the
Factory Mortgage and the Farm Mortgage.
Section 2.4 Payment of Term Loan A Note. The outstanding
principal balance of the Term Loan A Note shall be due and payable as follows:
(a) On June 1, 2000 and the first day of each month
thereafter, in monthly installments of $18,667; and
(b) On the Maturity Date, the entire unpaid principal balance
of the Term Loan A Note, and all unpaid interest accrued thereon, shall
in any event be due and payable.
Section 2.5 Term Loan B Advances. The Lender has previously
made advances to Diamond in the amount of $2,250,000 (the "Term Loan B
Advances"). The Borrowers' obligation to pay the Term Loan B Advances shall be
evidenced by the Term Loan B Note and shall be secured by the Collateral as
provided in Article III and the Mortgaged Property as defined in each of the
Factory Mortgage and the Farm Mortgage.
Section 2.6 Payment of Term Loan B Note. The outstanding
principal balance of the Term Loan B Note shall be due and payable as follows:
(a) On June 1, 2000 and the first day of each month
thereafter, in monthly installments of $17,658; and
(b) On the Maturity Date, the entire unpaid principal balance
of the Term Loan B Note, and all unpaid interest accrued thereon, shall
in any event be due and payable.
Section 2.7 Spread. The spread (the "Spread") means, with
respect to calculation of the Revolving Floating Rate, one percent (1.0%), and
with respect to calculation of the Term Floating Rate, one and one-quarter
percent (1.25%).
Section 2.8 Interest; Minimum Interest Charge; Default
Interest; Participations; Usury. Interest accruing on the Notes shall be due and
payable in arrears on the first day of each month.
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(a) REVOLVING NOTE. Except as set forth in Sections 2.8(e),
2.8(f) and 2.8(g), the outstanding principal balance of the Revolving
Note shall bear interest at the Revolving Floating Rate.
(b) TERM LOAN A NOTE. Except as set forth in Sections 2.8(e),
2.8(f) and 2.8(g), the outstanding principal balance of the Term Loan A
Note shall bear interest at the Term Floating Rate.
(c) TERM LOAN B NOTE. Except as set forth in Sections 2.8(e),
2.8(f) and 2.8(g), the outstanding principal balance of the Term Loan B
Note shall bear interest at the Term Floating Rate.
(d) MINIMUM INTEREST CHARGE. Notwithstanding Sections 2.8(a),
2.8(b), 2.8(c) and 2.8(e), the Borrowers shall pay to the Lender
interest of not less than $100,000 per calendar year (the "Minimum
Interest Charge") during the term of this Agreement, and the Borrowers
shall pay any deficiency between the Minimum Interest Charge and the
amount of interest otherwise calculated under Sections 2.8(a), 2.8(b),
or 2.8(c) on the date and in the manner provided in Section 2.10;
provided, however, that if the period for which the Minimum Interest
Charge is being calculated is shorter than one year, such amount shall
be prorated on a per diem basis for such shorter period.
(e) DEFAULT INTEREST RATE. At any time during any Default
Period, in the Lender's sole discretion and without waiving any of its
other rights and remedies, the principal of the Advances outstanding
from time to time shall bear interest at the Default Rate, effective
for any periods designated by the Lender from time to time during that
Default Period.
(f) PARTICIPATIONS. If any Person shall acquire a
participation in the Advances under this Agreement, the Borrower shall
be obligated to the Lender to pay the full amount of all interest
calculated under this Section 2.8, along with all other fees, charges
and other amounts due under this Agreement, regardless if such Person
elects to accept interest with respect to its participation at a lower
rate than the Revolving Floating Rate or the Term Floating Rate, or
otherwise elects to accept less than its prorata share of such fees,
charges and other amounts due under this Agreement.
(g) USURY. In any event no rate change shall be put into
effect which would result in a rate greater than the highest rate
permitted by law.
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Section 2.9 Fees.
(a) ORIGINATION FEE. The Borrower hereby agrees to pay the
Lender a fully earned and non-refundable origination fee in the amount
of $18,750, which fee is due and payable upon the execution of this
Agreement.
(b) UNUSED LINE FEE. For the purposes of this Section 2.11(b),
"Unused Amount" means the Maximum Line reduced by (i) outstanding
Revolving Advances and (ii) the L/C Amount. The Borrowers agree to pay
to the Lender an unused line fee at the rate of one-quarter of one
percent (0.25%) per annum on the average daily Unused Amount from the
date of this Agreement to and including the Termination Date, due and
payable monthly in arrears on the first day of the month and on the
Termination Date.
(C) AUDIT FEES. The Borrower hereby agrees to pay the Lender,
on demand, audit fees in connection with any audits or inspections
conducted by the Lender of any Collateral or the Borrower's operations
or business at the rates established from time to time by the Lender as
its audit fees (which fees are currently $70 per hour per auditor),
together with all actual out-of-pocket costs and expenses incurred in
conducting any such audit or inspection, such audits shall be
conducted, at the least, on a quarterly basis; provided, however, that
the Borrowers shall not have to reimburse the Lender for such fees,
costs and expenses incurred during the Inactive Period except for
audits conducted at the Borrowers' request to bring the Inactive Period
to an end. In addition, except during Default Periods, the Borrowers
shall not have to reimburse the Lender for such fees, costs and
expenses to the extent they exceed $80,000 (including audits during the
Inactive Period) during the period beginning on the date of this
Agreement and ending on the first anniversary of this Agreement. If
Center is sold, this limitation shall be renegotiated in a commercially
reasonable manner by the Lender and the Borrowers.
(d) LETTER OF CREDIT FEES. The Borrower agrees to pay the
Lender a fee with respect to each Letter of Credit, if any, accruing on
a daily basis and computed at the annual rate of two and one-half
percent (2.5%) of the aggregate amount that may then be drawn on all
issued and outstanding Letters of Credit assuming compliance with all
conditions for drawing thereunder (the "Aggregate Face Amount"), from
and including the date of issuance of such Letter of Credit until such
date as such Letter of Credit shall terminate by its terms or be
returned to the Lender, due and payable monthly in arrears on the first
day of each month and on the Termination Date; provided, however that
during Default Periods, in the Lender's sole discretion and without
waiving any of its other rights and remedies, such fee shall increase to
five and one-half percent (5.5%) of the Aggregate Face Amount. The
foregoing fee shall be in
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addition to any and all fees, commissions and charges of any Issuer of
a Letter of Credit with respect to or in connection with such Letter of
Credit
(e) LETTER OF CREDIT ADMINISTRATIVE FEES. The Borrower agrees
to pay the Lender, on demand, the administrative fees charged by the
Issuer in connection with the honoring of drafts under any Letter of
Credit, amendments thereto, transfers thereof and all other activity
with respect to the Letters of Credit at the then-current rates
published by the Issuer for such services rendered on behalf of
customers of the Issuer generally.
Section 2.10 Computation of Interest and Fees; When Interest
Due and Payable. Interest accruing on the outstanding principal balance of the
Advances and fees hereunder outstanding from time to time shall be computed on
the basis of actual number of days elapsed in a year of 360 days. Interest shall
be payable in arrears on the first day of each month and on the Termination
Date.
Section 2.11 Capital Adequacy.
If any Related Lender determines at any time that its Return
has been reduced as a result of any Rule Change, such Related Lender may require
the Borrower to pay it the amount necessary to restore its Return to what it
would have been had there been no Rule Change. For purposes of this Section
2.11:
(a) "Capital Adequacy Rule" means any law, rule, regulation,
guideline, directive, requirement or request regarding capital
adequacy, or the interpretation or administration thereof by any
governmental or regulatory authority, central bank or comparable
agency, whether or not having the force of law, that applies to any
Related Lender. Such rules include rules requiring financial
institutions to maintain total capital in amounts based upon
percentages of outstanding loans, binding loan commitments and letters
of credit.
(b) "L/C Rule" means any law, rule, regulation, guideline,
directive, requirement or request regarding letters of credit, or the
interpretation or administration thereof by any governmental or
regulatory authority, central bank or comparable agency, whether or not
having the force of law, that applies to any Related Lender. Such rules
include rules imposing taxes, duties or other similar charges, or
mandating reserves, special deposits or similar requirements against
assets of, deposits with or for the account of, or credit extended by
any Related Lender, on letters of credit.
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(c) "Related Lender" includes (but is not limited to) the
Lender, any parent corporation of the Lender and any assignee of any
interest of the Lender hereunder and any participant in the loans made
hereunder.
(d) "Return" for any period, means the return as determined by
a Related Lender on the Advances and Letters of Credit based upon its
total capital requirements and a reasonable attribution formula that
takes account of the Capital Adequacy Rules and the L/C Rules then in
effect, costs of issuing or maintaining any Letter of Credit and
amounts received or receivable under this Agreement or the Notes with
respect to any Advance or Letter of Credit. Return may be calculated
for each calendar quarter and for the shorter period between the end of
a calendar quarter and the date of termination of whole of this
Agreement.
(e) "Rule Change" means any change in any Capital Adequacy
Rule or L/C Rule occurring after the date of this Agreement, but the
term does not include any changes in applicable requirements that at
the Closing Date are scheduled to take place under the existing capital
Adequacy Rules or L/C Rules or any increases in the capital that any
Related Lender is required to maintain to the extent that the increases
are required due to a regulatory authority's assessment of the
financial condition of such Related Lender.
The Lender will promptly notify the Borrower of any event of which it has
knowledge, occurring after the date hereof, which will entitle the Lender to
compensation pursuant to this Section 2.11. Certificates of any Related Lender
sent to the Borrower from time to time claiming compensation under this Section
2.11, stating the reason therefor and setting forth in reasonable detail the
calculation of the additional amount or amounts to be paid to the Related Lender
hereunder to restore its Return shall be conclusive absent manifest error. In
determining such amounts, the Related Lender may use any reasonable averaging
and attribution methods.
Section 2.12 Voluntary Prepayment; Reduction of the Maximum
Line; Termination of the Credit Facility by the Borrower. Except as otherwise
provided herein, each Borrower may prepay the Revolving Advances made to it in
whole at any time or from time to time in part. Diamond may prepay the Term Loan
A Advances (other than in accordance with Section 2.4) or prepay the Term Loan B
Advances (other than in accordance with Section 2.6), or Heska may terminate the
Credit Facility or reduce the Maximum Line at any time if it (i) gives the
Lender at least 30 days' prior written notice and (ii) pays the Lender the
prepayment, termination or line reduction fees in accordance with Section 2.13.
Any prepayment of the Term Loan A Advances (other than in accordance with
Section 2.4), any prepayment of the Term Loan B Advances (other than in
accordance with Section 2.6), or reduction in the Maximum Line must be in an
amount not less than $250,000 or an integral multiple thereof. If the Borrower
reduces the Maximum Line to zero, all Obligations
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shall be immediately due and payable. Any partial prepayments of the Term Loan A
Note (other than in accordance with Section 2.4), and any partial prepayments of
the Term Loan B Note (other than in accordance with Section 2.6), shall be
applied to principal payments due and owing in inverse order of their
maturities. Upon termination of the Credit Facility and payment and performance
of all Obligations, the Lender shall release or terminate the Security Interest
and the Security Documents to which the Borrowers are entitled by law.
Section 2.13 Termination, Line Reduction and Prepayment Fees;
Waiver of Termination, Prepayment and Line Reduction Fees.
(a) TERMINATION AND LINE REDUCTION FEES. If the Credit
Facility is terminated for any reason as of a date other than the
Maturity Date, or Heska reduces the Maximum Line, the Borrowers shall
pay the Lender a fee in an amount equal to one percent (1.0%) of the
Maximum Line (or the reduction, as the case may be).
(b) PREPAYMENT FEES. If the Term Loan A Note or the Term Loan
B Note is prepaid for any reason except in accordance with Sections 2.4
and 2.6, respectively, the Borrowers shall pay to the Lender a fee in
an amount equal to one percent (1.0%) of the amount prepaid.
(c) WAIVER OF TERMINATION AND LINE REDUCTION FEES. The
Borrowers will not be required to pay the termination or line reduction
fees otherwise due under this Section 2.13 if such termination or line
reduction is made (i) because of refinancing of the Borrowers by an
affiliate of the Lender, (ii) within 60 days after any demand for
payment upon any Borrower in accordance with Section 2.11, or (iii)
within 60 days after any Discretionary Reduction Date.
Section 2.14 Mandatory Prepayment. Without notice or demand,
if the outstanding principal balance of the Revolving Advances shall at any time
exceed the Borrowing Base, the Borrower shall immediately (or, to the extent
such condition is a result of a Discretionary Reduction, within 5 Business Days)
prepay the Revolving Advances to the extent necessary to eliminate such excess.
Any payment received by the Lender under Section 2.12 may be applied to the
Obligations, in such order and in such amounts as the Lender, in its discretion,
may from time to time determine; provided that any prepayment under Section 2.12
which the Borrower designates as a payment of the Revolving Advances, shall be
applied to the Revolving Advances; provided, further, that any prepayment under
Section 2.12 which the Borrower designates as a partial prepayment of the Term
Loan A Note or the Term Loan B Note, shall be applied to principal installments
of the Term Loan A Note or the Term Loan B Note respectively, in inverse order
of maturity.
Section 2.15 Payment. All payments to the Lender shall be made
in immediately available funds and shall be applied to the Obligations upon
receipt by the
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Lender. The Lender may hold all payments not constituting immediately available
funds for three (3) days before applying them to the Obligations.
Notwithstanding anything in Section 2.2, the Borrower hereby authorizes the
Lender, in its discretion at any time or from time to time without the
Borrower's request and even if the conditions set forth in Section 4.2 would not
be satisfied, to make a Revolving Advance in an amount equal to the portion of
the Obligations from time to time due and payable.
Section 2.16 Payment on Non-Banking Days. Whenever any payment
to be made hereunder shall be stated to be due on a day which is not a Banking
Day, such payment may be made on the next succeeding Banking Day, and such
extension of time shall in such case be included in the computation of interest
on the Advances or the fees hereunder, as the case may be.
Section 2.17 Liability Records. The Lender may maintain from
time to time, at its discretion, liability records as to the Obligations. All
entries made on any such record shall be presumed correct until the Borrower
establishes the contrary. Upon the Lender's demand, the Borrower will admit and
certify in writing the exact principal balance of the Obligations that the
Borrower then asserts to be outstanding. Any billing statement or accounting
rendered by the Lender shall be conclusive and fully binding on the Borrower
unless the Borrower gives the Lender specific written notice of exception within
30 days after receipt.
Section 2.18 Issuance of Letters of Credit.
(a) Upon any Borrower's Request the Lender shall cause an
Issuer to issue, from the Funding Date to the Termination Date, one or
more documentary letters of credit (each, a "Letter of Credit") for
such Borrower's account, provided that:
(i) The Lender shall have no obligation to cause an
Issuer to issue any Letter of Credit for the benefit of the
Borrower if (A) a Default Period exists, or (B) the face
amount of the Letter of Credit to be issued would exceed the
lesser of:
(1) $500,000 less the L/C Amount, or
(2) the Borrowing Base less the sum of (a)
all outstanding and unpaid Revolving Advances and (b)
the L/C Amount.
Each Letter of Credit, if any, shall be issued pursuant to a
separate L/C Application entered by the Borrower and the
Lender for the benefit of the Issuer, completed in a manner
satisfactory to the Lender and the Issuer. The terms and
conditions set forth in each such L/C Application shall
supplement the terms and conditions hereof, but if the terms
of any such L/C Application
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and the terms of this Agreement are inconsistent, the terms
hereof shall control.
(b) No Letter of Credit shall be issued with an expiry date
later than the Maturity Date.
(c) Any request for the issuance of a Letter of Credit under
this Section 2.18 shall be deemed to be a representation by the
Borrower that the statements set forth in Section 4.2 hereof are
correct as of the time of the request.
Section 2.19 Payment of Amounts Drawn Under Letters of Credit.
The Borrower acknowledges that the Lender, as co-applicant, will be liable to
the Issuer of any Letter of Credit for reimbursement of any and all draws
thereunder and all other amounts required to be paid under the applicable L/C
Application. Accordingly, the Borrower agrees to pay to the Lender any and all
amounts required to be paid under the applicable L/C Application, when and as
required to be paid thereby, and the amounts designated below, when and as
designated:
(a) The Borrower hereby agrees to pay the Lender on the day a
draft is honored under any Letter of Credit a sum equal to all amounts
drawn under such Letter of Credit plus any and all reasonable charges
and expenses that the Issuer or the Lender may pay or incur relative to
such draw, plus interest on all such amounts, charges and expenses as
set forth below (all such amounts are hereinafter referred to as the
"Obligation of Reimbursement").
(b) The Borrower hereby agrees to pay the Lender on demand
interest on all amounts, charges and expenses payable by the Borrower
to the Lender under this Section 2.19, accrued from the date any such
draft, charge or expense is paid by the Issuer until payment in full by
the Borrower at the Revolving Floating Rate.
If the Borrower fails to pay to the Lender promptly the amount of its
Obligation of Reimbursement in accordance with the terms hereof and the
L/C Application pursuant to which such Letter of Credit was issued, the
Lender is hereby irrevocably authorized and directed, in its sole
discretion, to make a Revolving Advance in an amount sufficient to
discharge the Obligation of Reimbursement, including all interest
accrued thereon but unpaid at the time of such Revolving Advance, and
such Revolving Advance shall be evidenced by the Revolving Note and
shall bear interest as provided in Section 2.8 hereof.
Section 2.20 Special Account. If this Credit Facility is
terminated for any reason whatsoever, while any Letter of Credit is outstanding,
the Borrower shall thereupon pay the Lender in immediately available funds for
deposit in the Special Account an amount
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equal to the maximum aggregate amount available to be drawn under all Letters of
Credit then outstanding, assuming compliance with all conditions for drawing
thereunder. The Special Account shall be maintained for the Lender by any
financial institution acceptable to the Lender. Any interest earned on amounts
deposited in the Special Account shall be credited to the Special Account.
Amounts on deposit in the Special Account may be applied by the Lender at any
time or from time to time to the Borrower's Obligation of Reimbursement or any
other Obligations, in the Lender's sole discretion, and shall not be subject to
withdrawal by the Borrower so long as the Lender maintains a security interest
therein. The Lender agrees to transfer any balance in the Special Account to the
Borrower at such time as the Lender is required to release its security interest
in the Special Account under applicable law.
Section 2.21 Obligations Absolute. The obligations of the
Borrower arising under Section 2.18 shall be absolute, unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement, under all circumstances whatsoever, including (without limitation)
the following circumstances:
(a) any lack of validity or enforceability of any Letter of
Credit or any other agreement or instrument relating to any Letter of
Credit (collectively the "Related Documents");
(b) any amendment or waiver of or any consent to departure
from all or any of the Related Documents;
(c) the existence of any claim, setoff, defense or other right
which the Borrower may have at any time, against any beneficiary or any
transferee of any Letter of Credit (or any persons or entities for whom
any such beneficiary or any such transferee may be acting), or other
person or entity, whether in connection with this Agreement, the
transactions contemplated herein or in the Related Documents or any
unrelated transactions;
(d) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever;
(e) payment by or on behalf of the Issuer or the Lender under
any Letter of Credit against presentation of a draft or certificate
which does not strictly comply with the terms of such Letter of Credit;
or
(f) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
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ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 3.1 Grant of Security Interest. The Borrower hereby
pledges, assigns and grants to the Lender a security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for the
payment and performance of the Obligations; provided, however, that no security
interest is granted in any Collateral specifically identified in the financing
statements filed by the Other Lenders (the "Other Lender's Collateral");
provided, further, that the Borrower does grant a security interest in the Other
Lender's Collateral after the related debt on such specific Other Lender's
Collateral owed to the respective Other Lender has been satisfied, other than
through a permitted secured refinancing of such indebtedness with another Other
Lender.
Section 3.2 Notification of Account Debtors and Other
Obligors. The Lender may during any Default Period notify any account debtor or
other person obligated to pay the amount due that such right to payment has been
assigned or transferred to the Lender for security and shall be paid directly to
the Lender. The Borrower will join in giving such notice if the Lender so
requests. At any time after the Borrower or the Lender gives such notice to an
account debtor or other obligor, the Lender may, but need not, in the Lender's
name or in the Borrower's name, (a) demand, xxx for, collect or receive any
money or property at any time payable or receivable on account of, or securing,
any such right to payment, or grant any extension to, make any compromise or
settlement with or otherwise agree to waive, modify, amend or change the
obligations (including collateral obligations) of any such account debtor or
other obligor; and (b) as the Borrower's agent and attorney-in-fact, notify the
United States Postal Service to change the address for delivery of the
Borrower's mail to any address designated by the Lender, otherwise intercept the
Borrower's mail, and receive, open and dispose of the Borrower's mail, applying
all Collateral as permitted under this Agreement and holding all other mail for
the Borrower's account or forwarding such mail to the Borrower's last known
address.
Section 3.3 Assignment of Insurance. As additional security
for the payment and performance of the Obligations, the Borrower hereby assigns
to the Lender any and all monies (including, without limitation, proceeds of
insurance and refunds of unearned premiums) due or to become due under, and all
other rights of the Borrower with respect to, any and all policies of insurance
now or at any time hereafter covering the Collateral, to the extent such rights
may be assigned in accordance with such policies, or any evidence thereof or any
business records or valuable papers pertaining thereto, and the Borrower hereby
directs the issuer of any such policy to pay all such monies directly to the
Lender. At any time, after and during the continuance of an Event of Default,
the Lender may (but need not),
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in the Lender's name or in the Borrower's name, execute and deliver proof of
claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.
Section 3.4 Occupancy
(a) The Borrower hereby irrevocably grants to the Lender the
right to take exclusive possession of the Premises at any time during a
Default Period.
(b) The Lender may use the Premises only to hold, process,
manufacture, sell, use, store, liquidate, realize upon or otherwise
dispose of goods that are Collateral and for other purposes that the
Lender may in good xxxxx xxxx to be related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and
terminate upon the earlier of (i) payment in full and discharge of all
Obligations and termination of the Commitment, and (ii) final sale or
disposition of all goods constituting Collateral and delivery of all
such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for
any rent or other compensation for the possession, occupancy or use of
any of the Premises; provided, however, that if the Lender does pay or
account for any rent or other compensation for the possession,
occupancy or use of any of the Premises, the Borrower shall reimburse
the Lender promptly for the full amount thereof. In addition, the
Borrower will pay, or reimburse the Lender for, all taxes, fees,
duties, imposts, charges and expenses at any time incurred by or
imposed upon the Lender by reason of the execution, delivery,
existence, recordation, performance or enforcement of this Agreement or
the provisions of this Section 3.4.
Section 3.5 License. The Borrower hereby grants to the Lender
a non-exclusive, worldwide and royalty-free license to use or otherwise exploit
all trademarks, franchises, trade names, copyrights and patents of the Borrower
for the purpose of selling, leasing or otherwise disposing of any or all
Collateral during any Default Period. Notwithstanding the foregoing, such grant
shall not constitute an assignment of any Intellectual Property License to the
extent granting such a license is prohibited by or would constitute a default
under any such Intellectual Property License (but only to the extent such
prohibition is enforceable under applicable law).
Section 3.6 Financing Statement. A carbon, photographic or
other reproduction of this Agreement or of any financing statements signed by
the Borrower is sufficient as a financing statement and may be filed as a
financing statement in any state to
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perfect the security interests granted hereby. For this purpose, the following
information is set forth:
Name and address of Debtors:
Heska Corporation
0000 Xxxxxxxx Xxxxxxx
Xxxx Xxxxxxx, Xxxxxxxx 00000
Federal Tax Identification No. 00-0000000
Diamond Animal Health, Inc.
0000 00xx Xxxxxx XX
Xxx Xxxxxx, Xxxx 00000
Federal Tax Identification No. 00-0000000
Center Laboratories, Inc.
00 Xxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, Xxx Xxxx 00000
Federal Tax Identification No. 00-0000000
Name and address of Secured Party:
Xxxxx Fargo Business Credit, Inc.
MAC C7300-300
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
Federal Tax Identification No. 00-0000000
Section 3.7 Setoff. The Borrower agrees that the Lender may at
any time or from time to time during any Default Period, at its sole discretion
and without demand and without notice to anyone, setoff any liability owed to
the Borrower by the Lender, whether or not due, against any Obligation, whether
or not due. In addition, whether or not a Default Period exists, each other
Person holding a participating interest in any Obligations shall have the right
to appropriate or setoff any deposit or other liability then owed by such Person
to the Borrower, whether or not due, and apply the same to the payment of said
participating interest, as fully as if such Person had lent directly to the
Borrower the amount of such participating interest.
Section 3.8 Security Interest in Special Account. The Borrower
hereby pledges, and grants to the Lender a security interest in, all funds held
in the Special Account from time to time and all proceeds thereof, as security
for the payment of all Obligations.
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ARTICLE IV
CONDITIONS OF LENDING
Section 4.1 Conditions Precedent to the Initial Revolving and
Term Advances. The Lender's obligation to make the initial Advance hereunder
shall be subject to the condition precedent that the Lender shall have received
all of the following, each in form and substance satisfactory to the Lender:
(a) This Agreement, properly executed by each Borrower.
(b) The Notes, properly executed by the appropriate Borrowers.
(c) A true and correct copy of any and all leases pursuant to
which any Borrower is leasing the Premises, together with a landlord's
disclaimer and consent with respect to each such lease.
(d) A Patent and Trademark Security Agreement with respect to
its registered trademarks, executed by Center.
(e) Separate Lockbox Agreements, executed by Center, Heska,
Regulus and Xxxxx Fargo Bank, NA.
(f) Amendments to the Farm Mortgage and the Factory Mortgage,
executed by the Borrower.
(g) With respect to each of the Mortgages, an endorsement to
bring down and make current the title insurance policy previously
issued for the benefit of the Lender and any documents required by the
title insurance company in connection therewith.
(h) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against any Borrower, (ii) no financing statements have been
filed and remain in effect against any Borrower except those financing
statements relating to Permitted Liens or to liens held by Persons who
have agreed in writing that upon receipt of proceeds of the Advances,
they will deliver UCC releases and/or terminations satisfactory to the
Lender, and (iii) the Lender has duly filed all financing statements
necessary to perfect the Security Interest, to the extent the Security
Interest is capable of being perfected by filing.
(i) A certificate of each Borrower's secretary or assistant
secretary certifying as to (i) the resolutions of such Borrower's
directors and if required,
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shareholders, authorizing the execution, delivery and performance of
the Loan Documents, (ii) such Borrower's articles of incorporation and
bylaws, and (iii) the signatures of such Borrower's officers or agents
authorized to execute and deliver the Loan Documents and other
instruments, agreements and certificates, including Advance requests,
on such Borrower's behalf.
(j) A current certificate issued by the Secretary of State of
the state of incorporation of each Borrower, certifying that such
Borrower is in compliance with all applicable organizational
requirements of such state.
(k) Evidence that each Borrower is duly licensed or qualified
to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it
makes such licensing or qualification necessary.
(l) A certificate of one of the Borrowers' officers confirming
the representations and warranties set forth in Article V.
(m) An opinion of counsel to the Borrowers, addressed to the
Lender.
(n) Separate guaranties, executed by each of Diamond and
Center.
(o) Certificates of the insurance required hereunder and under
the Mortgages, with all hazard insurance containing a lender's loss
payable endorsement in the Lender's favor and with all liability
insurance naming the Lender as an additional insured.
(p) An amendment to the Amended and Restated Security Interest
- Subordination Agreement dated as of August __, 1998, increasing the
principal amount allowed under the "Obligations" defined therein to at
least $13,102,500.13, executed by the City of Des Moines, Iowa, for the
benefit of Lender.
(q) Payment of the fees and commissions due through the date
of the initial Advance under Section 2.9 and expenses incurred by the
Lender through such date and required to be paid by the Borrower under
Section 9.8, including all legal expenses incurred through the date of
this Agreement.
(r) Such other documents as the Lender in its sole discretion
may require.
Section 4.2 Conditions Precedent to All Advances and Causing
All Letters of Credit to be Issued. The Lender will not consider a request for
any Advance or the issuance of any Letter of Credit unless on the date thereof:
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(a) the representations and warranties contained in Article V
hereof are correct on and as of such date of such Advance as though
made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date; and
(b) no event has occurred and is continuing, or would result
from such Advance or the issuance of such Letter of Credit, as the case
may be, which constitutes a Default or an Event of Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Each Borrower represents and warrants to the Lender as
follows:
Section 5.1 Corporate Existence and Power; Name; Chief
Executive Office; Inventory and Equipment Locations; Tax Identification Number.
Diamond is a corporation, duly organized, validly existing and in good standing
under the laws of the State of Iowa, Each of Heska and Center is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each Borrower is duly licensed or qualified to transact
business in all jurisdictions where the character of the property owned or
leased or the nature of the business transacted by it makes such licensing or
qualification necessary. No dissolution or termination of any Borrower has
occurred, and no notice of dissolution or articles of termination have been
filed with respect to any Borrower. Each Borrower has all requisite corporate
power and authority, to conduct its business, to own its properties and to
execute and deliver, and to perform all of its obligations under the Loan
Documents. Since 1994, each Borrower has done business solely under the names
set forth in Schedule 5.1 hereto. Each Borrower's chief executive office and
principal place of business is located at the address set forth under the name
of such Borrower in Schedule 5.1 hereto, and all of such Borrower's records
relating to its business or the Collateral are kept at that location. All
Inventory and Equipment is located at that location or at one of the other
locations set forth in Schedule 5.1 hereto. Each Borrower's tax identification
number is correctly set forth in Section 3.6 hereto.
Section 5.2 Authorization of Borrowing; No Conflict as to Law
or Agreements. The execution, delivery and performance by each Borrower of the
Loan Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of such Borrower's shareholders; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department,
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commission, board, bureau, agency or instrumentality, domestic or foreign, or
any third party, except such authorization, consent, approval, registration,
declaration, filing or notice as has been obtained, accomplished or given prior
to the date hereof; (iii) violate any provision of any law, rule or regulation
(including, without limitation, Regulation X of the Board of Governors of the
Federal Reserve System) or of any order, writ, injunction or decree presently in
effect having applicability to such Borrower or of such Borrower's articles of
incorporation and bylaws; (iv) result in a breach of or constitute a default
under any indenture or loan or credit agreement or any other material agreement,
lease or instrument to which such Borrower is a party or by which it or its
properties may be bound or affected; or (v) result in, or require, the creation
or imposition of any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature (other than the Security Interest)
upon or with respect to any of the properties now owned or hereafter acquired by
such Borrower.
Section 5.3 Legal Agreements.
(a) Immediately prior to execution of this Agreement, the Old
Credit Documents constituted the legal, valid and binding obligations
of Diamond, enforceable against Diamond in accordance with their
respective terms, subject to general principles of equity and the
effects of bankruptcy and insolvency laws applicable to creditors
generally. Diamond has no claim, defense or offset to enforcement of
the Old Credit Documents.
(b) This Agreement constitutes and, upon due execution by each
Borrower, the other Loan Documents will constitute the legal, valid and
binding obligations of such Borrower, enforceable against such Borrower
in accordance with their respective terms, subject to general
principles of equity and the effects of bankruptcy and insolvency laws
applicable to creditors generally.
Section 5.4 Subsidiaries. No Borrower has any Subsidiaries
except as set forth in Schedule 5.4.
Section 5.5 Financial Condition; No Adverse Change. Heska has
heretofore furnished to the Lender its consolidated and consolidating financial
statements and those statements fairly present the Borrowers' financial
condition on the dates thereof and the results of its operations and cash flows
for the periods then ended and were prepared in accordance with generally
accepted accounting principles (except for the absence of footnotes and subject
to normal year-end adjustments with respect to unaudited financial statements).
Since the date of the most recent financial statements, to the date hereof,
there has been no material adverse change in any Borrower's business, properties
or condition (financial or otherwise).
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Section 5.6 Litigation. Except as set forth in Schedule 5.6
hereto, there are no actions, suits or proceedings pending or, to any Borrower's
knowledge, threatened against or affecting any Borrower or the properties of any
Borrower before any court or governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, which, if determined adversely
to such Borrower, would have a material adverse effect on the financial
condition, properties or operations of such Borrower.
Section 5.7 Regulation U. No Borrower is engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no part of the proceeds of any Advance will be used
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
Section 5.8 Taxes. Each Borrower and its Affiliates have paid
or caused to be paid to the proper authorities when due all federal, state and
local taxes required to be withheld by each of them (other than (a) any such tax
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which proper reserves have been made, or (b) any
such taxes in an aggregate amount among all Borrowers less than $25,000 at any
given time). Each Borrower and its Affiliates have filed all federal, state and
local tax returns which to the knowledge of the officers of such Borrower or any
Affiliate, as the case may be, are required to be filed, and each Borrower and
its Affiliates have paid or caused to be paid to the respective taxing
authorities all taxes as shown on said returns or on any assessment received by
any of them to the extent such taxes have become due (other than (a) any such
tax whose amount, applicability or validity is being contested in good faith by
appropriate proceedings and for which proper reserves have been made, or (b) any
such taxes in an aggregate amount among all Borrowers less than $25,000 at any
given time).
Section 5.9 Titles and Liens. Each Borrower has good and
absolute title to all Collateral described in the collateral reports provided to
the Lender and all other Collateral, properties and assets (other than assets
identified as being subject to capital leases) reflected in the latest financial
statements referred to in Section 5.5 and all proceeds thereof, free and clear
of all mortgages, security interests, liens, adverse claims and encumbrances,
except for Permitted Liens. No financing statement naming any Borrower as debtor
is on file in any office except to perfect only Permitted Liens.
Section 5.10 Plans. Except as disclosed to the Lender in
writing prior to the date hereof, no Borrower nor any Affiliates of any Borrower
maintains or has maintained any Plan. To the best of its knowledge, no Borrower
nor any Affiliate of any Borrower has received any notice or has any knowledge
to the effect that it is not in full compliance with any of the requirements of
ERISA, except as set forth on Schedule 5.10. No Reportable Event or other fact
or circumstance which may have an adverse effect on the Plan's tax
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qualified status exists in connection with any Plan. No Borrower nor any
Affiliate of any Borrower has:
(a) Any accumulated funding deficiency within the meaning of
ERISA; or
(b) Any liability or knows of any fact or circumstances which
could result in any liability to the Pension Benefit Guaranty
Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than accrued
benefits which or which may become payable to participants or
beneficiaries of any such Plan).
Section 5.11 Default. Each Borrower is in compliance with all
provisions of all agreements, instruments, decrees and orders to which it is a
party or by which it or its property is bound or affected, the breach or default
of which could have a material adverse effect on any Borrower's financial
condition, properties or operations.
Section 5.12 Environmental Matters.
(a) Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(i) "Environmental Law" means any federal, state,
local or other governmental statute, regulation, law or
ordinance dealing with the protection of human health and the
environment.
(ii) "Hazardous Substances" means pollutants,
contaminants, hazardous substances, hazardous wastes,
petroleum and fractions thereof, and all other chemicals,
wastes, substances and materials listed in, regulated by or
identified in any Environmental Law.
(b) To each Borrower's best knowledge, except as previously
disclosed to Lender, there are not present in, on or under the Premises
any Hazardous Substances in such form or quantity as to create any
liability or obligation for any Borrower or for the Lender under common
law of any jurisdiction or under any Environmental Law, and no
Hazardous Substances have ever been stored, buried, spilled, leaked,
discharged, emitted or released in, on or under the Premises in such a
way as to create any such liability.
(c) Except as set forth in Schedule 5.12, to each Borrower's
best knowledge, no Borrower has disposed of Hazardous Substances in
such a manner as to create any liability under any Environmental Law.
(d) Except as previously disclosed to Lender, there are not
and there never have been any requests, claims, notices,
investigations, demands, administrative
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proceedings, hearings or litigation, relating in any way to the
Premises or any Borrower, alleging liability under, violation of, or
noncompliance with any Environmental Law or any license, permit or
other authorization issued pursuant thereto, which could create
liability to any Borrower in excess of $25,000. To each Borrower's best
knowledge, no such matter is threatened or impending.
(e) To each Borrower's best knowledge, except as previously
disclosed to Lender, each Borrower's businesses are and have in the
past always been conducted in accordance with all Environmental Laws
and all licenses, permits and other authorizations required pursuant to
any Environmental Law and necessary for the lawful and efficient
operation of such businesses are in the Borrowers' possession and are
in full force and effect. Except as set forth in Schedule 5.12, to each
Borrower's best knowledge, there is no threat that any permit required
under any Environmental Law will be withdrawn, terminated, limited or
materially changed.
(f) To each Borrower's best knowledge, except as previously
disclosed to Lender, the Premises are not and never have been listed on
the National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System or any similar federal,
state or local list, schedule, log, inventory or database.
(g) Except as set forth in Schedule 5.12, each Borrower has
delivered to Lender all environmental assessments, audits, reports,
permits, licenses and other documents describing or relating in any way
to the Premises or such Borrower's businesses to the extent in such
Borrower's possession or control.
Section 5.13 Submissions to Lender. All financial and other
information provided to the Lender by or on behalf of each Borrower in
connection with such Borrower's request for the credit facilities contemplated
hereby were true and correct in all material respects as of the date given and,
as to projections, valuations or proforma financial statements, presented, at
the time given, a good faith opinion as to such projections, valuations and
proforma condition and results. It is recognized by the Lender that projections
and forecasts provided by or on behalf of the Borrowers, although reflecting the
Borrowers' good faith projections or forecasts based on methods and data which
the Borrowers believe to be reasonable and accurate, are not to be viewed as
facts and that actual results during the periods covered by any such projections
and forecasts may (and are likely to) differ from the projected or forecasted
results. Notwithstanding the foregoing, it is recognized by the Borrowers that
the Lender will rely on, among other things, the Borrowers' projections in
setting financial covenants set forth in Articles VI and VII hereof, and nothing
in this Section 5.13 shall be construed as a waiver of the Lender's right to
rely on such covenants or to exercise its remedies in case of a breach of such
covenants.
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Section 5.14 Financing Statements. Each Borrower has provided
to the Lender signed financing statements sufficient when filed to perfect the
Security Interest and the other security interests created by the Security
Documents. When such financing statements are filed in the offices noted
therein, the Lender will have a valid and perfected security interest in all
Collateral and all other collateral described in the Security Documents which is
capable of being perfected by filing financing statements. None of the
Collateral or other collateral covered by the Security Documents is or will
become a fixture on real estate, unless a sufficient fixture filing is in effect
with respect thereto.
Section 5.15 Rights to Payment. To the best of each Borrower's
knowledge, except as disclosed to Lender, each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral or other collateral covered by the Security Documents is
(or, in the case of all future Collateral or such other collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in such Borrower's records pertaining thereto as being
obligated to pay such obligation.
Section 5.16 Financial Solvency. Both before and after giving
effect to all of the transactions contemplated in the Loan Documents, no
Borrower, and no Affiliate of any Borrower:
(a) was or will be insolvent, as that term is used and defined in
Section 101(32) of the United States Bankruptcy Code and Section 2 of the
Uniform Fraudulent Transfer Act;
(b) has unreasonably small capital or is engaged or about to engage in
a business or a transaction for which any remaining assets of such Borrower or
such Affiliate are unreasonably small;
(c) by executing, delivering or performing its obligations under the
Loan Documents or other documents to which it is a party or by taking any action
with respect thereto, intends to, nor believes that it will, incur debts beyond
its ability to pay them as they mature;
(d) by executing, delivering or performing its obligations under the
Loan Documents or other documents to which it is a party or by taking any action
with respect thereto, intends to hinder, delay or defraud either its present or
future creditors; and
(e) at this time contemplates filing a petition in bankruptcy or for an
arrangement or reorganization or similar proceeding under any law of any
jurisdiction, or, to the best knowledge of any Borrower, is the subject of any
actual, pending or threatened bankruptcy, insolvency or similar proceedings
under any law of any jurisdiction.
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ARTICLE VI
BORROWER'S AFFIRMATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, each Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
Section 6.1 Reporting Requirements. Heska will deliver, or
cause to be delivered, to the Lender each of the following, which shall be in
form and detail acceptable to the Lender:
(a) as soon as available, and in any event within 90 days
after the end of each fiscal year of Heska, Heska's audited financial
statements with the unqualified opinion of independent certified public
accountants selected by Heska and acceptable to the Lender, which
annual financial statements shall include Heska's balance sheet as at
the end of such fiscal year and the related statements of Heska's
income, retained earnings and cash flows for the fiscal year then
ended, prepared on a consolidating and consolidated basis to include
any Affiliates, all in reasonable detail and prepared in accordance
with GAAP, together with (i) copies of all management letters prepared
by such accountants and (ii) a certificate of Heska's chief financial
officer stating that to the best of his knowledge such financial
statements have been prepared in accordance with GAAP and whether or
not such officer has knowledge of the occurrence of any Default or
Event of Default hereunder and, if so, stating in reasonable detail the
facts with respect thereto;
(b) within 5 business days of filing with the United States
Securities and Exchange Commission, a copy of each of Heska's annual or
quarterly reports on forms 10K or 10Q;
(c) as soon as available and in any event within 20 days after
the end of each month (or, in the case of months that coincide with the
end of the Borrowers' fiscal quarter, within 30 days after the end of
such month), an unaudited/internal balance sheet and statement of
income and retained earnings of Heska as at the end of and for such
month and for the year to date period then ended, prepared on a
consolidated and consolidating basis in accordance with GAAP, subject
to year-end audit adjustments; and accompanied by a certificate of
Heska's chief financial officer, substantially in the form of Exhibit G
hereto, stating (i) that to the best of his knowledge such financial
statements have been prepared in accordance with GAAP and fairly
represent each Borrower's financial condition and the results of its
operations, subject to year-end audit adjustments, (ii) whether or not
such officer has knowledge of the occurrence of any Default or Event of
Default hereunder not
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theretofore reported and remedied and, if so, stating in reasonable
detail the facts with respect thereto, and (iii) all relevant facts in
reasonable detail to evidence, and the computations as to, whether or
not the Borrower is in compliance with the requirements set forth in
Sections 6.12, 6.13, 6.14, 6.15, and 7.10;
(d) weekly, or more frequently if the Lender so requires,
sales journals, collection reports, and credit memos of each Borrower;
(e) Except during the Inactive Period, monthly within 20 days
after the end of each month, agings of each Borrower's accounts
receivable and its accounts payable, an inventory certification report,
and a calculation of each Borrower's Accounts, Eligible Accounts,
Inventory and Eligible Inventory as at the end of such month or shorter
time period;
(f) at least 30 days before the beginning of each fiscal year
of Heska, the projected balance sheets and income statements for each
month of such year, each in reasonable detail, representing each
Borrower's good faith projections and certified by such Borrower's
chief financial officer as being the most accurate projections
available and identical to the projections used by such Borrower for
internal planning purposes, together with such supporting schedules and
information as the Lender may in its discretion require;
(g) immediately after the commencement thereof, notice in
writing of all litigation and of all proceedings before any
governmental or regulatory agency affecting any Borrower of the type
described in Section 5.12 or which seek a monetary recovery against any
Borrower in excess of $50,000;
(h) as promptly as practicable (but in any event not later
than five business days) after an officer of any Borrower obtains
knowledge of the occurrence of any breach, default or event of default
under any Security Document or any event which constitutes a Default or
Event of Default hereunder, notice of such occurrence, together with a
detailed statement by a responsible officer of such Borrower of the
steps being taken by such Borrower to cure the effect of such breach,
default or event;
(i) as soon as possible and in any event within 30 days after
any Borrower knows or has reason to know that any Reportable Event with
respect to any Plan has occurred, the statement of such Borrower's
chief financial officer setting forth details as to such Reportable
Event and the action which such Borrower proposes to take with respect
thereto, together with a copy of the notice of such Reportable Event to
the Pension Benefit Guaranty Corporation;
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(j) as soon as possible, and in any event within 10 days after
any Borrower fails to make any quarterly contribution required with
respect to any Plan under Section 412(m) of the Internal Revenue Code
of 1986, as amended, the statement of such Borrower's chief financial
officer setting forth details as to such failure and the action which
such Borrower proposes to take with respect thereto, together with a
copy of any notice of such failure required to be provided to the
Pension Benefit Guaranty Corporation;
(k) promptly upon knowledge thereof, notice of any loss of or
material damage to any Collateral or other collateral covered by the
Security Documents or of any substantial adverse change in the
Collateral or such other collateral or the prospect of payment thereof,
in each case involving a loss, damage or change of $50,000 of more;
(l) promptly upon their distribution, copies of all financial
statements, reports and proxy statements which the Borrower shall have
sent to its stockholders;
(m) promptly after the sending or filing thereof, copies of
all regular and periodic reports which any Borrower shall file with the
Securities and Exchange Commission or any national securities exchange;
(n) promptly upon filing, copies of the state and federal tax
returns and all schedules thereto of each Borrower;
(o) promptly upon knowledge thereof, notice of any Borrower's
violation of any law, rule or regulation, the non-compliance with which
could materially and adversely affect any Borrower's business or its
financial condition; and
(p) from time to time, with reasonable promptness, any and all
receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents
and delivery receipts for goods sold, and such other material, reports,
records or information as the Lender may request.
Section 6.2 Books and Records; Inspection and Examination.
Each Borrower will keep accurate books of record and account for itself
pertaining to the Collateral and pertaining to such Borrower's business and
financial condition and such other matters as the Lender may from time to time
request in which true and complete entries will be made in accordance with GAAP
and, upon the Lender's request, will permit any officer, employee, attorney or
accountant for the Lender to audit, review, make extracts from or copy any and
all corporate and financial books and records of such Borrower at all times
during ordinary business hours, to send and discuss with account debtors and
other obligors requests for verification of amounts owed to such Borrower, and
to discuss such Borrower's affairs with
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any of its directors, officers, employees or agents. Each Borrower will permit
the Lender, or its employees, accountants, attorneys or agents, to examine and
inspect any Collateral, other collateral covered by the Security Documents or
any other property of such Borrower at any time during ordinary business hours.
Section 6.3 Account Verification. The Lender may at any time
and from time to time send or require any Borrower to send requests for
verification of accounts or notices of assignment to account debtors and other
obligors. The Lender may also at any time and from time to time telephone
account debtors and other obligors to verify accounts.
Section 6.4 Compliance with Laws.
(a) Each Borrower will (i) comply with the requirements of
applicable laws and regulations, the non-compliance with which would
materially and adversely affect its business or its financial condition
and (ii) use and keep the Collateral, and require that others use and
keep the Collateral, only for lawful purposes, without violation of any
federal, state or local law, statute or ordinance.
(b) Without limiting the foregoing undertakings, each Borrower
specifically agrees that it will comply in all material respects with
all applicable Environmental Laws and obtain and comply with all
permits, licenses and similar approvals required by any Environmental
Laws, and will not generate, use, transport, treat, store or dispose of
any Hazardous Substances in such a manner as to create any material
liability or obligation under the common law of any jurisdiction or any
Environmental Law.
Section 6.5 Payment of Taxes and Other Claims; Payment of
Past-Due Accounts. Each Borrower will pay or discharge, when due, (a) all taxes,
assessments and governmental charges levied or imposed upon it or upon its
income or profits, upon any properties belonging to it (including, without
limitation, the Collateral) or upon or against the creation, perfection or
continuance of the Security Interest, prior to the date on which penalties
attach thereto, (b) all federal, state and local taxes required to be withheld
by it, and (c) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a lien or charge upon any properties of such
Borrower; provided, that no Borrower shall be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which proper reserves
have been made. Each Borrower will, at all times (except for the period of time
beginning on the date of this Agreement and ending 60 days prior to the end of
the Inactive Period) immediately pay all of its accounts payable that are 60
days or more past due. Each Borrower will at all times maintain its accounts
payable in accordance with the previous sentence.
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Section 6.6 Maintenance of Properties.
(a) Each Borrower will keep and maintain the Collateral, the
other collateral covered by the Security Documents and all of its other
properties necessary or useful in its business in good condition,
repair and working order (normal wear and tear excepted) and will from
time to time replace or repair any worn, defective or broken parts;
provided, however, that nothing in this Section 6.6 shall prevent any
Borrower from discontinuing the operation and maintenance of any of its
properties if such discontinuance is, in such Borrower's judgment,
desirable in the conduct of the Borrower's business and not
disadvantageous in any material respect to the Lender.
(b) Each Borrower will defend the Collateral against all
claims or demands of all persons (other than the Lender) claiming the
Collateral or any interest therein.
(c) Each Borrower will keep all Collateral and other
collateral covered by the Security Documents free and clear of all
security interests, liens and encumbrances except Permitted Liens.
Section 6.7 Insurance. Each Borrower will obtain and at all
times maintain insurance with insurers believed by such Borrower to be
responsible and reputable, in such amounts and against such risks as may from
time to time be reasonably required by the Lender, but in all events in such
amounts and against such risks as is usually carried by companies engaged in
similar business and owning similar properties in the same general areas in
which such Borrower operates. Without limiting the generality of the foregoing,
each Borrower will at all times keep all tangible Collateral insured against
risks of fire (including so-called extended coverage), theft, collision (for
Collateral consisting of motor vehicles) and such other risks and in such
amounts as the Lender may reasonably request, with any loss payable to the
Lender to the extent of its interest, and all policies of such insurance shall
contain a lender's loss payable endorsement for the Lender's benefit acceptable
to the Lender. All policies of liability insurance required hereunder shall name
the Lender as an additional insured.
Section 6.8 Preservation of Existence. Each Borrower will
preserve and maintain its existence and all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business and
shall conduct its business in an orderly, efficient and regular manner.
Section 6.9 Delivery of Instruments, etc. Upon request by the
Lender, each Borrower will promptly deliver to the Lender in pledge all
instruments, documents and chattel papers constituting Collateral, duly endorsed
or assigned by such Borrower.
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Section 6.10 Collateral Account.
(a) If, notwithstanding the instructions to debtors to make
payments to the Lockbox, any Borrower receives any payments on
Receivables, such Borrower shall deposit such payments into such
Borrower's Collateral Account. Until so deposited, such Borrower shall
hold all such payments in trust for and as the property of the Lender
and shall not commingle such payments with any of its other funds or
property; provided, however, that the foregoing shall not be construed
to allow the Lender to withhold any such payments after full payment
and discharge of all Obligations.
(b) Amounts deposited in any Collateral Account shall not bear
interest and shall not be subject to withdrawal by any Borrower, except
after full payment and discharge of all Obligations; provided, however,
that if the Borrowers' only outstanding Obligations are principal owing
under the Term Loan A Note and the Term Loan B Note, and if no such
principal amount is due, the Lender agrees to remit such amounts to
such Borrower's demand deposit account maintained with Xxxxx Fargo
Bank.
(c) All deposits in any Collateral Account shall constitute
proceeds of Collateral and shall not constitute payment of the
Obligations. The Lender shall from time to time within one Banking Day,
apply deposited funds in each Collateral Account to the payment of the
Obligations, in any order or manner of application satisfactory to the
Lender, by transferring such funds to the Lender's general account.
(d) All items deposited in any Collateral Account shall be
subject to final payment. If any such item is returned uncollected, the
Borrowers will immediately pay the Lender, or, for items deposited in a
Collateral Account, the bank maintaining such account, the amount of
that item, or such bank at its discretion may charge any uncollected
item to any commercial account or other account belonging to the
Borrower to whom the item was payable.
Section 6.11 Performance by the Lender. If any Borrower at any
time fails to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue for a
period of ten calendar days after the Lender gives such Borrower written notice
thereof (or in the case of the agreements contained in Sections 6.5, 6.7 and
6.10, immediately upon the occurrence of such failure, without notice or lapse
of time), the Lender may, but need not, perform or observe such covenant on
behalf and in the name, place and stead of such Borrower (or, at the Lender's
option, in the Lender's name) and may, but need not, take any and all other
actions which the Lender may reasonably deem necessary to cure or correct such
failure (including, without limitation, the payment of taxes, the satisfaction
of security interests, liens or encumbrances, the performance of obligations
owed to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing
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statements, and the endorsement of instruments); and such Borrower shall
thereupon pay to the Lender on demand the amount of all monies expended and all
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender,
together with interest thereon from the date expended or incurred at the
Revolving Floating Rate. To facilitate the Lender's performance or observance of
such covenants of the Borrowers, each Borrower hereby irrevocably appoints the
Lender, or the Lender's delegate, acting alone, as such Borrower's attorney in
fact (which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of such Borrower any and all instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and other agreements and writings required to be obtained,
executed, delivered or endorsed by such Borrower under this Section 6.11.
Section 6.12 Minimum Book Net Worth. Heska will maintain, on a
consolidated basis, as of each date listed below, its Book Net Worth at an
amount not less than the amount set forth opposite such date:
Period Minimum Book Net Worth
------ ----------------------
March 31, 2000 $34,609,000
April 30, 2000 $33,011,000
May 31, 2000 $31,399,000
June 30, 2000 $29,844,000
July 31, 2000 $27,828,000
August 31, 2000 $26,095,000
September 30, 2000 $24,915,000
October 31, 2000 $23,302,000
November 30, 2000 $22,110,000
December 31, 2000 and the
last day of each month thereafter $21,666,000
Section 6.13 Minimum Net Income. Heska will achieve, on a
consolidated basis, during each period described below, Net Income in an amount
not less than the amount set forth opposite such period (amounts in parentheses
denote negative numbers):
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Period Minimum Net Income
------ ------------------
Three months ending March 31, 2000 ($10,830,000)
Six months ending June 30, 2000 ($15,595,000)
Nine months ending September 30, 2000 ($20,524,000)
Twelve months ending December 31, 2000 ($23,773,000)
Section 6.14 Minimum Cash Balance. During the Inactive Period,
Heska shall maintain at all times, on a consolidated basis, Cash of not less
than $3,000,000. At all times thereafter, Heska shall maintain, on a
consolidated basis, its Liquidity at not less than $6,000,000.
Section 6.15 Minimum Individual Book Net Worth. Each Borrower
shall at all times maintain its Book Net Worth, calculated without regard to any
Subsidiary or other Affiliate, at an amount greater than zero.
Section 6.16 New Covenants. On or before December 31, 2000,
the Borrower and the Lender shall agree on new covenant levels for Sections
6.12, 6.13, 7.4(a)(v), and 7.10 for periods after such date. The new covenant
levels will be based on the Borrower's projections for such periods and shall be
no less stringent than the present levels. An Event of Default shall occur if
the new covenants are not agreed to by the above date.
ARTICLE VII
NEGATIVE COVENANTS
So long as the Obligations shall remain unpaid, or the Credit
Facility shall remain outstanding, each Borrower agrees that, without the
Lender's prior written consent:
Section 7.1 Liens. Such Borrower will not create, incur or
suffer to exist any mortgage, deed of trust, pledge, lien, security interest,
adverse claim, assignment or transfer (collectively, "Liens") upon or of any of
its assets, now owned or hereafter acquired, to secure any indebtedness;
excluding, however, from the operation of the foregoing, the following
(collectively, "Permitted Liens"):
(a) in the case of any of such Borrower's property which is
not Collateral or other collateral described in the Security Documents,
mortgages, deeds of trust, covenants, restrictions, rights, easements
and minor irregularities in title which do not materially interfere
with such Borrower's business or operations as presently conducted;
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(b) Liens in existence on the date hereof and listed in
Schedule 7.1 hereto;
(c) the Security Interest and Liens and security interests
created by the Security Documents;
(d) purchase money Liens given, simultaneously with or within
one hundred twenty (120) days after the acquisition or construction of
real property or tangible personal property (including vendor's rights
under purchase contracts under an agreement whereby title is retained
for the purpose of securing the purchase price thereof and lessors'
liens under capitalized lease obligations) or any Lien given to a
financial institution financing the acquisition or construction of the
real property or tangible personal property, on real property or
tangible personal property hereafter acquired or constructed and not
heretofore owned by any Borrower; provided, however, that in each such
case such Lien (i) does not exceed the amount paid for such acquisition
or construction, and (ii) is limited to such acquired or constructed
real or tangible personal property;
(e) carriers', mechanics', materialmen's, suppliers', and
other like Liens and charges arising in the ordinary course of business
securing obligations that are not incurred in connection with the
obtaining of any advance or credit and which are not overdue, or are
being contested in good faith by appropriate proceedings;
(f) Liens arising in connection with worker's compensation,
unemployment insurance and progress payments under government contracts
and liens securing the performance of bids, tenders, leases, contracts
(other than for the repayment of borrowed money), statutory
obligations, surety customs and appeal bonds and other obligations of
like nature, incurred, in each case, in the ordinary course of
business;
(g) judgment liens in existence in an amount not more than
$100,000;
(h) zoning restrictions, easements, licenses, encumbrances,
reservations, provisions, covenants, conditions, waivers, restrictions
on the use of property or minor irregularities of title (and with
respect to leasehold interests, mortgages, obligations, liens and other
encumbrances incurred, created, assumed or permitted to exist and
arising by, through or under a landlord or owner of the leased
property, with or without consent of the lessee) as normally exist with
respect to similar properties which do not in the aggregate materially
impair the use thereof in the operation of any Borrower's business;
(i) any preexisting Lien (whether or not assumed) on any real
property or tangible personal property hereafter acquired by any
Borrower; provided, however,
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that in each such case such Lien is limited to such acquired real or
tangible personal property; provided, further, that proceeds from a
Term Advance are not used to acquire such real property or tangible
personal property;
(j) extensions, renewals and replacements of the Liens
referred to in clause (b), (d) or (i) above; provided, any such
extension, renewal or replacement liens shall be limited to the
property or assets covered by the Lien extended, renewed or replaced;
(k) leases, subleases, licenses and sublicenses to third
parties of patents, patent applications, trademarks and copyrights, in
each case in the ordinary course of its business as currently
conducted; and
(l) Liens of brokers under brokerage agreements entered into
in the ordinary course of business as presently conducted.
Section 7.2 Indebtedness. Such Borrower will not incur,
create, assume or permit to exist any indebtedness or liability on account of
deposits or advances or any indebtedness for borrowed money or letters of credit
issued on such Borrower's behalf, or any other indebtedness or liability
evidenced by notes, bonds, debentures or similar obligations, except:
(a) indebtedness arising hereunder;
(b) indebtedness of such Borrower in existence on the date
hereof and listed in Schedule 7.2 hereto;
(c) indebtedness of such Borrower (i) relating to liens of
such Borrower permitted in accordance with Section 7.1, (ii) arising
out of guaranties of such Borrower permitted under Section 7.3, or
(iii) arising for such Borrower as a result of an investment in or loan
to such Borrower by another Borrower in accordance with Section 7.4.
(d) unsecured trade debt incurred, and cash advances received
from customers, in each case in the ordinary course of business;
(e) indebtedness of any Person existing at the time such
Person is merged with or into such Borrower, to the extent the Lender
consents to such merger in accordance with Section 7.7, and provided
that such Debt is not incurred in connection with or in contemplation
of such merger;
(f) extensions, renewals and replacements of the debt referred
to in clause (b) or (c) above; provided that any such extension,
renewal or replacement
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shall be in an amount not greater than, and on terms no less favorable
to such Borrower (other than interest rate increases) than, the amount
extended, renewed or replaced;
(g) other Debt in an amount not to exceed $100,000; and
(h) capital leases to the extent the entry into such leases
does not cause a Default or Event of Default hereunder.
Section 7.3 Guaranties. Such Borrower will not assume,
guarantee, endorse or otherwise become directly or contingently liable in
connection with any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by such Borrower
for deposit or collection or similar transactions in the ordinary
course of business;
(b) guaranties, endorsements and other direct or contingent
liabilities in connection with the obligations of other Persons, in
existence on the date hereof and listed in Schedule 7.3 hereto; and
(c) guaranties of the obligations of one Borrower given by
another Borrower.
Section 7.4 Investments and Subsidiaries.
(a) Such Borrower will not purchase or hold beneficially any
stock or other securities or evidences of indebtedness of, make or
permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any other Person, including
specifically but without limitation any partnership or joint venture,
except:
(i) investments in direct obligations of the United
States of America or any agency or instrumentality thereof
whose obligations constitute full faith and credit obligations
of the United States of America having a maturity of one year
or less, commercial paper issued by U.S. corporations rated
"A-1" or "A-2" by Standard & Poors Corporation or "P-1" or
"P-2" by Xxxxx'x Investors Service or certificates of deposit
or bankers' acceptances having a maturity of one year or less
issued by members of the Federal Reserve System having
deposits in excess of $100,000,000 (which certificates of
deposit or bankers' acceptances are fully insured by the
Federal Deposit Insurance Corporation);
(ii) advances or loans to such Borrower's officers
and employees not exceeding at any one time an aggregate of
$200,000;
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(iii) advances in the form of progress payments,
prepaid rent not exceeding two months or security deposits;
(iv) unless a Default Period exists or would exist
immediately after or as a result of any such loan, advance or
capital contribution, loans, advances or capital contributions
by Heska to any Subsidiary that is also a Borrower; provided,
however, that both before and after such advance or
contribution both Heska's Tangible Net Worth and such
Subsidiary's Tangible Net Worth must equal or exceed $100,000;
(v) unless a Default Period exists or would exist
immediately after or as a result of any such advance or
contribution, advances or contributions by Heska to any
Subsidiary that is not a Borrower; provided, however, that (A)
both before and after such advance or contribution Heska's
Tangible Net Worth must equal or exceed $100,000 and (B) all
contributions and advances made in reliance on this subsection
(v) shall not exceed $700,000 in the aggregate during the 2000
fiscal year;
(vi) investments, including investments in
Subsidiaries, existing on the date hereof and listed in
Schedule 7.4;
(vii) investments in the following items arising in
the ordinary course of business: (A) prepaid expenses and
negotiable instruments held for collection; (B) Accounts (and
Investments obtained in exchange or settlement of Accounts for
which the Borrower has determined that collection is not
likely); and (C) lease, utility and worker's compensation,
performance and other similar deposits;
(viii) unless a Default Period exists or would exist
immediately after or as a result of any such loan or advance,
loans or advances by any Subsidiary that is also a Borrower to
Heska; provided, however, that both before and after such loan
or advance both Heska's Tangible Net Worth and such
Subsidiary's Tangible Net Worth must equal or exceed $100,000.
(b) Such Borrower will not create or permit to exist any
Subsidiary; provided, however, that so long as no Default Period
exists, upon written request by such Borrower, the Lender shall not
withhold its consent to the creation of (i) any domestic subsidiary
provided such Borrower causes such subsidiary to deliver to the Lender
a guaranty, a security agreement, and UCC financing statements and
other documents requested by the Lender to create a first priority
security interest on behalf of the Lender, or to perfect such security
interest, in all assets of such subsidiary, or (ii) any foreign
subsidiary.
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Section 7.5 Dividends. Such Borrower will not declare or pay
any dividends (other than dividends payable solely in stock of such Borrower) on
any class of its stock or make any payment on account of the purchase,
redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly; provided,
however, that (A) any Subsidiary may pay dividends to Heska; provided, however,
that if such Subsidiary is also a Borrower such Subsidiary's Tangible Net Worth
both before and after such dividend must equal or exceed $100,000; and (B) if no
Default Period then exists or would occur immediately following or as a result
of such repurchase, Heska may repurchase capital stock of Heska held by any
employee provided Heska is required to do so pursuant to any employee equity
subscription agreement, stock ownership plan or stock option agreement in effect
from time to time; and provided further that the aggregate price paid for all
such repurchased, redeemed, acquired or retired capital shall not exceed
$100,000 during any fiscal year. Notwithstanding the foregoing, the exercise of
stock options for the purchase of Heska's capital stock shall not, by means of
any deemed repurchase of shares as a result of a cashless exercise or otherwise,
cause a breach of this Section 7.5.
Section 7.6 Sale or Transfer of Assets; Suspension of Business
Operations. Such Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than (A)
sale of Inventory in the ordinary course of business; (B) licenses and
sublicenses to third parties of patents, patent applications, trademarks and
copyrights, in each case in the ordinary course of its business as currently
conducted; (C) the sale of used equipment, provided that the aggregate amount of
any such sales of equipment shall not exceed $100,000 during any year, unless
the proceeds of such sales are delivered to the Lender for application against
the Obligations; (D) sales or other dispositions of Investments permitted by
Section 7.4; (E) sales of defaulted receivables to a collection agency in the
ordinary course of business; (F) other sales of assets with book value of not
more than $100,000 during any fiscal year, for fair and reasonable
consideration, to the extent such sale could not reasonably be expected to have
a material adverse effect; and (G) so long as the outstanding balance under the
Center Revolving Note is zero and no Advances have been made to any Borrower in
reliance on the assets of Center, a sale of substantially all the assets of
Center. Such Borrower will not in any manner transfer any property without prior
or present receipt of full and adequate consideration.
Section 7.7 Consolidation and Merger; Asset Acquisitions. Such
Borrower will not consolidate with or merge into any Person, or permit any other
Person to merge into it, or acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all the assets of any
other Person; provided, however, that the Lender will not unreasonably withhold
its consent to any merger or acquisition.
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Section 7.8 Restrictions on Nature of Business. Such Borrower
will not engage in any line of business materially different from that presently
engaged in by such Borrower and/or lines of business reasonably related or
supplementing thereto and will not purchase, lease or otherwise acquire assets
not related to its business.
Section 7.9 Accounting. Such Borrower will not adopt any
material change in accounting principles other than as required by GAAP, the
SEC, or NASDAQ. Such Borrower will not adopt, permit or consent to any change in
its fiscal year.
Section 7.10 Capital Expenditures. The Borrowers, together
with any Affiliates, will not incur or contract to incur, in the aggregate,
Capital Expenditures of more than $2,800,000 in the aggregate during the period
from January 1, 2000 through December 31, 2000.
Section 7.11 Discounts, etc. Such Borrower will not, following
and during the continuance of an Event of Default, if requested by the Lender,
grant any discount, credit or allowance to any customer of such Borrower or
accept any return of goods sold, or modify, amend, subordinate, cancel or
terminate the obligation of any account debtor or other obligor of such
Borrower.
Section 7.12 Defined Benefit Pension Plans. Such Borrower will
not adopt, create, assume or become a party to any defined benefit pension plan,
unless disclosed to the Lender pursuant to Section 5.10.
Section 7.13 Other Defaults. Such Borrower will not permit any
breach, default or event of default to occur under any note, loan agreement,
indenture, lease, mortgage, contract for deed, security agreement or other
contractual obligation binding upon such Borrower if the effect of such breach,
default or event of default is to permit the lender thereof to accelerate the
payment of $100,000 or more; provided, however, that such Borrower shall not be
in breach hereunder so long as such breach, default or event of default is being
contested in good faith by appropriate proceedings, for which proper reserves
have been made, and the Lender has been given written notice of such content.
Section 7.14 Place of Business; Name. Such Borrower will not
transfer its chief executive office or principal place of business, or move,
relocate, close or sell any business location. Such Borrower will not permit any
tangible Collateral or any records pertaining to the Collateral to be located in
any state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been,
filed in order to perfect the Security Interest. Such Borrower will not change
its name. Upon written request by any Borrower, after delivery by such Borrower
of (a) financing statements, financing statement amendments, and other documents
requested by the Lender for the purpose of perfecting or maintaining priority or
perfection of the Security
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Interest and the other security interests evidenced by the Security Documents,
and (b) searches and other proof requested by the Lender to evidence such
priority and perfection, the Lender shall grant its consent to (x) a relocation
of business locations or Collateral within the United States or (y) a change of
any Borrower's name.
Section 7.15 Organizational Documents. Such Borrower will not
become an S Corporation within the meaning of the Internal Revenue Code of 1986,
as amended.
ARTICLE VIII
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
Section 8.1 Events of Default. "Event of Default", wherever
used herein, means any one of the following events:
(a) default in the payment of the Obligations (other than the
Obligations specified in Section 8.1(b)) when they become due and
payable;
(b) default in the payment of any fees, commissions, costs or
expenses required to be paid by any Borrower under this Agreement or
any other Loan Document within 5 Business Days of the date they become
due and payable;
(c) default in the performance, or breach, of the covenants
contained in Section 6.4(a) or Section 6.6(a) of this Agreement if such
default remains unremedied 15 Business Days after its occurrence; or
default in the performance, or breach, of any other covenant or
agreement of any Borrower contained in this Agreement or any other Loan
Document;
(d) Any Borrower or any Guarantor shall be or become
insolvent, or admit in writing its or his inability to pay its or his
debts as they mature, or make an assignment for the benefit of
creditors; or any Borrower or any Guarantor shall apply for or consent
to the appointment of any receiver, trustee, or similar officer for it
or him or for all or any substantial part of its or his property; or
such receiver, trustee or similar officer shall be appointed without
the application or consent of such Borrower or such Guarantor, as the
case may be; or any Borrower or any Guarantor shall institute (by
petition, application, answer, consent or otherwise) any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it or him
under the laws of any jurisdiction; or any such proceeding shall be
instituted (by petition, application or otherwise) against any Borrower
or any such Guarantor; or any judgment, writ, warrant of attachment or
execution or similar process shall be issued or levied against a
substantial part of the property of any Borrower or any Guarantor;
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(e) A petition shall be filed by or against any Borrower or
any Guarantor under the United States Bankruptcy Code naming such
Borrower or such Guarantor as debtor;
(f) Any representation or warranty made by any Borrower in
this Agreement, by any Guarantor in any guaranty delivered to the
Lender, or by any Borrower (or any of its officers) or any Guarantor in
any agreement, certificate, instrument or financial statement or other
statement contemplated by or made or delivered pursuant to or in
connection with this Agreement or any such guaranty shall prove to have
been incorrect in any material respect when deemed to be effective;
(g) The rendering against any Borrower of a final judgment,
decree or order for the payment of money in excess of $100,000 and the
continuance of such judgment, decree or order unsatisfied and in effect
for any period of 30 consecutive days without a stay of execution;
(h) A default under any bond, debenture, note or other
evidence of indebtedness of any Borrower owed to any Person other than
the Lender, or under any indenture or other instrument under which any
such evidence of indebtedness has been issued or by which it is
governed, or under any lease of any of the Premises, and the expiration
of the applicable period of grace, if any, specified in such evidence
of indebtedness, indenture, other instrument or lease, if the effect of
such default is to permit the lender thereof to accelerate the payment
of indebtedness $100,000 or more;
(i) Any Reportable Event, which the Lender determines in good
faith might constitute grounds for the termination of any Plan or for
the appointment by the appropriate United States District Court of a
trustee to administer any Plan, shall have occurred and be continuing
30 days after written notice to such effect shall have been given to
such Borrower by the Lender; or a trustee shall have been appointed by
an appropriate United States District Court to administer any Plan; or
the Pension Benefit Guaranty Corporation shall have instituted
proceedings to terminate any Plan or to appoint a trustee to administer
any Plan; or any Borrower shall have filed for a distress termination
of any Plan under Title IV of ERISA; or any Borrower shall have failed
to make any quarterly contribution required with respect to any Plan
under Section 412(m) of the Internal Revenue Code of 1986, as amended,
which the Lender determines in good faith may by itself, or in
combination with any such failures that the Lender may determine are
likely to occur in the future, result in the imposition of a lien on
such Borrower's assets in favor of the Plan;
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(j) An event of default shall occur under any Security
Document or under any other security agreement, mortgage, deed of
trust, assignment or other instrument or agreement securing any
obligations of any Borrower hereunder or under any note;
(k) Except as permitted by Section 7.6 of this Agreement, any
Borrower shall liquidate, dissolve, terminate or suspend its business
operations or otherwise fail to operate its business in the ordinary
course, or sell all or substantially all of its assets, without the
Lender's prior written consent;
(l) Any Borrower shall fail to pay, withhold, collect or remit
any tax or tax deficiency when assessed or due (other than any tax
deficiency which is being contested in good faith and by proper
proceedings and for which it shall have set aside on its books adequate
reserves therefor) or notice of any state or federal tax liens shall be
filed or issued (unless such lien is being contested in good faith and
by proper proceedings and for which it shall have set aside on its
books adequate reserves therefor);
(m) Default in the payment of any amount owed by any Borrower
to the Lender, other than any indebtedness arising hereunder;
(n) Any Guarantor shall repudiate, purport to revoke or fail
to perform any such Guarantor's obligations under such Guarantor's
guaranty in favor of the Lender, or any Guarantor shall cease to exist;
(o) Any event or circumstance with respect to any Borrower
shall occur such that the Lender shall believe in good faith that the
prospect of payment of all or any part of the Obligations or the
performance by any Borrower under the Loan Documents is impaired or any
material adverse change in the business or financial condition of any
Borrower shall occur;
(p) Any Borrower shall take or participate in any action which
would be prohibited under the provisions of any Subordination Agreement
or make any payment on Subordinated Indebtedness (as defined in any
Subordination Agreement) that any Person was not entitled to receive
under the provisions of such Subordination Agreement; or
Section 8.2 Rights and Remedies. During any Default Period,
the Lender may exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to Heska, declare the Commitment
to be terminated, whereupon the same shall forthwith terminate;
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(b) the Lender may, by notice to Heska, declare the
Obligations to be forthwith due and payable, whereupon all Obligations
shall become and be forthwith due and payable, without presentment,
notice of dishonor, protest or further notice of any kind, all of which
each Borrower hereby expressly waives;
(c) the Lender may refuse to fund any requested Advance made
by any Borrower;
(d) the Lender may, without notice to any Borrower and without
further action, apply any and all money owing by the Lender to any
Borrower to the payment of the Obligations;
(e) the Lender may exercise and enforce any and all rights and
remedies available upon default to a secured party under the UCC,
including, without limitation, the right to take possession of
Collateral, or any evidence thereof, proceeding without judicial
process or by judicial process (without a prior hearing or notice
thereof, which each Borrower hereby expressly waives) and the right to
sell, lease or otherwise dispose of any or all of the Collateral, and,
in connection therewith, each Borrower will on demand assemble the
Collateral and make it available to the Lender at a place to be
designated by the Lender which is reasonably convenient to both
parties;
(f) the Lender may exercise and enforce its rights and
remedies under the Loan Documents; and
(g) the Lender may exercise any other rights and remedies
available to it by law or agreement.
Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (d) or (e) of Section 8.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind.
Section 8.3 Certain Notices. If notice to any Borrower of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 9.5) at least ten
calendar days before the date of intended disposition or other action.
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ARTICLE IX
MISCELLANEOUS
Section 9.1 Restatement of Old Credit Documents. This
Agreement is executed for the purpose of amending and restating the Old Credit
Documents.
Section 9.2 Release. Each Borrower hereby absolutely and
unconditionally releases and forever discharges the Lender, the Participants and
any and all parent corporations, subsidiary corporations, affiliated
corporations, insurers, indemnitors, successors and assigns thereof, together
with all of the present and former directors, officers, agents and employees of
any of the foregoing, from any and all claims, demands or causes of action of
any kind, nature or description relating to the transactions contemplated by
this Agreement, whether arising in law or equity or upon contract or tort or
under any state or federal law or otherwise, which such Borrower has had or has
made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Agreement, whether such claims, demands and
causes of action are matured or unmatured or known or unknown. For greater
certainty, nothing herein shall constitute a release by any Borrower of any
Person for any such claim, demand or cause of action arising after the date of
this Agreement.
Section 9.3 No Waiver; Cumulative Remedies. No failure or
delay by the Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law.
Section 9.4 Amendments, Etc. No amendment, modification,
termination or waiver of any provision of any Loan Document or consent to any
departure by any Borrower therefrom or any release of a Security Interest shall
be effective unless the same shall be in writing and signed by the Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No notice to or demand on any Borrower
in any case shall entitle such Borrower to any other or further notice or demand
in similar or other circumstances.
Section 9.5 Addresses for Notices, Etc. Except as otherwise
expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below:
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If to the Borrowers:
Heska Corporation
0000 Xxxxxxxx Xxxxxxx
Xxxx Xxxxxxx, Xxxxxxxx 00000
Telecopier: (000) 000-0000
Attention: Chief Financial Officer
If to the Lender:
Xxxxx Fargo Business Credit, Inc.
MAC C7300-300
0000 Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
Telecopier: 000-000-0000
Attention: Xxxxxxx Xxxxxx
or, as to each party, at such other address or telecopier number as may
hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if sent by overnight courier, or (d) the
date of transmission if delivered by telecopy, except that notices or requests
to the Lender pursuant to any of the provisions of Article II shall not be
effective until received by the Lender.
Section 9.6 Further Documents. Each Borrower will from time to
time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements and other
agreements and writings that the Lender may reasonably request in order to
secure, protect, perfect or enforce the Security Interest or the Lender's rights
under the Loan Documents (but any failure to request or assure that any Borrower
executes, delivers or endorses any such item shall not affect or impair the
validity, sufficiency or enforceability of the Loan Documents and the Security
Interest, regardless of whether any such item was or was not executed, delivered
or endorsed in a similar context or on a prior occasion).
Section 9.7 Collateral. This Agreement does not contemplate a
sale of accounts, contract rights or chattel paper, and, as provided by law,
each Borrower is entitled to any surplus and shall remain liable for any
deficiency. The Lender's duty of care with respect to Collateral in its
possession (as imposed by law) shall be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of
Collateral in
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the custody or possession of a bailee or other third person, exercises
reasonable care in the selection of the bailee or other third person, and the
Lender need not otherwise preserve, protect, insure or care for any Collateral.
The Lender shall not be obligated to preserve any rights any Borrower may have
against prior parties, to realize on the Collateral at all or in any particular
manner or order or to apply any cash proceeds of the Collateral in any
particular order of application.
Section 9.8 Costs and Expenses. Each Borrower, jointly and
severally, agrees to pay on demand all costs and expenses, including (without
limitation) reasonable attorneys' fees, incurred by the Lender in connection
with the Obligations, this Agreement, the Loan Documents, and any other document
or agreement related hereto or thereto, and the transactions contemplated
hereby, including without limitation all such costs, expenses and fees incurred
in connection with the negotiation, preparation, execution, amendment,
administration, performance, collection and enforcement of the Obligations and
all such documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.
Section 9.9 Indemnity. In addition to the payment of expenses
pursuant to Section 9.8, each Borrower, jointly and severally, agrees to
indemnify, defend and hold harmless the Lender, and any of its participants,
parent corporations, subsidiary corporations, affiliated corporations, successor
corporations, and all present and future officers, directors, employees,
attorneys and agents of the foregoing (the "Indemnitees") from and against any
of the following (collectively, "Indemnified Liabilities"):
(i) any and all transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by
reason of the execution and delivery of the Loan Documents or
the making of the Advances;
(ii) any claims, loss or damage to which any
Indemnitee may be subjected if any representation or warranty
contained in Section 5.12 proves to be incorrect in any
respect or as a result of any violation of the covenant
contained in Section 6.4(b); and
(iii) any and all other liabilities, losses, damages,
penalties, judgments, suits, claims, costs and expenses of any
kind or nature whatsoever (including, without limitation, the
reasonable fees and disbursements of counsel) in connection
with the foregoing and any other investigative, administrative
or judicial proceedings, whether or not such Indemnitee shall
be designated a party thereto, which may be imposed on,
incurred by or asserted against any such Indemnitee, in any
manner related to or arising out of or in connection with the
making of the Advances and the Loan Documents or the use or
intended use of the proceeds of the Advances;
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provided that no Borrower shall have any such obligation for any Indemnified
Liabilities arising from any act or omission by an Indemnitee which constitutes
gross negligence or willful misconduct. If any investigative, judicial or
administrative proceeding arising from any of the foregoing is brought against
any Indemnitee, upon such Indemnitee's request, each Borrower, or counsel
designated by any such Borrower and satisfactory to the Indemnitee, will resist
and defend such action, suit or proceeding to the extent and in the manner
directed by the Indemnitee, at such Borrower's sole costs and expense. Each
Indemnitee will use its best efforts to cooperate in the defense of any such
action, suit or proceeding. If the foregoing undertaking to indemnify, defend
and hold harmless may be held to be unenforceable because it violates any law or
public policy, each Borrower shall nevertheless make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Each Borrower's obligation under this Section
9.9 shall survive the termination of this Agreement and the discharge of such
Borrower's other obligations hereunder.
Section 9.10 Participants. The Lender and its participants, if
any, are not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of its
participants. All rights and powers specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns.
Section 9.11 Execution in Counterparts. This Agreement and
other Loan Documents may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.
Section 9.12 Binding Effect; Assignment; Complete Agreement;
Exchanging Information. The Loan Documents shall be binding upon and inure to
the benefit of the Borrowers and the Lender and their respective successors and
assigns, except that no Borrower shall have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement, together with the Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and supersedes
all prior agreements, written or oral, on the subject matter hereof. Without
limiting the Lender's right to share information regarding any Borrower and its
Affiliates with the Lender's participants (except that the Lender shall not
share any information with a participant that is a competitor, or an affiliate
of a competitor, of any such Borrower, in the area of researching, developing
and manufacturing animal health products), accountants, lawyers and other
advisors, the Lender, WFC Holdings Corporation, and all direct and indirect
subsidiaries of WFC Holdings Corporation, may exchange any and all information
they may have in their possession regarding any Borrower and its Affiliates, and
each Borrower waives any right of confidentiality it may have with respect to
such exchange of such information.
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Section 9.13 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
Section 9.14 Headings. Article and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
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Section 9.15 Governing Law; Jurisdiction, Venue; Waiver of
Jury Trial. The Loan Documents shall be governed by and construed in accordance
with the substantive laws (other than conflict laws) of the State of Colorado.
The parties hereto hereby (i) consent to the personal jurisdiction of the state
and federal courts located in the State of Colorado in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Lender or any Borrower in connection with this Agreement or the other Loan
Documents shall be venued in either the District Court for the City and County
of Denver, Colorado, or the United States District Court, District of Colorado;
and (iv) agree that a final judgment in any such suit, action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. THE PARTIES WAIVE ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO THIS
AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first above written.
XXXXX FARGO HESKA CORPORATION
BUSINESS CREDIT, INC.
By /s/Xxxxxxxx Xxxxxx By /s/Xxxxxx X. Xxxxxxxx
------------------------------ ----------------------
Xxxxxxx Xxxxxx, Assistant Xxxxxx X. Xxxxxxxx, Chief
Vice President Financial Officer
DIAMOND ANIMAL HEALTH, INC.
By /s/Xxxxxx X. Xxxxxxxx
----------------------
Xxxxxx X. Xxxxxxxx, Secretary
and Treasurer
CENTER LABORATORIES, INC.
By /s/Xxxxxx X. Xxxxxxxx
----------------------
Xxxxxx X. Xxxxxxxx, Secretary
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Table of Exhibits and Schedules
Exhibit A Form of Heska Revolving Note
Exhibit B Form of Diamond Revolving Note
Exhibit C Form of Center Revolving Note
Exhibit D Form of Term Loan A Note
Exhibit E Form of Term Loan B Note
Exhibit F Premises
Exhibit G Compliance Certificate
-------------------
Schedule 5.1 Trade Names, Chief Executive Office, Principal
Place of Business, and Locations of Collateral
Schedule 5.4 List of Subsidiaries
Schedule 5.6 Litigation
Schedule 5.10 Plans
Schedule 5.12 Environmental Matters
Schedule 7.1 Permitted Liens
Schedule 7.2 Permitted Indebtedness and Guaranties
Schedule 7.3 Guarantees
Schedule 7.4 Investments
61
Exhibit A to Amended and Restated Credit
and Security Agreement
REVOLVING NOTE
$10,000,000 Denver, Colorado
June ___, 2000
For value received, the undersigned, HESKA CORPORATION, a
Delaware corporation (the "Borrower"), hereby promises to pay on the Termination
Date under the Credit Agreement (defined below), to the order of XXXXX FARGO
BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), at its main
office in Denver, Colorado, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Ten Million Dollars
($10,000,000) or, if less, the aggregate unpaid principal amount of all
Revolving Advances made by the Lender to the Borrower under the Credit Agreement
(defined below) together with interest on the principal amount hereunder
remaining unpaid from time to time, computed on the basis of the actual number
of days elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Second Amended and
Restated Credit and Security Agreement of even date herewith (as the same may
hereafter be amended, supplemented or restated from time to time, the "Credit
Agreement") by and among the Lender, the Borrower, Diamond Animal Health, Inc.,
and Center Laboratories, Inc. The principal hereof and interest accruing thereon
shall be due and payable as provided in the Credit Agreement. This Note may be
prepaid only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is the Heska Revolving Note referred to in the Credit Agreement. This Note
is secured, among other things, pursuant to the Credit Agreement and the
Security Documents as therein defined, and may now or hereafter be secured by
one or more other security agreements, mortgages, deeds of trust, assignments or
other instruments or agreements.
The Borrower hereby agrees to pay all costs of collection,
including attorneys' fees and legal expenses in the event this Note is not paid
when due, whether or not legal proceedings are commenced.
62
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
HESKA CORPORATION
By
--------------------------------------
Xxxxxx X. Xxxxxxxx,
Chief Financial Officer
-2-
63
Exhibit B to Amended and Restated Credit
and Security Agreement
REVOLVING NOTE
$10,000,000 Denver, Colorado
June ___, 2000
For value received, the undersigned, DIAMOND ANIMAL HEALTH,
INC., an Iowa corporation ("Diamond") and HESKA CORPORATION, a Delaware
corporation (collectively, the "Borrowers"), hereby promise to pay on the
Termination Date under the Credit Agreement (defined below), to the order of
XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), at
its main office in Denver, Colorado, or at any other place designated at any
time by the holder hereof, in lawful money of the United States of America and
in immediately available funds, the principal sum of Ten Million Dollars
($10,000,000) or, if less, the aggregate unpaid principal amount of all
Revolving Advances made by the Lender to Diamond under the Credit Agreement
(defined below) together with interest on the principal amount hereunder
remaining unpaid from time to time, computed on the basis of the actual number
of days elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Second Amended and
Restated Credit and Security Agreement of even date herewith (as the same may
hereafter be amended, supplemented or restated from time to time, the "Credit
Agreement") by and among the Lender, the Borrowers, and Center Laboratories,
Inc. The principal hereof and interest accruing thereon shall be due and payable
as provided in the Credit Agreement. This Note may be prepaid only in accordance
with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. To the
extent this Note evidences the Borrower's Obligation to pay Existing Revolving
Advances, this Note is issued in substitution for and replacement of, but not in
payment of, Diamond's promissory note dated as of September 8, 1998, payable to
the order of the Lender in the original principal amount of $2,500,000. This
Note is the Diamond Revolving Note referred to in the Credit Agreement. This
Note is secured, among other things, pursuant to the Credit Agreement and the
Security Documents as therein defined, and may now or hereafter be secured by
one or more other security agreements, mortgages, deeds of trust, assignments or
other instruments or agreements.
64
The Borrower hereby agrees to pay all costs of collection,
including attorneys' fees and legal expenses in the event this Note is not paid
when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
DIAMOND ANIMAL HEALTH, INC. HESKA CORPORATION
By By
------------------------------- ---------------------------------------
Xxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx,
Secretary and Treasurer Chief Financial Officer
-2-
65
Exhibit C to Amended and Restated Credit
and Security Agreement
REVOLVING NOTE
$10,000,000 Denver, Colorado
June ___, 2000
For value received, the undersigned, CENTER LABORATORIES,
INC., a Delaware corporation ("Center") and HESKA CORPORATION, a Delaware
corporation (collectively, the "Borrowers"), hereby promise to pay on the
Termination Date under the Credit Agreement (defined below), to the order of
XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), at
its main office in Denver, Colorado, or at any other place designated at any
time by the holder hereof, in lawful money of the United States of America and
in immediately available funds, the principal sum of Ten Million Dollars
($10,000,000) or, if less, the aggregate unpaid principal amount of all
Revolving Advances made by the Lender to Center under the Credit Agreement
(defined below) together with interest on the principal amount hereunder
remaining unpaid from time to time, computed on the basis of the actual number
of days elapsed and a 360-day year, from the date hereof until this Note is
fully paid at the rate from time to time in effect under the Second Amended and
Restated Credit and Security Agreement of even date herewith (as the same may
hereafter be amended, supplemented or restated from time to time, the "Credit
Agreement") by and between the Lender, the Borrowers, and Diamond Animal Health,
Inc. The principal hereof and interest accruing thereon shall be due and payable
as provided in the Credit Agreement. This Note may be prepaid only in accordance
with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is the Center Revolving Note referred to in the Credit Agreement. This Note
is secured, among other things, pursuant to the Credit Agreement and the
Security Documents as therein defined, and may now or hereafter be secured by
one or more other security agreements, mortgages, deeds of trust, assignments or
other instruments or agreements.
The Borrowers hereby agree to pay all costs of collection,
including attorneys' fees and legal expenses in the event this Note is not paid
when due, whether or not legal proceedings are commenced.
66
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
CENTER LABORATORIES, INC. HESKA CORPORATION
By By
-------------------------------- ---------------------------------------
Xxxxxx X. Xxxxxxxx, Secretary Xxxxxx X. Xxxxxxxx,
Chief Financial Officer
-2-
67
Exhibit D to Amended and Restated Credit
and Security Agreement
TERM LOAN A NOTE
$1,040,000.13 Denver, Colorado
June 14, 2000
For value received, the undersigned, DIAMOND ANIMAL HEALTH,
INC., an Iowa corporation ("Diamond") and HESKA CORPORATION, a Delaware
corporation (collectively, the "Borrowers"), hereby promise to pay on the
Termination Date under the Credit Agreement (defined below), to the order of
XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), at
its main office in Denver, Colorado, or at any other place designated at any
time by the holder hereof, in lawful money of the United States of America and
in immediately available funds, the principal sum of One Million Forty Thousand
and 13/100 Dollars ($1,040,000.13) or, if less, the aggregate unpaid principal
amount of all Term Loan A Advances made by the Lender to Diamond under the
Credit Agreement (defined below) together with interest on the principal amount
hereunder remaining unpaid from time to time, computed on the basis of the
actual number of days elapsed and a 360-day year, from the date hereof until
this Note is fully paid at the rate from time to time in effect under the Second
Amended and Restated Credit and Security Agreement of even date herewith (as the
same may hereafter be amended, supplemented or restated from time to time, the
"Credit Agreement") by and among the Lender, the Borrowers, and Center
Laboratories, Inc. The principal hereof and interest accruing thereon shall be
due and payable as provided in the Credit Agreement. This Note may be prepaid
only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is issued in substitution for and replacement of, but not in payment of,
Diamond's Term Loan A Note dated as of September 8, 1998, payable to the order
of the Lender in the original principal amount of $1,600,000. This Note is the
Term Loan A Note referred to in the Credit Agreement. This Note is secured,
among other things, pursuant to the Credit Agreement and the Security Documents
as therein defined, and may now or hereafter be secured by one or more other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements.
68
The Borrower hereby agrees to pay all costs of collection,
including attorneys' fees and legal expenses in the event this Note is not paid
when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
DIAMOND ANIMAL HEALTH, INC. HESKA CORPORATION
By By
-------------------------------- ---------------------------------------
Xxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx,
Secretary and Treasurer Chief Financial Officer
-2-
69
Exhibit E to Amended and Restated Credit
and Security Agreement
TERM LOAN B NOTE
$2,062,500 Denver, Colorado
June ___, 2000
For value received, the undersigned, DIAMOND ANIMAL HEALTH,
INC., an Iowa corporation ("Diamond") and HESKA CORPORATION, a Delaware
corporation (collectively, the "Borrowers"), hereby promise to pay on the
Termination Date under the Credit Agreement (defined below), to the order of
XXXXX FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), at
its main office in Denver, Colorado, or at any other place designated at any
time by the holder hereof, in lawful money of the United States of America and
in immediately available funds, the principal sum of Two Million Sixty-Two
Thousand Five Hundred Dollars ($2,062,500) or, if less, the aggregate unpaid
principal amount of all Term Loan B Advances made by the Lender to Diamond under
the Credit Agreement (defined below) together with interest on the principal
amount hereunder remaining unpaid from time to time, computed on the basis of
the actual number of days elapsed and a 360-day year, from the date hereof until
this Note is fully paid at the rate from time to time in effect under the Second
Amended and Restated Credit and Security Agreement of even date herewith (as the
same may hereafter be amended, supplemented or restated from time to time, the
"Credit Agreement") by and among the Lender, the Borrowers, and Center
Laboratories, Inc. The principal hereof and interest accruing thereon shall be
due and payable as provided in the Credit Agreement. This Note may be prepaid
only in accordance with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit
Agreement, which provides, among other things, for acceleration hereof. This
Note is issued in substitution for and replacement of, but not in payment of,
Diamond's Term Loan B Note dated as of September 8, 1998, payable to the order
of the Lender in the original principal amount of $2,250,000. This Note is the
Term Loan B Note referred to in the Credit Agreement. This Note is secured,
among other things, pursuant to the Credit Agreement and the Security Documents
as therein defined, and may now or hereafter be secured by one or more other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements.
70
The Borrower hereby agrees to pay all costs of collection,
including attorneys' fees and legal expenses in the event this Note is not paid
when due, whether or not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor
and protest are expressly waived.
DIAMOND ANIMAL HEALTH, INC. HESKA CORPORATION
By By
-------------------------------- ---------------------------------------
Xxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx,
Secretary and Treasurer Chief Financial Officer
-2-
71
Exhibit F to Amended and Restated Credit
and Security Agreement
PREMISES
The Premises referred to in the Amended and Restated Credit
and Security Agreement are legally described as follows:
All of the Northeast 1/4 of the Southwest 1/4 of Section 17, Township 78 North,
Range 23 West of the Fifth Principal Meridian lying North and East of the
Chicago, Burlington & Quincy Railroad (formerly known as Des Moines & Knoxville
Railway and sometimes erroneously described as the Des Moines & Kansas City
Railway) now included in and forming a part of the City of Des Moines, Polk
County, Iowa, except the following:
The South 208 3/4 feet of the East 434 feet of said Northeast 1/4 of the
Southwest 1/4 of Section 17, Township 78 North, Range 23, West of the Fifth
Principal Meridian, Polk County, Iowa;
A strip of ground 30 feet in width lying Northerly from and adjacent to the
Northerly line of the 100 foot right-of-way of the Chicago, Burlington & Quincy
Railroad Company in the South 17 acres (except street) of the Northeast 1/4 of
the Southwest 1/4 of Section 17, Township 78 North, Range 23, West of the Fifth
Principal Meridian, Polk County, Iowa;
A rectangular piece in the Northeast 1/4 of the Southwest 1/4 of Section 17,
Township 78 North, Range 23 West of the Fifth Principal Meridian, Polk County,
Iowa, lying within the following described lines: Beginning at a point on the
West line of said Northeast 1/4 of said Southwest 1/4 of said Section 17 which
is 120 feet North of the Northerly line of the 100 foot right-of-way; of the
Chicago, Burlington & Quincy Railroad Company; thence South along said West line
of said Northeast 1/4 of said Southwest 1/4 of said Section 17, a distance of
120 feet to the Northerly line of said railroad right-of-way; thence Easterly at
right angles to said West line of said Northeast 1/4 of said Southwest 1/4 of
said Section 17, a distance of 80 feet; thence North on a line 80 feet East of
and parallel with the West line of said Northwest 1/4 of Southwest 1/4 of said
Section 17, a distance of 120 feet; thence Westerly in a straight line a
distance of 80 feet to the point of beginning; and
The Southeast 1/4 of the Northeast 1/4 and the Northeast 1/4 of the Northeast
1/4 and the Northeast 1/4 of the Southeast 1/4 and the Southeast 1/4 of the
Southeast 1/4 of Section 22, Township 77 North, Range 23 West of the 5th P.M. in
Xxxxxx County, Iowa and the portion of the Northwest 1/4 of the Southwest 1/4
located north and west of the roadway in Section 23, Township 77 North, Range 23
West of the 5th P.M. in Xxxxxx County, Iowa.
72
Exhibit G to Amended and Restated Credit
and Security Agreement
COMPLIANCE CERTIFICATE
To: Xxxxxxx Xxxxxx
Xxxxx Fargo Business Credit, Inc.
Date: , 20
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Subject: Heska Corporation
Financial Statements
In accordance with our Second Amended and Restated Credit and
Security Agreement dated as of June 14, 2000 (the "Credit Agreement"), attached
are the financial statements of Heska Corporation ("Heska") as of and for
________________, 20___ (the "Reporting Date") and the year-to-date period then
ended (the "Current Financials"). All terms used in this certificate have the
meanings given in the Credit Agreement.
I certify that, to the best of my knowledge, the Current
Financials have been prepared in accordance with GAAP, subject to year-end audit
adjustments, and fairly present the Borrower's financial condition and the
results of its operations as of the date thereof.
Events of Default. (Check one):
[ ] The undersigned does not have knowledge of the occurrence of a
Default or Event of Default under the Credit Agreement.
[ ] The undersigned has knowledge of the occurrence of a Default
or Event of Default under the Credit Agreement and attached
hereto is a statement of the facts with respect to thereto.
I hereby certify to the Lender as follows:
[ ] The Reporting Date does not xxxx the end of one of the
Borrower's fiscal quarters, hence I am completing all
paragraphs below except paragraph 2.
[ ] The Reporting Date marks the end of one of the Borrower's
fiscal quarters, hence I am completing all paragraphs below.
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Financial Covenants. I further hereby certify as follows:
1. Minimum Book Net Worth. Pursuant to Section 6.12 of the
Credit Agreement, as of the Reporting Date, Heska's Book Net Worth was,
on a consolidated basis, $_________________, which [ ] satisfies [ ]
does not satisfy the requirement that such amount be not less than
$_____________ on the Reporting Date.
2. Minimum Net Income. Pursuant to Section 6.13 of the Credit
Agreement, as of the Reporting Date, Heska's Net Income was, on a
consolidated basis, $_________________, which [ ] satisfies [ ] does
not satisfy the requirement that such amount be no less than
$______________ on the Reporting Date.
3. Minimum Cash Balance. Pursuant to Section 6.14 of the
Credit Agreement, as of the Reporting Date, the Borrower's Cash was
$_________________, which [ ] satisfies [ ] does not satisfy the
requirement that such amount be no less than $______________ on the
Reporting Date.
4. Minimum Individual Book Net Worth. Pursuant to Section 6.15
of the Credit Agreement, as of the Reporting Date, Heska's Book Net
Worth was $_________________, Diamond's Book Net Worth was
$_________________, and Center's Book Net Worth was $_________________,
which [ ] satisfies [ ] does not satisfy the requirement that such
amounts be no less than zero on the Reporting Date.
5. Capital Expenditures. Pursuant to Section 7.10 of the
Credit Agreement, as of the Reporting Date, Heska's Capital
Expenditures were, in the aggregate and on a consolidated basis,
$_______________ which [ ] satisfies [ ] does not satisfy the
requirement that such amount be not more than $______________ during
its fiscal year ending December 31, _____________.
Attached hereto are all relevant facts in reasonable detail to
evidence, and the computations of the financial covenants referred to above.
These computations were made in accordance with GAAP.
HESKA CORPORATION
By
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Xxxxxx X. Xxxxxxxx
Its Chief Financial Officer
