SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
June 29, 1999
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
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(Exact name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-26682 11-3199437
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(Commission File Number) (I.R.S. Employer Identification No.)
10 Edison Street East, Amityville, New York 11701
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (516) 842-7600
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
On June 29, 1999, Technology Flavors & Fragrances, Inc., a Delaware
corporation (the "Company"), entered into a Loan and Security Agreement (the
"Loan Agreement") with Foothill Capital Corporation ("Foothill") providing for a
three year $3,000,000 revolving credit facility (the "Foothill Facility"). The
Foothill Facility replaces the Company's existing revolving credit facility with
The Chase Manhattan Bank (the "Chase Facility"). At closing, the Company drew
down on the Foothill Facility in the amount of approximately $2,185,605 to repay
in full all amounts outstanding under the Chase Facility.
Outstanding borrowings under the Foothill Facility will initially
bear interest at a rate of three quarters of one percent (0.75%) in excess of
the rate of interest announced from time to time by Norwest Bank Minnesota,
N.A., as its reference rate (the "Reference Rate"), subject to certain
adjustments based upon the Company's financial performance (the "Interest
Rate").
Borrowings under the Foothill Facility are subject to certain
eligibility requirements relating to the Company's receivables and inventories
and the discretion of Foothill. Outstanding borrowings are secured by
substantially all of the assets of the Company, including the Company's product
formulations. During the term of the Foothill Facility, the Company must comply
with financial and other covenants contained in the Loan Agreement.
As part of the Loan Agreement, the Company's wholly-owned
subsidiaries, Technology Flavors & Fragrances, Inc., an Ontario corporation, and
Technology Flavors & Fragrances S.A., a corporation organized under the laws of
the Republic of Chile, agreed to guarantee the Company's obligations under the
Loan Agreement pursuant to an Unconditional Guaranty executed by each
subsidiary.
The foregoing descriptions of the Loan Agreement and each
Unconditional Guaranty and the transactions contemplated thereby are not
intended to be complete and are qualified in their entirety by the complete
texts of the Loan Agreement and each Unconditional Guaranty.
Item 7. Exhibits.
10.1 Loan and Security Agreement, dated as of June 29, 1999, between
Technology Flavors & Fragrances and Foothill Capital Corporation.
10.2 Unconditional Guaranty, dated as of June 29, 1999, between
Technology Flavors & Fragrances, Inc. and Foothill Capital
Corporation.
10.3 Unconditional Guaranty, dated as of June 29, 1999, between
Technology Flavors & Fragrances S.A. and Foothill Capital
Corporation.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
By: /s/ Joseph A. Gemmo
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Joseph A. Gemmo
Vice President and Chief Financial Officer
Dated: July 16, 1999
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EXHIBIT INDEX
Exhibit Description Page
------- ----------- ----
10.1 Loan and Security Agreement, dated as of June 29, --
1999, between Technology Flavors & Fragrances and
Foothill Capital Corporation.
10.2 Unconditional Guaranty, dated as of June 29, 1999, --
between Technology Flavors & Fragrances, Inc. and
Foothill Capital Corporation.
10.3 Unconditional Guaranty, dated as of June 29, 1999, --
between Technology Flavors & Fragrances S.A. and
Foothill Capital Corporation.
Exhibit 10.1
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), dated as of June 29,
1999, by and between TECHNOLOGY FLAVORS & FRAGRANCES, INC., a Delaware
corporation (the "Borrower") which maintains its chief executive office at 10
Edison Street East, Amityville, New York 11701, and FOOTHILL CAPITAL
CORPORATION, a California corporation (the "Lender") whose mailing address is
7443 Lee Davis Road, Suite 200, Post Office Box 218, Mechanicsville, Virginia
23111, provides:
1. Definitions: As used herein, the following terms, when initial capital
letters are used, shall have the respective meanings set forth below. In
addition, all terms defined in the Uniform Commercial Code as enacted in the
Commonwealth of Virginia (the "UCC"), whether or not capitalized, shall have the
meanings given therein unless otherwise defined herein. Further, in each
instance in this Agreement, exclusive of Schedule A where this sentence shall
not be applicable, where the Lender is granted one or more rights to act in its
discretion or in its sole discretion, Lender's actions shall be predicated on
the exercise of such rights by Lender utilizing its discretion in a commercially
reasonable manner consistent with Lender's past practices, if such past
practices are applicable to the situation.
1.1 Account Debtor shall mean the account debtor or any customer of the
Borrower who is obligated or indebted to the Borrower with respect to any of the
Receivables and/or the prospective purchaser with respect to any contract right,
and/or any Person who enters into or proposes to enter into any contract or
other arrangement with the Borrower pursuant to which the Borrower is to deliver
any personal property or perform any service.
1.2 Affiliate shall mean any Person directly or indirectly controlling,
controlled by, or under common control with the Borrower. For purposes of this
definition, "control" as applied to any Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of the Borrower whether through the ownership of voting securities, by
contract or otherwise.
1.3 Business Day(s) shall mean a day on which the Lender is open to
conduct a full lending business.
1.4 Collateral shall mean the following types or items of personal
property, whether now owned or hereafter acquired by the Borrower, wherever
located: (a) the Receivables, the General Intangibles, the Inventory, the
Equipment, the Payments and all other items of personal property; (b) all of the
Borrower's rights, title and interest in and to all goods and other property
represented by or securing any of the foregoing, including all goods that may be
reclaimed or repossessed from or returned by Account Debtors; (c) all of the
Borrower's rights as an unpaid seller, including stoppage in transit, detinue
and reclamation; (d) all additional amounts due the Borrower from any Account
Debtor, irrespective of whether such additional amounts have been specifically
assigned to the Lender; (e) all guarantees and other agreements and property
securing or relating to any of the items referred to above or acquired for the
purpose of securing or enforcing such items; (f) all books of account and
records, ledger sheets, files, documents, customer lists and other documents
containing the names, addresses and other information regarding the Borrower's
customers; computer tapes, programs, discs and other material, media or
documents relating to the recording, billing or analyzing of any of the above;
all computers, word processors, printers, switches, interfaces, source codes,
mask works, software, instructional material, and connectors, and all parts,
accessories, additions, substitutions, or options together with all property or
equipment used in connection with any of the above or which are used to operate
or cause to operate any features, special applications, format controls, options
or software of any or all of the above-mentioned items; (g) all policies of
insurance on the foregoing property and the proceeds of such insurance; (h) all
rebates received or due from manufacturers and others; (i) all post office
boxes; (j) all present and future proprietary fragrance, flavor and/or other
formulas owned, developed and utilized by or licensed to Borrower in connection
with the processing and manufacturing of its finished goods; (k) any sums due to
Borrower being held by other whether pursuant to an escrow agreement of
otherwise; and (l) all proceeds and products of any of the foregoing in whatever
form, including cash, negotiable instruments and other evidences of
indebtedness, chattel paper, security agreements and other documents.
1.5 Eligible Government Accounts shall mean the amount of billed
Government Accounts of the Borrower for work completed, under specific
Government Contracts which are and at all times shall continue to be acceptable
in all respects to the Lender in its reasonable discretion and which have been
assigned to the Lender pursuant to the Assignment of Claims Act or any
appropriate regulation of any department, agency or instrumentality
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of the United States (without regard to prior approvals of such specific
Government Contracts) after deducting therefrom (a) all billed Government
Accounts under which more than 90 days have elapsed from the invoice date, (b)
all Government Accounts arising under Government Contracts which contain an
express prohibition against assignment; (c) all retainages, payments,
adjustments, setoffs and credits applicable thereto, and (d) all amounts due
thereon considered by the Lender, in its reasonable discretion, to be difficult
to collect or uncollectable by reason of return, rejection, repossession, loss
or damage of or to the products or goods giving rise thereto.
1.6 Eligible Inventory shall mean all Inventory valued at the lowest of
(a) the Borrower's net purchase cost or net manufacturing cost, (b) the lowest
bulk market price, (c) the Borrower's lowest bulk selling price, minus estimated
expenses for completion and disposal, and minus an allowance for normal profit
margin for bulk sales, (d) any ceiling prices which may be established by any
law, or (e) prevailing market value, excluding, however, any Inventory which
consists of (i) any goods located in Canada, Chile, California and or at any
locations of the vendors of Borrower or otherwise located outside of the United
States, any goods which are Orbitz or any goods designated for a customer whose
account receivable is ineligible, (ii) any goods located outside of a State in
which the Lender has properly perfected its security interest by filing, free
and clear of all other Liens, (iii) any goods not in the actual possession of,
or in transit to or from, the Borrower or any goods in the possession of a
bailee, warehouseman, consignee or similar Person, (iv) all work-in-process, (v)
any goods the sale or other disposition of which has given rise to a Receivable,
(vi) any goods which the Lender determines in its reasonable discretion at any
time and in good faith are defective, unmerchantable or obsolete, (vii) any
goods which are not covered by insurance as required by Section 6.5 hereof, and
(viii) any goods which the Lender in its reasonable discretion has deemed to be
ineligible because the Lender otherwise considers the collateral value thereof
to be impaired or its ability to realize such value to be insecure.
1.7 Eligible Receivables shall mean, at any time of determination thereof,
each Receivable of the Borrower to the extent that it conforms and continues to
conform to the following criteria to the satisfaction of the Lender: (i) the
Receivable arose from a bona fide sale of goods or provision of services by the
Borrower, and such goods or services have been delivered to the appropriate
Account Debtor or its respective designees, the Borrower has in its possession
shipping and delivery receipts evidencing such shipment and delivery, no return,
rejection or repossession has occurred and such goods or services have been
finally accepted by the Account Debtor; (ii) the Receivable is based upon a
written order or contract which Borrower believes to be enforceable, for goods
delivered or services rendered and the same were shipped, held, or performed in
accordance with such order or contract; (iii) the title of the Borrower to the
Receivable and, except as to the Account Debtor and any creditor which finances
the Account Debtor's purchase of such goods, to any goods is absolute and is not
subject to any prior assignment, claim, lien, or security interest, and the
Borrower otherwise has the full and unqualified right and power to assign and
grant a security interest in it to the Lender; (iv) the amount shown on the
books of the Borrower and on any invoice, certificate, schedule or statement
delivered to the Lender is owing to the Borrower and no partial payment has been
received unless reflected on such invoice, certificate, schedule or statement;
(v) the Receivable is not subject to any claim of reduction, counterclaim,
set-off, recoupment, or other defense in law or equity, or any claim for
credits, allowances, or adjustments by the Account Debtor because of returned,
inferior, or damaged goods, unsatisfactory services or for any other reason;
(vi) the Account Debtor has not returned or refused to retain, or otherwise
notified the Borrower of any dispute concerning, or claimed nonconformity of,
any of the goods or services from the sale of which the Receivable arose; (vii)
the Receivable is not outstanding more than the number of days set forth in
Schedule A attached hereto from the date of the invoice therefor; (viii) the
Receivable does not arise out of a contract with, or order from, an Account
Debtor that, by its terms, forbids or makes void or unenforceable the assignment
by the Borrower to the Lender of the Receivable arising with respect thereto;
(ix) the Borrower has not received any note, trade acceptance draft or other
instrument with respect to, or in payment of, the Receivable, unless, if any
such instrument has been received, the Borrower immediately notified the Lender
and, at the latter's request, endorsed or assigned and delivered the same to the
Lender; (x) the Borrower has not received any notice of the death of the Account
Debtor or a partner thereof; nor has the Borrower received any notice of
dissolution, termination of existence, insolvency, business failure, appointment
of a receiver for any part of the property of, assignment for the benefit of
creditors by, or the filing of a petition in bankruptcy or the commencement of
any proceeding under any bankruptcy or insolvency laws by or against, the
Account Debtor; (xi) the Account Debtor is not an Affiliate of the Borrower;
(xii) the Account Debtor is not incorporated in or primarily conducting business
in any jurisdiction located outside of the United States of America or Canada,
unless the accounts receivables due from such Account Debtor are credit insured
by an insurance company satisfactory to Lender under a contract in form, scope
and content satisfactory to Lender or backed by an irrevocable letter of credit
confirmed by a domestic bank; (xiii) the Borrower is not indebted in any manner
to the
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Account Debtor, with the exception of customary credits, adjustments and/or
discounts given to a Account Debtor by the Borrower in the ordinary course of
its business. The Lender, in the exercise of its sole discretion, may exclude
from eligibility all or any portion of any Receivable that (i) exceeds 10% the
total Receivables due to Borrower, provided however, that from any such
Receivable so excluded, an amount of up to 10% of the Eligible Receivables due
to Borrower shall, if such amounts otherwise meet the criteria to be an Eligible
Receivable, be included up to such 10% of Receivables amount; or (ii) results in
an otherwise unacceptable concentration of the Receivables of the Account
Debtor; or (iii) the Lender has deemed ineligible because of reasonable
uncertainty as to the credit worthiness of the Account Debtor or because the
Lender otherwise considers the collateral value thereof to be impaired or its
ability to realize such value to be insecure; or (iv) represents an intercompany
(except as set forth in section vi below), officer, employee, contra or
affiliated company account or accounts; or (v) which are due from domestic
Account Debtors wherein more than 50% of the total balance due from such Account
Debtor is beyond one hundred twenty (120) days from invoice date (vi) which are
due from foreign Account Debtors wherein more than 50% of the total balance due
from such Account Debtor is beyond one hundred fifty (150) days from invoice
date and/or to the extent that such amounts due from such foreign Account
Debtors exceed the amount of credit insurance approved by Lender and in effect
from time to time for Lender as beneficiary of such coverage; or (vi) which are
based upon invoices for research and development charges allocated to an Account
Debtor. In the event of any dispute under the foregoing criteria, as to whether
a Receivable is, or has ceased to be, an Eligible Receivable, the decision of
the Lender in the exercise of its sole discretion shall control. Receivables
otherwise meeting the above conditions to be Eligible Receivables except for the
fact that the Account Debtor is located in Canada shall be Eligible
Receivables-Canadian and may be advanced against in accordance with Section
2.1(a).
1.8 Environmental Laws shall mean all federal, state and local laws,
whether now or hereafter enacted, and as amended from time to time, relating to
pollution or protection of the environment, including, without limitation, laws
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials into the environment (including, without limitation, ambient air,
surface water, ground water or land), or otherwise relating to the manufacture,
generation, production, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, and any and all
regulations, codes, plans, orders, decrees, judgments, injunctions, notices or
demand letters issued, entered, promulgated or approved thereunder.
1.9 Equipment shall mean (a) all equipment of the Borrower of every type
and description, now owned and hereafter acquired and wherever located,
including, without limitation, all machinery, motor vehicles and other rolling
stock, furniture, furnishings, tools, dies, fittings, accessories, all
substitutions therefor, leasehold improvements, fixtures, and materials and
supplies relating to any of the foregoing; (b) all present and future documents
of title and trust receipts relating to any of the foregoing; (c) all present
and future rights, claims and causes of action of the Borrower in connection
with purchases of (or contracts for the purchase of), or warranties relating to,
or damages to, goods held or to be held by the Borrower as equipment; (d) all
present and future warranties, manuals and other written materials (and
packaging thereof or relating thereto) relating to any of the foregoing; and (e)
all present and future general intangibles of the Borrower in any way relating
to any of the foregoing.
1.10 Event of Default shall mean any event described in Section 9.1
hereof.
1.11 Fair Labor Standards Act shall mean the Fair Standards Labor Act as
amended, 29 U.S.C. Sections 201-209, any applicable regulations and
interpretations issued pursuant thereto, and any amendments to any of the
foregoing.
1.12 General Intangibles shall mean all general intangibles now owned or
hereafter acquired by the Borrower, including, without limitation, choses of
action, causes of action and all other intangible property of every kind and
nature, including, without limitation, corporate or other business records,
inventions, designs, blueprints, plans, patents, patent applications,
trademarks, trade names, trade secrets, all present and future proprietary
fragrance, flavor and/or other formulas owned, developed and or utilized by
Borrower in connection with the processing and manufacturing of its finished
goods, goodwill, registrations, domestic and foreign copyrights, copyright
applications, service marks, logos, licenses, franchises, customer lists, tax
refunds, tax refund claims, contractual rights, insurance policies on lives of
employees payable to the Borrower, any letter of credit on which the Borrower is
a beneficiary, rights or claims against carriers and shippers, leases and rights
to indemnification between the Borrower and the U.S. Government or any agency
thereof, and all amendments thereto.
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1.13 Government Accounts shall mean all accounts arising out of any
Government Contract.
1.14 Government Contracts shall mean any contract between the Borrower and
the United States Government or any agency thereof, and all amendments thereto.
1.15 Guarantor and Guarantors shall mean individually and collectively the
Person(s) listed on Schedule A attached hereto.
1.16 Hazardous Materials shall mean any (i) hazardous, regulated and/or
toxic chemicals, materials, substances or wastes occurring in the air, water,
soil or ground water on, over or under the real property owned, occupied or
controlled by the Borrower, or in or on improvements thereon (the "Property"),
as defined by the Comprehensive Environmental Response, Compensation, and
Liability Act (Superfund or CERCLA), and the Superfund Amendments and the
Reauthorization Act of 1986 (SARA), 42 U.S.C. ss.ss. 9601 et seq., the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. ss.ss. 11001 et seq., the
Resource Conservation and Recovery Act (the Solid Waste Disposal Act or RCRA),
42 U.S.C. ss.ss. 6901 et seq., the Federal Water Pollution Control Act, (CWA),
33 U.S.C. ss.ss. 1251 et seq., the Clean Air Act (CAA), 42 U.S.C. ss.ss. 7401 et
seq., and the Toxic Substances Control Act (TSCA), 15 U.S.C. ss.ss. 2601 et.
seq., or comparable state statutes, as each such statute may be amended from
time to time, and/or as defined in regulations promulgated thereunder; (ii) oil,
petroleum products, and their by-products; (iii) any substance, the presence of
which is prohibited or controlled by any other applicable federal or state or
local laws, regulations, statutes or ordinances now in force or hereafter
enacted relating to waste disposal or environmental protection with respect to
hazardous, toxic or other substances generated, produced, leaked, released,
spilled or disposed of at or from the Property; and (iv) any other substance
which by law requires special handling in its collection, storage, treatment or
disposal including, but not limited to, asbestos, polychlorinated biphenyls
(PCBs), urea formaldehyde foam insulation and lead-based paints, but not
including small quantities of such materials present on the Property in retail
containers and used in the ordinary course of the Borrower's business.
1.17 Inventory shall mean all inventory now owned or hereafter acquired by
the Borrower, including, without limitation (a) all goods which are held for
sale or lease by the Borrower or are furnished or to be furnished by the
Borrower under contracts for service, (b) all raw materials, work in process,
finished goods, materials and supplies of every kind used or consumed in
connection with the manufacture, packing, shipping, advertising or sale of such
goods, (c) all proceeds and products from the sale or other disposition of such
goods, including all goods returned or repossessed, or acquired by the Borrower
by way of substitution or replacement, and all additions and accessions thereto,
and all documents and instruments covering such goods, and (d) all of the above
owned by the Borrower or in which the Borrower now has or in which the Borrower
may hereafter acquire an interest, whether in transit or in the Borrower's
constructive or actual possession or held by the Borrower or others for the
Borrower's account (including any of the above held on consignment), including,
without limitation, all of the above which may be located on the Borrower's
premises or upon the premises of any carriers, forwarding agents, truckers,
warehousemen, vendors, selling agents, finishers, converters or other third
parties who may have possession, temporary or otherwise, thereof.
1.18 Letter(s) of Credit shall mean any letter(s) of credit issued
pursuant to Section 2.4 hereof for or on behalf of the Borrower.
1.19 Loan Documents shall mean this Agreement, the Guaranty or any other
agreement or document referred to herein or now or hereafter executed and
delivered by Borrower in connection with the transactions contemplated hereby,
together with any and all revisions, amendments, restatements and modifications
to, replacements of and substitutions for, any of the foregoing.
1.20 Lockbox Agreement shall mean the written agreement by and among the
Borrower, the Lender and a federally insured banking institution, in form and
substance satisfactory to the Lender, whereby said parties agree that Payments
shall be mailed to a U.S. Post Office box to which the bank shall have exclusive
and unrestricted access under such agreement. Under such agreement, Payments
shall hereafter be deposited into an account of the Lender maintained at the
bank for application to the Revolving Loan.
1.21 Note shall mean, collectively, any promissory notes executed by the
Borrower to evidence the any other loans by the Lender to the Borrower as
renewed, extended, restated or modified from time to time described in Section
2.3.
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1.22 Obligations shall mean, without limitation, the Revolving Loans,
other loans by the Lender to the Borrower and all other indebtedness and
liabilities of the Borrower to the Lender of every kind, nature and description,
now existing or hereafter arising, regardless of how they arise or by what
agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument and whether liquidated or unliquidated, secured or
unsecured, direct or indirect (that is, whether the same are due directly from
the Borrower to the Lender, or are due indirectly from the Borrower to the
Lender by reason of the Borrower having acted as endorser, guarantor or obligor
of indebtedness, liabilities or obligations to the Lender of any third party),
absolute or contingent, due or to become due, and all obligations to perform
acts or refrain from taking any action. Obligations shall also include all
interest, fees and other charges chargeable to the Borrower or due from the
Borrower to the Lender from time to time and all costs and expenses referred to
in Sections 13 and 14 hereof.
1.23 Payment(s) shall mean any check, note, draft, bill of exchange,
acceptance, money order, legal tender or other form of payment or evidence of
indebtedness in total or partial payment of the amount due on any Receivable or
other Collateral.
1.24 Permitted Liens shall mean (a) the existing interest of Wasco Funding
Corp. of 150 East 58th Street, New York, New York as to one Varian Model 3800
Gas Chromatograph S/N00726 with all of its attachments and accessories and any
other lien or security interest specifically consented to by the Lender in
writing or as set forth on Schedule 1.24 attached hereto; and (b) purchase money
security interests on Equipment acquired after the date hereof in the ordinary
course of business provided such security interests secure not more than the
lower of the cost or fair market value of such Equipment and in the aggregate do
not exceed the amount as set forth in Schedule A attached hereto.
1.25 Person shall mean an individual, partnership, corporation, limited
liability company, business franchise, joint stock company, trust,
unincorporated association, joint venture, government authority or other entity
of whatever nature.
1.26 Reasonable Attorneys' Fees shall mean, as used in any of the Loan
Documents, the fees of counsel based upon counsel's usual and customary hourly
rates and not upon any fixed percentage of the Obligations.
1.27 Receivables shall mean (a) all of the Borrower's present and future
accounts, contract rights, receivables, promissory notes and other instruments,
chattel paper and all rights to receive the payment of money or other
consideration under present or future contracts, including, without limitation,
all of the Borrower's rights under each Government Contract and all related
Government Accounts now owned or hereafter acquired by the Borrower; (b) all
present and future cash of the Borrower; (c) all present and future judgments,
orders, awards and decrees in favor of the Borrower and causes of action in
favor of the Borrower; (d) all present and future contingent and noncontingent
rights of the Borrower to the payment of money for any reason whatsoever,
whether arising in contract, tort or otherwise, including, without limitation,
all rights to receive payments under presently existing or hereafter acquired or
created letters of credit; (e) all present and future claims, rights of
indemnification and other rights of the Borrower under or in connection with any
contracts or agreements to which the Borrower is or becomes a party or third
party beneficiary; (f) all goods previously or hereafter returned, repossessed
or stopped in transit, the sale, lease or other disposition of which contributed
to the creation of any account, instrument or chattel paper of the Borrower; (g)
all present and future rights of the Borrower as an unpaid seller of goods,
including rights of stoppage in transit, detinue and reclamation; (h) all rights
which the Borrower may now or at any time hereafter have, by law or agreement,
against any Account Debtor or other obligor of the Borrower, and all rights,
liens and security interests which the Borrower may now or at any time hereafter
have, by law or agreement, against any property of any Debtor or other obligor
of the Borrower; and (i) all present and future interests and rights of the
Borrower, including rights to the payment of money, under or in connection with
all present and future leases and subleases of real or personal property to
which the Borrower is a party, as lessor, sublessor, lessee or sublessee.
1.28 Reference Rate shall mean the rate of interest announced from time to
time by Norwest Bank Minnesota, N. A., as its "prime rate" or "reference rate"
as the case may be, whether or not such announced rate is the best rate
available from such financial institution. The Borrower hereby acknowledges and
agrees that the Reference Rate is a reference used in determining interest rates
on certain loans by the Lender and is not intended to be the lowest rate of
interest charged on any extension of credit to any customer. In the event the
foregoing institution ceases to announce a
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Reference Rate or the same is unascertainable or is discontinued by the Lender
as a standard, a comparable prime rate designated by the Lender shall be deemed
to be the Reference Rate.
1.29 Revolving Loans shall mean the loans described in Section 2.1
2. Loans, Interest, Fees and Letters of Credit
2.1 Subject to the terms and conditions of this Agreement, the Lender
agrees to make Revolving Loans from time to time to the Borrower in an aggregate
principal amount of:
(a) the percentage of Eligible Receivables set forth in Schedule A
attached hereto, and
(b) the percentage of Eligible Inventory set forth in Schedule A
attached hereto, and
(c) the percentage of Eligible Government Accounts set forth in
Schedule A attached hereto.
2.2 The Revolving Loans shall be made on the following terms and
conditions:
(a) The Revolving Loans shall be used solely for refinancing
existing indebtedness and for working capital.
(b) The aggregate principal amount of Revolving Loans based on the
value of Eligible Inventory shall not exceed the amount set forth in Schedule A
attached hereto.
(c) The aggregate principal amount of Revolving Loans shall not
exceed the amount set forth in Schedule A attached hereto.
(d) All Revolving Loans will be made from time to time in the sole
discretion of the Lender provided that no Event of Default has occurred and is
continuing beyond any applicable cure period and/or there has been no material
adverse change in the financial or collateral condition of Borrower. After
notice to the Borrower, the Lender may, in its discretion, change any or all of
the percentages set forth in Section 2.1(a), (b) or (c). All Revolving Loans
shall be payable without offset to the Lender and shall be evidenced by the
entries upon certain books and records designated by the Lender.
(e) The Revolving Loans shall accrue interest on the daily
outstanding balance thereof at the annual rate (the "Interest Rate") set forth
in Schedule A attached hereto. Accrued interest shall be payable to the Lender
on the first day of each month beginning on the date set forth on Schedule A
attached hereto. The effective date of any increase or decrease in the Interest
Rate shall be the date on which the Reference Rate changes. All interest shall
be computed on the basis of a 360-day year and paid for the actual number of
days elapsed in each interest calculation period.
(f) Upon the occurrence of any Event of Default and the continuance
thereof beyond any applicable cure period with regard thereto, the Interest Rate
may be increased, at the Lender's option, to a rate equal to the rate set forth
on Schedule A attached hereto above the Reference Rate in effect from time to
time (the "Default Rate of Interest"). Lender, at its discretion and upon the
curing of such default by Borrower, may thereafter reduce the interest rate from
the Default Rate of Interest then being charged.
(g) In addition to the interest payable to the Lender pursuant to
Section 2.2(e), the Borrower shall also pay to the Lender or the Lender may
collect from advances made to the Borrower under the Revolving Loans an amount
of interest equal to the aggregate of the amounts calculated each month by
multiplying the amount of each Payment received by the Lender from Account
Debtors during such month by the Interest Rate for a period beginning on the
date after a Payment is applied to the principal balance due under the Revolving
Loans and ending on the date set forth in Schedule A attached hereto.
(h) The Borrower shall pay the Lender a monthly service fee equal to
the amount set forth in Schedule A attached hereto (the "Service Fee").
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(i) The Lender shall send the Borrower a monthly statement of the
Borrower's loan account showing all debits and credits and which shall also
reflect the interest accrued on the Revolving Loans pursuant to Section 2.2(e)
and (f) hereof, the additional interest charged with respect to Payments
pursuant to Section 2.2(g) hereof (collectively, the "Interest) and the Service
Fee for the immediately preceding month. The Interest and Service Fee shall be
added by the Lender to the Borrower's loan account at the end of each month and
shall be deemed to be first paid from amounts subsequently credited to the loan
account. The statement of the loan account shall be deemed correct and accepted
by and conclusively binding upon the Borrower unless the Borrower notifies the
Lender in writing specifically as to a particular discrepancy within 20 days
from the mailing and/or forwarding by facsimile transmission by Lender of such
statement.
3. Security for the Obligations.
3.1 To secure the payment and performance of the Obligations, the Borrower
hereby grants to the Lender a continuing security interest in all existing and
hereinafter acquired or arising Collateral.
3.2 As additional security for the payment and performance of the
Obligations, the Obligations shall be guaranteed by the Guarantors who shall
each execute and deliver to the Lender an unconditional guaranty (the "Guaranty
Agreement") in the form attached hereto.
4. Receivables.
4.1 Unless the Lender requires a Lockbox Agreement, the Lender hereby
authorizes and permits the Borrower to receive from Account Debtors or otherwise
all Payments, subject to the reasonable direction and control of the Lender at
all times. The Borrower shall open and maintain at its expense a depository
account ("Depository Account") over which the Lender alone shall have the power
of withdrawal or, if requested by the Lender a lockbox, with a bank acceptable
to the Lender, and deposit or direct all Payments to such account or lockbox
immediately upon receipt thereof. The Borrower's loan account with the Lender
shall be credited with (i) all amounts received on any Business Day in the
Lender's Chase Manhattan bank account by wire transfer from the Depository
Account or the Lockbox prior to 12:00 noon on such day; (ii) on the date an ACH
for collected funds is initiated from the Depository Account or (iii) all
Payments actually received at the Lender's address set forth at the beginning of
this Agreement pursuant to Section 4.2 on the date of such receipt. Payments
which are deposited into the Lender's account after 12:00 noon on any day shall
be credited to the Borrower's loan account on the next Business Day.
4.2 Upon an Event of Default which continues beyond any applicable cure
period related thereto or an adverse change in Borrowers financial or collateral
condition, the Lender shall have the right at any time to notify Account Debtors
of its security interest in the Receivables and to require Payments to be made
directly to the Lender. Upon an Event of Default which continues beyond any
applicable cure period related thereto, to facilitate direct collection, the
Borrower hereby appoints the Lender and any officer or employee of the Lender,
as the Lender may from time to time designate, as attorney-in-fact for the
Borrower to (a) receive, open and dispose of all mail addressed to the Borrower
and take therefrom any Payments or proceeds of Receivables; (b) take over the
Borrower's post office boxes or make other arrangements, in which the Borrower
shall cooperate, to receive the Borrower's mail, including notifying the post
office authorities to change the address for delivery of mail addressed to the
Borrower to such address as the Lender shall designate; (c) endorse the name of
the Borrower in favor of the Lender upon any and all Payments that may come into
the Lender's possession; (d) sign and endorse the name of the Borrower on any
invoice or bill of lading relating to any Receivable, on verifications of
Receivables sent to any Debtor, to drafts against Account Debtors, to
assignments of Receivables and to notices to Account Debtors; and (e) do all
acts and things necessary to carry out this Agreement, including signing the
name of the Borrower on any instruments required by law in connection with the
transactions contemplated hereby and on financing statements as permitted by the
UCC. The Borrower hereby ratifies and approves all acts of such attorney-in-fact
and neither the Lender nor any other such attorney-in-fact shall be liable for
any acts of commission or omission, or for any error of judgment or mistake of
fact or law unless occasioned by the Lender's or such attorney-in-fact's gross
negligence or willful misconduct. This power, being coupled with an interest, is
irrevocable so long as any of the Obligations remain unsatisfied.
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4.3 The Lender shall not, under any circumstances, be liable for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any Receivable or any instrument received in payment thereof or for
any damage resulting therefrom unless occasioned by the Lender's gross
negligence or willful misconduct. The Lender may, after the occurrence of an
Event of Default which continues beyond any applicable cure period related
thereto, without notice to or consent from the Borrower, sue upon or otherwise
collect, extend the time of payment of, or compromise or settle for cash, credit
or otherwise upon any terms, any of the Receivables or any securities,
instruments or insurance applicable thereto and/or release the obligor thereon.
The Lender is authorized to accept the return of the goods represented by any of
the Receivables, without notice to or consent of the Borrower, or without
discharging or any way affecting the Obligations.
4.4 The Lender shall not be liable for or prejudiced by any loss,
depreciation or other damage to the Receivables and other Collateral unless
caused by the Lender's gross negligence or willful misconduct.
4.5 On or before ten (10) days after the end of each month, or from time
to time as the Lender may reasonably require, the Borrower shall deliver to the
Lender schedules of all outstanding Receivables and existing Inventory. Such
schedules shall be in form satisfactory to the Lender and shall show the age of
such Receivables in intervals of not more than 30 days, and contain such other
information and be accompanied by such supporting documents as the Lender may
from time to time reasonably prescribe. At the Lender's reasonable request, the
Borrower shall also deliver to the Lender copies of the Account Debtor's
invoices, evidences of shipment or delivery and such other schedules and
information as the Lender may reasonably request. The items to be provided under
this Section are to be prepared and delivered to the Lender from time to time
solely for its convenience in maintaining records of the Collateral and the
Borrower's failure to give any of such items to the Lender shall not affect,
terminate, modify or otherwise limit the Lender's security interest granted
herein.
5. Representations and Warranties. The Borrower hereby represents and
warrants to the Lender that:
5.1 (a) The Borrower is and at all times hereafter shall be a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation and has the corporate power and authority to conduct
its business as now conducted and as proposed to be conducted while this
Agreement is in effect; (b) the execution and delivery of this Agreement and the
performance of the transactions contemplated hereby are within the corporate
authority of the Borrower and have been duly authorized by all proper and
necessary corporate action; (c) the execution and delivery of this Agreement and
the performance of the transactions contemplated hereby will not violate or
contravene any provisions of law or the articles of incorporation or bylaws of
the Borrower, or result in a breach or default in respect of the terms of any
other agreement to which the Borrower is a party or by which it is bound, which
breach or default would result in the creation, imposition or enforcement of any
lien against any of the Collateral, or would have a material adverse effect on
the conduct of the Borrower's business as it is now being conducted and proposed
to be conducted while this Agreement is in effect, or would otherwise materially
impair the value of value of the security interest granted to the Lender
hereunder; and (d) the Borrower is duly qualified as a foreign corporation and
is in good standing and duly authorized to do business in every jurisdiction
where the nature of its properties or its business requires such qualification
and authorization except where the failure to so comply would not have a
material adverse effect on Borrower.
5.2 This Agreement is the valid and legally binding agreement of the
Borrower enforceable against the Borrower in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
enforcement is sought by proceedings in equity or at law).
5.3 Except as previously disclosed to the Lender in writing, no Person has
sold substantially all of its assets to the Borrower or sold assets having a
value in excess of $50,000 to the Borrower outside the ordinary course of such
seller's business or in a transaction subject to the bulk transfer laws at any
time in the past.
5.4 The execution and delivery of this Agreement and the performance of
the transactions contemplated hereby do not require any approval or consent of
any governmental agency or authority, of stockholders of the Borrower, or of any
other Person.
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5.5 The financial statements of the Borrower and the Guarantors attached
hereto as Schedule 5.5, attached hereto, fairly represent, in all material
respects, the financial condition of the Borrower and the results of its
operations and transactions as of the dates and for the periods of such
statements and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the period
involved. There has been no material adverse change in the business, operations,
prospects, assets, properties or condition (financial or otherwise) of the
Borrower or the Guarantor since the date of said financial statements.
5.6 The Borrower has filed all federal, state, local and other tax returns
and reports required to be filed by it and such returns and reports are true and
correct in all material respects. The Borrower has paid all taxes, assessments
and other governmental charges lawfully levied or imposed on or against it or
its property, other than those presently payable without penalty or interest.
5.7 There is no litigation or proceeding or governmental investigation
pending or, to the knowledge of the Borrower, threatened against or relating to
the Borrower, its properties or business which is not reflected in the financial
statements and other related information previously submitted to the Lender by
the Borrower.
5.8 The Borrower is not in violation of or default under any statute,
regulation, license, permit, order, writ, injunction or decree of any
government, governmental department, commission, board, bureau, agency,
instrumentality or court, which violation or default would have a material
adverse effect on the business, properties or condition, financial or otherwise,
of the Borrower.
5.9 To its knowledge Borrower is in all material respects in compliance
with all federal, state and local laws, including, but not limited to,
Environmental Laws and the Fair Labor Standards Act.
5.10 (a) Within the three year period immediately preceding the date
hereof, the Borrower has not terminated any employee pension benefit plan
("Plan"), within the meaning of Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") maintained by the Borrower which is
or was subject to Title IV of ERISA and as of the date hereof, (i) is not in the
process of terminating any Plan, and (ii) no fact, including, without
limitation, any reportable event described in Section 4043 of ERISA exists in
connection with any Plan of the Borrower which might constitute grounds for (x)
the termination of any Plan by the Pension Benefit Guaranty Corporation or (y)
the appointment by the appropriate United States District Court of a trustee to
administer any Plan.
(b) The Borrower has fulfilled its obligations under the minimum
funding standards of ERISA and the Internal Revenue Code (the "Code") with
respect to each Plan and is in compliance in all material respects with the
provisions of ERISA and the Code presently applicable to each Plan, and has made
all contributions to the Plans required by the terms thereof.
(c) The Borrower has not incurred any liability under Section 4203
or 4205 of ERISA with respect to any withdrawal or partial withdrawal from any
multiemployer plan (as defined in Section 4001(a)(3) of ERISA which has not been
satisfied.
5.11 The Borrower is not in default under a material contract, which
default would have a material adverse effect on the business, properties or
condition, financial or otherwise, of the Borrower, or in the performance of any
covenants or conditions respecting any indebtedness which is material to the
Borrower, and no holder of any such indebtedness of the Borrower has given
notice of any asserted default thereunder, and no liquidation or dissolution of
the Borrower and no receivership, insolvency, bankruptcy, reorganization or
other similar proceeding relative to the Borrower or its properties is pending
or, to the knowledge of the Borrower, is threatened against it.
5.12 The Borrower maintains a place of business and keeps Collateral and
maintains its books of account and records, including all material records
concerning the Collateral, only at the location(s) set forth in Schedule A
attached hereto.
5.13 The Borrower is the sole owner of and has good and marketable title
to the Collateral, and the Borrower has full right and power to grant the Lender
a security interest therein. At the time the Collateral becomes
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subject to the Lender's security interest, the Collateral will be free from all
liens, encumbrances and security interests in favor of any Person other than the
Lender, except for Permitted Liens.
5.14 As to each and every Receivable, to the best of the Borrower's
knowledge and belief (a) it is a bona fide existing obligation, valid and
enforceable against the Account Debtor for a sum certain for sales of goods
shipped or delivered, or goods leased, or services rendered in the ordinary
course of business; (b) all supporting documents, instruments, chattel paper and
other evidence of indebtedness, if any, delivered to the Lender are complete and
correct and are valid and enforceable in accordance with their terms, except to
the extent enforceability may be limited by bankruptcy, insolvency or similar
laws affecting creditor's rights generally and by equitable principles of
general applicability (regardless of whether such enforceability is considered
in a proceeding in equity or at law), and all signatures and endorsements that
appear thereon are genuine, and all signatures and endorsers have full capacity
to contract; (c) the Account Debtor is liable for and will make payment of the
amount expressed in such Receivable according to its terms; (d) it is subject to
no discount, allowance or special terms of payment, except for ordinary trade
discounts and allowances for prompt payment, without the prior approval of the
Lender; (e) it is subject to no dispute, defense or offset, real or claimed
(other than merchandise disputes in the ordinary course of business which have
been disclosed to Lender); (f) it is not subject to any prohibition or
limitation upon assignment; and (g) the Borrower has full right and power to
grant the Lender a security interest therein and the security interest granted
in such Receivable to the Lender in Section 3 hereof will be a valid first
security interest which will inure to the benefit of the Lender without further
action.
5.15 No portion of the Revolving Loans shall be used to purchase or carry
any "Margin Security" or "Margin Stock" as such terms are used in Regulations G
and U of the Board of Governors of the Federal Reserve System, 12 C.F.R. 207 and
221.
5.16 The Borrower is now in all material respects in compliance and will
in the future comply with any and all of the requirements of Title 31 Section
3727 and Title 41 Section 15 of the United States Code where such statutes are
applicable to a particular Receivable, and shall take all such other action as
may be necessary to facilitate the direct collection of or ensure perfection of
the Lender's security interest in the Receivables at all times.
5.17 Except as set forth on Schedule 5.17, no franchises, licenses,
trademarks, trade names, copyrights or patents are owned or licensed by, or
registered in the name of, or have been applied for by, the Borrower, and no
such rights or agreements are necessary to the conduct of the present business
of the Borrower. Except as set forth on Schedule 5.17, the Borrower has no
knowledge and has not received any notice to the effect that any product it
manufactures or sells, or any service it renders, or any process, method,
know-how, trade secret, part or material it employs in the manufacture of any
product it makes or sells or any service it renders, or the marketing or use by
it or another of any such product or service, may infringe any trademark, trade
name, copyright, patent, trade secret or legally protectable right of any other
Person .
5.18 The Borrower utilizes no tradenames in the conduct of its business,
except as set forth in Schedule 5.18 and has not changed its name, been the
surviving entity in a merger or acquired any business since July, 1993.
5.19 Except as set forth in Schedule 5.19, the Inventory is not now and
shall not at any time hereafter be stored with a bailee, warehouseman, or
similar Person without the Lender's prior written consent, which consent shall
not unreasonably be withheld. If any Inventory is so stored, the Borrower will,
concurrent with storing such Inventory, cause any such bailee, warehouseman, or
similar Person to issue and deliver to the Lender, in a form reasonably
acceptable to the Lender, warehouse receipts in the Lender's name evidencing the
storage of the Inventory. All such warehouse receipts do and will evidence
ownership of the Inventory stored by the issuers thereof, and the holder thereof
is and will continue to be the owner of good and marketable title of same, free
and clear of any liens or encumbrances. All such warehouse receipts are and will
be genuine, valid and enforceable by the holder thereof in accordance with their
terms and all statements thereon are and will be true and accurate in all
material respects.
5.20 All Equipment is personalty and is not and will not be affixed to
real estate in such manner as to become a fixture or part of such real estate.
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5.21 There are no strikes, work stoppages, material grievance proceedings
or other material controversies pending or, to the Borrower's knowledge,
threatened between the Borrower and any employees of the Borrower or any union
or other collective bargaining unit representing such employees. The Borrower is
in compliance, in all material respects, with all laws relating to the
employment of labor, including, without limitation, provisions relating to
wages, hours, collective bargaining, occupational safety and health, equal
employment opportunities and the withholding of income taxes and social security
contributions, the non-compliance with which might materially adversely affect
its business, operations, assets, properties or condition (financial or
otherwise).
5.22 After giving effect to the transactions contemplated by this
Agreement, the Borrower (a) will have capital and assets sufficient to carry on
its business and all businesses in which it is engaged or about to be engaged,
(b) will be solvent and able to pay its debts and other liabilities, whether
fixed or contingent, as they mature, and (c) will own property the present fair
saleable value of which on a going concern basis (assuming an orderly
liquidation) is greater than the amount required to pay its debts and other
liabilities as they become due, whether fixed or contingent. The Borrower does
not intend to incur, and does not believe that it is incurring obligations
beyond its ability to pay as they mature.
5.23 The foregoing representations and warranties are made by the Borrower
with the knowledge and intention that the Lender will rely thereon, are
continuing and are reaffirmed upon each advance under the Revolving Loan or
other loans authorized hereunder, and shall survive the execution and delivery
of this Agreement and the making of all loans hereunder.
6. Affirmative Covenants. The Borrower covenants and agrees that until all
of the Obligations have been paid in full, unless the Lender shall otherwise
consent in writing, it shall:
6.1 Maintain complete and accurate books of account and records pertaining
to the Collateral and the operations of the Borrower, and all such books of
account and records shall be kept and maintained at the location(s) set forth in
Schedule A attached hereto. The Borrower shall not move such books of account
and records without giving the Lender at least 30 days' prior written notice.
Prior to moving any of such books of account and records, the Borrower shall
execute and deliver to the Lender financing statements reasonably satisfactory
to the Lender. All such books of account and records and all financial
statements and reports furnished to the Lender shall be maintained and prepared
in accordance with generally accepted accounting principles applied on a basis
consistent with prior periods.
6.2 Grant the Lender, or its representatives, full and complete access to
all Collateral and to all books of account, records, correspondence and other
papers relating to the Collateral during normal business hours and the right to
inspect, examine, verify and make abstracts from and copies of the Collateral
and of such books of account, records, correspondence and other papers, and to
investigate such other activities and business of the Borrower as they may deem
necessary or appropriate at the time.
6.3 Deliver to the Lender:
(a) Within 45 days after the end of each calendar month of each
fiscal year, unaudited financial statements, including a balance sheet and
related profit and loss statements, for such month prepared by the Borrower's
chief financial officer. In the event that Borrower fails to deliver the
foregoing information and documents within such time period, Borrower shall
deliver to Lender said information and documents to Lender within 5 days from
the date on which it receives notice of such failure from Lender.
(b) Within 105 days after the end of Borrower's fiscal year, a copy
of Borrower's Annual Report and Form 10-KSB or Form 10-K, as the case may be,
for such year prepared by independent certified public accountants reasonably
acceptable to the Lender. In the event that Borrower fails to deliver the
foregoing information and documents within such time period, Borrower shall
deliver to Lender said information and documents to Lender within 30 days from
the date on which it receives notice of such failure from Lender. In the event
that Borrower fails to remain a public company or is not required to file an
Annual Report or Form 10-K SB or Form 10-K, Borrower shall provide to Lender,
reviewed or audited financial statements including a balance sheet and related
profit and loss statements for such fiscal year then ended prepared by
Borrower's independent certified public accountants reasonably acceptable to
Lender.
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(c) As soon as available, but in no event more than ten (10) days
after the end of each month, a written schedule in form satisfactory to the
Lender listing or otherwise describing the status of the Borrower's performance
and schedule for completion of each Government Contract which is or may become
the subject of a Receivable. In the event that Borrower fails to deliver the
foregoing information and documents within such time period, Borrower shall
deliver to Lender said information and documents to Lender within 5 days from
the date on which it receives notice of such failure from Lender
(d) Within 50 days after the end of each of Borrower's fiscal
quarters, copies of Borrower's Quarterly Report on Form 10-QSB or 10-Q, as the
case may be. In the event that Borrower fails to deliver the foregoing
information and documents within such time period, Borrower shall deliver to
Lender said information and documents to Lender within 10 days from the date on
which it receives notice of such failure from Lender. In the event that Borrower
fails to remain a public company or is not required to file an Quarterly Report
on Form 10-Q SB or Form 10-Q, Borrower shall provide to Lender, unaudited
financial statements including a balance sheet and related profit and loss
statements for such fiscal quarter then ended and for the cumulative period of
the fiscal year since the first day of such fiscal year prepared by Borrower's
Chief Financial Officer.
(e) Such other financial and business information and reports in
form and substance satisfactory to the Lender as and when the Lender may from
time to time reasonably request.
6.4 While this Agreement remains in effect and until the Obligations have
been paid in full, (a) maintain its corporate existence in good standing; (b)
make no material change in the nature or character of its business or engage in
any business which is unrelated to the business in which it is engaged on the
date of this Agreement; and (c) maintain and keep in full force and effect all
franchises, licenses and permits material to conduct of its business.
6.5 Maintain and keep all of its properties, real and personal, in good
working order, condition and repair and insure and keep insured all such
properties at all times against loss or damage by fire, theft, and such other
risks and hazards as are customarily insured against by corporations engaged in
similar businesses and in similar circumstances, or as the Lender may reasonably
specify from time to time, with insurers, in amounts and under policies
acceptable to the Lender, and insure against loss or damage from business
interruption on account of fire or other casualty and against liability on
account of property damage and personal injury and under all applicable worker's
compensation laws, and against such other risks as the Lender may reasonably
request, with insurers, in amounts and under policies reasonably acceptable to
the Lender. If the Borrower fails to do so, the Lender may obtain (but shall be
under no obligation to do so) such insurance and add the cost thereof to the
Obligations. The Borrower agrees that, if any loss should occur, the proceeds of
all such insurance policies that relate to the Collateral (the "Lender's
Policies") may be applied to the payment of all or any part of the Obligations,
as the Lender may direct. At the Lender's request, the Borrower shall within
five (5) days of such request, deliver to the Lender the original (or certified
copy) of each of the Lender's Policies and evidence of payment of all premiums
therefor. The Lender's Policies shall contain an endorsement, in form and
substance reasonably acceptable to the Lender, showing loss payable to the
Lender. Such endorsement or an independent instrument furnished to the Lender
shall provide that the insurer will give the Lender at least 30 days' written
notice before any such policy or policies of insurance shall be altered or
canceled and that no act of default of the Borrower or any person shall affect
the right of the Borrower to recover under the Lender's Policies in case of loss
of damage. The Borrower hereby directs all insurers under the Lender's Policies
to pay all proceeds payable thereunder directly to the Lender. The Borrower
irrevocably makes, constitutes and appoints the Lender (and all officers,
employees or agents designated by the Lender) as the Borrower's true and lawful
attorney and agent-in-fact for the purpose of making, settling and adjusting
claims under the Lender's Policies, endorsing the name of the Borrower on any
check, draft, instrument or other item of payment for the proceeds of such
policies and for making all determinations and decisions with respect to such
policies.
6.6 Comply at all times with the provisions of all leases to which the
Borrower is a party or under which it occupies property, so as to prevent any
loss of forfeiture thereof or thereunder, provided, however, that the Borrower
may cancel, surrender or modify any lease or contest in good faith any provision
thereof if such action is deemed advantageous to its business and if no
forfeiture, other than reasonable settlement payments in connection with such
surrenders or cancellations, under any such lease results therefrom.
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6.7 (a) Pay the Obligations as they become due or upon an Event of Default
which continues beyond any applicable cure period related thereto and/or a
material adverse change in the condition of Borrower (financial or otherwise) on
the demand of the Lender;
(b) Pay all indebtedness and obligations material to its business in
accordance with their terms and pay all taxes, assessments and governmental
charges lawfully levied or imposed on or against the Borrower or its properties
prior to the date when such taxes, assessments or charges shall become
delinquent, unless the Borrower shall contest the validity thereof in good faith
and shall post any bond or other security required by applicable law or by the
Lender against the payment thereof.
6.8 Comply, in all material respects, with all federal, state and local
laws which are material to the business of Borrower, including, but not limited
to requirements of Environmental Laws applicable to its business, whether now in
effect or hereafter enacted, and upon the reasonable request of the Lender, the
Borrower will provide the Lender with such evidence of such compliance.
6.9 If required, comply with Section 1809 of the Small Business Act
relating to I.R.S. Code Section 6302(h)(2)(C)(i)(iv) and (ii)(iv) or deposit
with a bank insured by the Federal Deposit Insurance Corporation or any
successor thereto, when due, all F.I.C.A. and withholding taxes and such other
taxes as may from time to time be owing, comply with all requirements of the
Lender with respect thereto and furnish the Lender with such proof of payment
thereof as the Lender may from time to time request.
6.10 Within thirty (30) days of conducting business in any state, qualify
as a foreign corporation and obtain all requisite licenses and permits in each
state in which the failure of the Borrower to so qualify would have a material
adverse effect on its business, operations, properties, assets or financial
condition.
6.11 In the event that any Receivable is not paid within one hundred
twenty (120) days after its due date and the total amount of Obligations owed to
Lender exceed the sum of (i) the then applicable Eligible Receivables Percentage
multiplied by the Eligible Receivables less the Receivable which has not paid
plus (ii) the then applicable Eligible Inventory Percentage multiplied by the
Eligible Inventory, Borrower shall take the necessary or appropriate steps to
file and perfect, at the Borrower's expense, any lien, judgment, claim or
lawsuit that may be available to the Borrower under the laws of the applicable
jurisdiction.
6.12 Defend the Collateral against all claims and demands of all Persons
at any time claiming the same or any interest therein and pay all costs and
expenses (including Reasonable Attorneys' Fees) incurred in connection with such
defense.
6.13 Promptly notify the Lender of any condition or event that
constitutes, or with the running of time, the giving of notice, or both, would
constitute, an Event of Default, and promptly inform the Lender of any material
adverse change in the financial condition of the Borrower or of Technology
Flavors & Fragrances, Inc. (Canada).
6.14 Promptly notify the Lender in writing of any action or omission of
the Lender which the Borrower claims caused or may cause injury, loss or damage
to the Borrower.
6.15 Within five (5) days of any change in the location of any of the
Borrower's places of business or the opening of any new place of business notify
Lender of such change or opening of new place of business.
6.16 At the request of the Lender, execute and deliver such financing
statements, documents and instruments, and perform all other acts as the Lender
deems are reasonably necessary, to perfect or continue the perfection of the
Lender's security interest in the Collateral, and pay, upon demand, all
reasonable expenses (including Reasonable Attorneys' Fees, filing fees and
taxes) incurred by the Lender in connection therewith.
6.17 At the request of the Lender, make available to the Lender a copy of
each Government Contract and a copy of each amendment thereto or modification
thereof which changes the price of such contract or the amount funded to pay for
such contract, except to the extent that furnishing such copies may be
prohibited by government security regulations.
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6.18 At the request of the Lender, submit to the Lender for the Lender's
approval those Government Contracts which the Borrower desires to be included in
determining Eligible Government Accounts, and provide such other information
concerning such Government Contracts as the Lender may reasonably request. The
Lender shall not unreasonably delay or withhold its response regarding the
Lender's approval of such Government Contracts.
6.19 Promptly after the furnishing thereof, provide to the Lender copies
of any statement or report furnished to any other Person pursuant to the terms
of any indenture, loan, credit, or similar agreement and not otherwise required
to be furnished to the Lender pursuant to any other Section of this Agreement.
Promptly after the sending or filing thereof, provide to the Lender copies of
all proxy statements, and reports which the Borrower or any Affiliate sends to
its stockholders, and copies of all regular, periodic, and special reports, and
all registration statements which the Borrower files with the Securities and
Exchange Commission or with any national securities exchange.
6.20 Prepare, execute, and file appropriate financing statements with
respect to any consigned Inventory showing the consignee as debtor, the Borrower
as secured party, and the Lender as assignee of the Borrower;
6.21 Not permit any item of the Equipment to become a fixture to real
estate or an accession to other property without the prior written consent of
the Lender, which consent shall not be unreasonably withheld, and the Equipment
is now and shall at all times remain personal property except with the Lender's
prior written consent. If any of the Equipment is or will be attached to real
estate in such a manner as to become a fixture under applicable state law and if
such real estate is encumbered, the Borrower will obtain from the holder of each
lien or encumbrance a written consent and subordination to the security interest
hereby granted, or a written disclaimer of any interest in the Equipment, in a
form acceptable to the Lender.
6.22 Promptly, upon request by the Lender, deliver, assign, and endorse to
the Lender all chattel paper, instruments, promissory notes and all other
documents held by the Borrower in connection therewith.
6.23 With respect to all real property owned, subleased, operated or
occupied by the Borrower, maintain and cause all operators, tenants, subtenants,
licensees and occupants of all such property to maintain such property free of
all Hazardous Materials, and prevent all such property from being used for the
manufacture, generation, production, processing, distribution, use, treatment,
storage, disposal, transport or handling of any Hazardous Materials; and deliver
to the Lender copies of all reports prepared by any governmental authority, any
environmental auditor or engineer, or any other person, relating to or in
connection with the Borrower's compliance with any Environmental Laws, unless
the Borrower cannot obtain such reports or copies thereof.
6.24 Sell or dispose of the Inventory only to buyers in the ordinary
course of business. Upon the sale, exchange, lease or disposition of Inventory,
the security interest of the Lender therein shall without breach in continuity
and without further formality or act continue in and attach to all cash and
non-cash proceeds of such sale, exchange, lease or disposition, including all
the instruments for the payment of money, Receivables, contract rights,
documents of title, shipping documents and chattel paper, and all Inventory
returned or rejected by customers or repossessed by the Borrower or by the
Lender. As to any such sale, exchange, lease or disposition, the Lender shall
have all of the rights of an unpaid seller, including stoppage in transit,
replevin, detinue and reclamation.
6.25 Notify the Lender, within five (5) days of any change in location of
any of the Inventory not in the ordinary course of business, and, prior to any
such change, execute and deliver to the Lender such financing statements
satisfactory to the Lender as the Lender may reasonably request. The Borrower,
at its sole expense, will defend the Inventory against any claims or demands
adverse to the Lender's interest therein, and will promptly pay, when due, all
taxes or assessments levied against the Borrower on the Inventory other than
those contested by the Borrower in good faith by appropriate proceedings. If the
Borrower shall fail to pay such taxes or assessments, or fail to keep the
Inventory free from any lien or security interest in favor of anyone other than
the Lender, the Lender may (but shall not be obligated to) make expenditures for
such purposes and any amounts so expended shall be added to the Obligations,
shall be repayable on demand and shall accrue interest at the rate specified in
Section 2.2 (e) until repaid.
6.26 Report, in form satisfactory to the Lender, such information as the
Lender may reasonably request regarding the Inventory. Such reports shall be for
such period, shall reflect the Borrower's records as at such time and shall be
rendered with such frequency as the Lender may reasonably designate, and each
such report shall confirm that all Inventory reported upon is subject to the
Lender's security interest.
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6.27 Advise the Lender promptly, in sufficient detail, of any substantial
change relating to the type, quantity or quality of the Inventory, or any event
which would have a material adverse effect on the value of the Inventory or on
the security interest granted to the Lender herein. A physical listing of all
Inventory, wherever located, shall be taken by the Borrower whenever reasonably
requested by the Lender, and a copy of such physical listing will be supplied to
the Lender. Such listing shall be extended to show the value of such Inventory
at the lowest wholesale price. The Lender may examine and inspect the Inventory
at any reasonable time.
6.28 Pay to the Lender, the Lender's customary Field Examination and Audit
Fees as set forth on Schedule A attached hereto.
6.29 At the request of the Lender, execute and deliver a Lockbox Agreement
to the Lender and comply with the terms thereof.
6.30 Borrower shall at all times maintain compliance with the financial
covenants set forth below:
(a) Tangible Net Worth for fiscal year end 12/31/99 shall be not
less than $1,750,000.00;
Capital expenditures for both direct purchases of equipment and leases, provided
there are no existing Event of Default, shall be allowed as follows:
(1) Not to exceed $250,000.00 for fiscal year ending
12/31/99;
(2) Not to exceed $400,000.00 for fiscal year ending
12/31/00; and
(3) Not to exceed $450,000.00 for fiscal year ending
12/31/01 and each fiscal year thereafter.
(c) Borrower shall at no time through 12/31/99 achieve less than 75%
of the pre-tax income projections for its fiscal ending 12/31/99 and each fiscal
year thereafter, which projections were provided to Lender by Borrower, a copy
of which is attached hereto as Schedule 6.30.
6.31 Not permit transfers of cash to Technology Flavors & Fragrances S.A
(Chile) to exceed $75,000.00 per month and shall require repatriation of all
sums in excess of $75,000.00 per month from Technology Flavors & Fragrances S.A
(Chile).
7. Negative Covenants. The Borrower covenants and agrees that until the
Obligations have been paid in full, unless the Lender shall consent in advance
in writing, it shall not:
7.1 Discontinue its business, sell a material part of its assets or
liquidate or sell, transfer, assign or otherwise dispose of any of the
Collateral, provided, however, that it may sell in the ordinary course of
business and for a full and adequate consideration in money or money's worth,
any product, merchandise or service produced, marketed or furnished by it.
7.2 Sell (except for the sale of Inventory in the ordinary course of
business), assign, pledge, grant a security interest in any of the Collateral,
whether now owned or hereafter acquired, except for Permitted Liens.
7.3 (a) Make any loans to any Person, including any of its officers,
directors or stockholders, other than loans to employees not to exceed $20,000
in the aggregate or (b) repay any existing loans made to it by its officers,
directors or stockholders, other than loans not in excess of $20,000 in the
aggregate existing as of the date hereof as set forth on Schedule 7.2.
7.4 (a) Declare or pay any dividends (except dividends payable solely in
shares of its capital stock) or make any other payments on its capital stock,
(b) issue, redeem, repurchase or retire, purchase or otherwise acquire any of
its capital stock now or hereafter outstanding, provided, however, that the
Borrower shall be permitted to repurchase up to $500,000 of its common stock (c)
grant or issue any warrant, right or option pertaining thereto or other security
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convertible into any of the foregoing other than any option or similar right
granted to any employee, director, officer, or consultant of Borrower pursuant
to Borrower's employee stock option plan in effect as of the date hereof, or
make any distribution to its stockholders (other than as provided herein) or set
aside any sum or property for any such purpose; provided, that no Event of
Default, or any event or condition the occurrence of which would, with the lapse
of time or the giving of notice, or both, become an Event of Default, exits or
would result therefrom.
7.5 Compromise or discount any Receivable except for ordinary trade
discounts or allowances for prompt payment.
7.6 Consolidate or merge with any Person or acquire or purchase any equity
or interest in any other Person (other than a wholly owned subsidiary of
Borrower, provided that Borrower shall be the surviving entity of any such
merger), including shares of stock of other corporations, or acquire or purchase
any assets or obligations of any other entity, except that the Borrower is
permitted to own notes and other Receivables acquired in the ordinary course of
business.
7.7 Change its name, do business under an assumed or trade name, or move
any of the Collateral to another location not permitted under this Agreement
without giving the Lender at least 30 days' prior written notice thereof and
executing and delivering to the Lender such financing statements satisfactory to
the Lender as the Lender may reasonably request.
7.8 Replace or terminate the individuals named in Schedule A attached
hereto as an officer or employee of the Borrower, without providing notice to
Lender five (5) days prior to such replacement or termination.
7.9 Enter into any sale-leaseback transaction, or incur indebtedness
except:
(a) The Obligations of the Borrower to the Lender;
(b) Unsecured current liabilities incurred in the ordinary course of
business;
(c) Indebtedness (not overdue) secured by Permitted Liens;
(d) Indebtedness under guarantees or for other contingent
liabilities to the extent permitted by this Agreement;
(e) Indebtedness of the Borrower which has been subordinated to the
Obligations pursuant to a subordination agreement acceptable to the Lender;
(f) Indebtedness allowed to Borrower under the terms of this
Agreement; and
(g) Other indebtedness which does not exceed the sum of $100,000 in
the aggregate.
7.10 (a) Lend or advance money, credit, or property to any Person or
Affiliate, except for employee loans not to exceed $20,000 in the aggregate at
any one time; (b) invest in (by capital contribution or otherwise), or purchase
or repurchase the stock or indebtedness, or all or a substantial part of the
assets or properties, of any Person except as otherwise provided herein; (c) or
guarantee, assume, endorse, or otherwise become responsible for (directly or
indirectly or by any instrument having the effect of assuring any Person's
payment or performance) the indebtedness, performance, obligations, stock, or
dividends of any Person or Affiliate; or (d) agree to do any of the foregoing
except the endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.
7.11 Incur, create, assume or permit to exist rental obligations or other
commitments under leases of real or personal property (except leases of
equipment in the ordinary course of business) other than under leases in effect
on the date of this Agreement.
8. Conditions for Closing and Advances. The Lender's obligations to make
any advance under the Revolving Loans are subject to the following:
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8.1 With respect to the initial advance, the Borrower shall have delivered
to the Lender the following and the following conditions precedent have been
satisfied in the sole discretion of the Lender:
(a) The Borrower's written authorization to deduct from the initial
advance the amount set forth in Schedule A attached hereto in payment of the
funding fee.
(b) This Agreement fully executed.
(c) The executed Guaranty Agreements required by Section 3.2.
(d) Landlord waivers in favor of the Lender and in form and content
satisfactory to the Lender executed by the owner of any premises leased by the
Borrower.
(e) Such executed financing statements or other documents which the
Lender may request in connection with the Collateral; evidence reasonably
satisfactory to the Lender that all filings under the Uniform Commercial Code or
with any federal or state agency or department that the Lender or its counsel
reasonably deems necessary in connection with the creation and perfection of the
security interest granted hereunder have been effected; and such other evidence
as the Lender may reasonably require that confirms that, as a result of such
filings, the Lender's security interest in the Collateral is consistent with the
representation contained in this Agreement relating thereto.
(f) If requested by the Lender, a Certificate of Good Standing for
the Borrower in the state of its incorporation.
(g) If requested by the Lender, a Certificate of the Borrower's
qualification to do business as a foreign corporation in the state(s) in which
the nature of its business or its properties makes such qualification necessary.
(h) A certificate of the President of the Borrower certifying to
such matters as the Lender may request as of the date of the closing.
(i) A certificate of the Secretary of the Borrower certifying that
the copies of the Borrower's bylaws and articles of incorporation and other
charter documents attached hereto are true and correct copies of same as of the
date of the closing.
(j) Certified copy of resolutions of the Board of Directors of the
Borrower authorizing the execution and delivery of this Agreement and the
performance of the transactions contemplated hereby, dated the date of the
closing.
(k) Certificates or endorsements evidencing the insurance coverage
required by Section 6.5 hereof.
(l) The written opinion of the Borrower's and Guarantor's counsel in
form and content reasonably satisfactory to the Lender and its counsel.
(m) Evidence satisfactory to the Lender that all past due federal,
state and local taxes owed by the Borrower have been paid in full or that there
is sufficient availability under Section 2.1 hereof to allow the Lender to make
such payment from the proceeds of the Revolving Loans.
(n) The fully completed and executed IRS Form 8821 with respect to
the Borrower.
(o) If requested by the Lender, the executed Lockbox Agreement.
(p) If requested by the Lender, the executed assignment or
assignments to the Lender of life insurance on the life of such individual(s)
and in such face amount as the Lender may request, together with evidence of
acceptance of such assignment(s) by the issuing company or companies.
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(q) If requested by the Lender, fully executed subordination and
intercreditor agreements in form acceptable to the Lender executed by such
Persons as determined by the Lender.
(r) All such other documents, receipts, certificates, instruments or
information as the Lender or its counsel may request.
(s) There shall exist no Event of Default (as hereinafter defined)
and no event which, upon the giving of notice or lapse of time or both, would
constitute an Event of Default.
(t) The representations and warranties contained in this Agreement
shall be true and correct.
(u) If required by the Lender, the Lender shall have conducted a
follow-up field examination with respect to the Borrower's assets and the
results of such field examination are in all respects satisfactory to the
Lender.
(v) The Lender shall have determined in good faith that no material
adverse change has occurred in the total financial condition of the Borrower and
Technology Flavors & Fragrances, Inc. (Canada), as set forth in the most recent
financial statements furnished to the Lender and as previously disclosed to the
Lender.
8.2 All future advances of the Revolving Loan will be made from time to
time, at the request of the Borrower, at the sole discretion of the Lender.
Future advances under the Revolving Loan shall be further conditioned upon the
following:
(a) The Borrower shall have delivered to the Lender such other
agreements, certificates, instruments, opinions and other documents and
materials as the Lender may reasonably request.
(b) The Borrower and the Guarantor shall have complied and shall
then be in compliance with all terms, covenants and conditions of this
Agreement.
(c) There shall exist no Event of Default and no event which, upon
notice or lapse of time or both, would constitute an Event of Default.
(d) The representations and warranties contained in this Agreement
shall be true and correct as of the date of each such request (except where such
representation by its terms relates to a date which is another specific date).
(e) The Lender shall have determined in good faith that no material
adverse change has occurred in the total financial condition of the Borrower and
Technology Flavors & Fragrances, Inc. (Canada) from the financial condition of
the Borrower and the Guarantor taken as a whole, as the case may be, as set
forth in the most recent financial statements furnished to the Lender pursuant
to this Agreement or from the financial condition of the Borrower and the
Guarantor, previously disclosed to the Lender in any other manner.
9. Events of Default and Remedies.
9.1 The following shall constitute Events of Default under this Agreement:
(a) The failure of the Borrower to pay when due any of the
Obligations.
(b) The failure of the Borrower to observe or perform any
affirmative or negative covenant contained in any of the Loan Documents.
(c) The discovery that any representation or warranty at any time
made in or in connection with any of the Loan Documents, was in any material
respect false at the time it was made.
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(d) The occurrence of a default (as described or defined therein)
under any other indebtedness or liability for borrowed money of the Borrower or
the Guarantor (other than the Revolving Loans) if the effect of such default is
to accelerate the maturity of such evidence of indebtedness or liability or to
permit the holder thereof to cause any indebtedness to become due prior to its
stated maturity and the aggregate amount of such indebtedness or liability
exceeds $100,000.
(e) The suspension by the Borrower or any Guarantor of the operation
of its present business or a material adverse change (in the reasonable opinion
of the Lender) in the nature of its business; the admission in writing by the
Borrower or any Guarantor of its inability to pay its debts as they mature; the
permitting of a receiver or trustee to be appointed for all or substantially all
of its assets and, if appointed without its consent, the failure to cause such
receiver or trustee to be discharged within 60 days; the instituting by the
Borrower or any Guarantor of proceedings under any law, state or federal,
relating to bankruptcy, insolvency or any reorganization or arrangement for the
relief of debtors or, if any such proceedings are instituted against it, the
failure to cause such proceedings to be dismissed or stayed within 60 days.
(f) The validity or enforceability of any of the Loan Documents
shall be contested by the Borrower or the Guarantor or the Borrower or the
Guarantor shall deny that it has any liability or obligation hereunder.
(g) The validity or enforceability of any Guaranty Agreement shall
be contested by the Borrower or the Guarantor shall deny that he has any current
or future liability or obligation thereunder, or shall fail to perform his
obligations thereunder.
(h) The loss, theft, damage, or destruction of any material portion
of the Collateral for which there is either no insurance coverage or for which,
in the reasonable opinion of the Lender, there is insufficient insurance
coverage.
(i) The Borrower makes any payment on account of indebtedness for
borrowed money that has been subordinated to any of the Obligations, other than
payments specifically permitted by the terms of such subordination.
(j) Any Person holding indebtedness for borrowed money that has been
subordinated to the Obligations, terminates the subordination agreement or
asserts that it is terminated, or becomes the subject of an insolvency
proceeding, or such Person dies and the subordination of such indebtedness for
borrowed money is revoked, terminated or is otherwise no longer effective.
(k) The filing against the Borrower of formal charges under any
federal or state law for which forfeiture of any part or all of the Collateral
is a part of the potential penalty and such charges are not dismissed within 90
days of the date of filing thereof.
9.2 Upon the occurrence of an Event of Default which continues beyond any
applicable cure period related thereto, the Lender at its option may, upon
notice to Borrower: (i) make no further advances under the Revolving Loan; (ii)
terminate this Agreement and declare the Obligations of the Borrower immediately
due and payable and exercise all of its rights and remedies against the Borrower
and any Collateral in accordance with this Agreement and/or as permit by law;
(iii) exercise all rights granted to a secured party under the UCC, under
applicable law, or otherwise or granted to the Lender herein. The Lender shall
have the right to require the Borrower to assemble any Collateral and make such
Collateral available at a location or locations designated by the Lender. The
Lender may foreclose its lien and security interest in the Collateral in any way
permitted by law. The Lender may enter the Borrower's premises without legal
process and without incurring a liability to the Borrower, if this can be done
without breach of peace, and remove the Collateral to such place or places as
the Lender may deem advisable, or the Lender may require the Borrower to make
the Collateral available to the Lender at a convenient place and, with or
without having the Collateral at the time or place of sale, the Lender may sell
or otherwise dispose of all or any part of the Collateral whether in its then
condition or after further preparation or processing, either at public or
private sale or at any broker's board, in lots or in bulk, for cash or for
credit, at any time or place, in one or more sales, and upon such terms and
conditions as the Lender may elect. In any such sale the Lender may be the
purchaser; (iv) take possession or control of, store, lease, operate, manage,
sell or otherwise dispose of all of any part of the Collateral; (v) notify all
parties under the contracts, accounts and Receivables forming all or any part of
the Collateral to make any payments
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due to the Borrower from such parties directly to the Lender; (vi) in the
Lender's own name, or in the name of the Borrower, demand, collect, receive, sue
upon or otherwise collect, extend the time of payment of, or compromise or
settle for cash, credit or otherwise upon any terms, any of the Receivables or
any securities, instruments or insurance applicable thereto and/or release the
obligor thereon; (vii) endorse as the agent of the Borrower any chattel paper,
documents, or instruments forming all or any part of the Collateral; (viii) make
formal application for the transfer of all of the Borrower's permits, licenses,
approvals, agreements, and the like relating to the Collateral or to the
Borrower's business to the Lender or to any assignee of the Lender or to any
purchaser of any of the Collateral; (ix) use and operate any Equipment or other
property of the Borrower to process or finish any Inventory; (x) pay, purchase,
contest, or compromise any encumbrance, charge, or lien that, in the opinion of
the Lender, appears to be prior or superior to its Lien and pay all expenses
incurred in connection therewith; (xi) prepare and file any bankruptcy proofs of
claim or similar documents against any Account Debtor; (xii) take any other
action which the Lender deems reasonably necessary or desirable to protect and
realize upon its security interest in the Collateral; (xiii) in addition to the
foregoing, and not in substitution therefor, take such measures as it deems
reasonably necessary or advisable to refurbish, repair, improve, process,
finish, operate, demonstrate, and prepare for sale the Collateral and may store,
ship, reclaim, recover, protect, advertise for sale or lease, and insure the
Collateral and exercise any one or more of the rights and remedies exercisable
by the Lender under other provisions of this Agreement, under the Note, or
provided by applicable law (including, without limitation, the UCC); (xiv)
obtain appointment of a receiver for all or any of the Collateral, the Borrower
and Guarantor hereby consenting to the appointment of such a receiver and each
agreeing not to oppose any such appointment. Any receiver so appointed shall
have such powers as may be conferred by the appointing authority including any
or all of the powers, rights and remedies which the Lender is authorized to
exercise by this Agreement, the Note and the Guaranty and shall have the right
to incur such obligations and to issue such certificates therefor as the
appointing authority shall authorize.
9.3 Any notices required under the UCC with respect to the sale or other
disposition of the Collateral shall be deemed reasonable if mailed by the Lender
to the Persons entitled thereto at their last known address at least five (5)
days prior to disposition of the Collateral and, in the case of a private sale
of Collateral, need state only that the Lender intends to negotiate such a sale.
9.4 The proceeds of any sale or disposition of the Collateral by the
Lender shall first be applied to the payment of all costs and expenses incurred
by the Lender in taking possession of, removing, storing, repairing or otherwise
preparing for sale and selling the Collateral (including the Lender's reasonable
attorney's fees and other legal costs and expenses). After payment of all such
costs and expenses, the Lender shall have the right to apply the remaining
proceeds of any such sale or disposition to the payment of the Obligations in
such order of application as the Lender may, in its sole discretion, elect.
9.5 The rights, options and remedies of the Lender shall be cumulative and
no failure or delay by the Lender in exercising any right, option or remedy
shall be deemed a waiver thereof or of any other right, option or remedy, or
waiver of any Event of Default hereunder.
9.6 In addition to the provisions of Section 9.2, it is expressly
understood and agreed between the Borrower and the Lender that default (which
shall include any failure by the Borrower to pay on demand any Obligation
payable on demand by it to the Lender) by the Borrower, beyond any applicable
grace period, on any other loans, indebtedness, liabilities or obligations of
the Borrower to the Lender or to any other Person (other than suppliers and
vendors in the ordinary course of business), now existing or hereafter arising,
regardless of how they arise or by what contract, agreement or instrument they
may be evidenced, or whether evidenced by any contract, agreement or instrument,
shall, at the Lender's option, if such default results in the acceleration of
any such indebtedness, liabilities or obligations in an amount which exceeds
$100,000 in the aggregate, constitute an Event of Default hereunder and a
default on all such other loans, indebtedness, liabilities or obligations of the
Borrower to the Lender.
9.7 The Borrower, having knowledge that it may be entitled to notice and a
hearing prior to repossession of the Collateral, hereby waives any right it may
have under existing or future law to notice of foreclosure or of any other act
described herein, to any hearing that may be held relating to foreclosure or any
other such act, and to any notice that may be required to be given by the Lender
prior to such hearing. The Borrower hereby expressly releases the Lender and its
agents from any and all liability relating to such foreclosure and any other
acts described herein unless occasioned by the Lender's gross negligence or
willful misconduct.
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10. Destruction of Documents. Any documents, schedules, invoices or other
papers delivered to the Lender by the Borrower may be destroyed or otherwise
disposed of by the Lender three months after they are delivered to or received
by the Lender, unless the Borrower requests prior to delivery, in writing, the
return of said documents, schedules, invoices or other papers and makes
arrangements, at the Borrower's expense, for their delivery to the Borrower.
11. Indemnification. The Borrower, its successors and assigns, agrees at
its sole cost and expense to defend, indemnify and hold harmless the Lender, its
directors, officers, employees, agents, contractors, subcontractors, licensees,
invitees, successors and assigns, from and against any and all claims, demands,
judgments, damages, actions, causes of action, injuries, administrative orders,
consent agreement and orders, liabilities, penalties, costs, and expenses of any
kind whatsoever (including claims arising out of loss of life, injury to
persons, property or business or damage to natural resources) in connection with
the activities of the Borrower, its successors and assigns, its predecessors in
interest, or third parties who have trespassed on the Borrower's premises,
suppliers to the Borrower, the Guarantor or parties in contractual relationship
with the Borrower, its successors and assigns, or any of them, whether or not
occasioned wholly or in part by any condition, accident or event caused by any
act or omission of the Lender, its directors, officers, employees, agents,
contractors, subcontractors, licensees, invitees, successors and assigns,
(excepting therefrom any act or omission arising out of Lender's gross
negligence or willful misconduct), which arises out of the violation or alleged
violation of any Environmental Law. The Borrower, its successors and assigns
shall assume the burden and expense of defending all suits, administrative
proceedings, and negotiations of any description, with any and all Persons
arising out of any of the occurrences set forth herein. The terms and conditions
of this Section shall survive the payment of the Obligations and termination of
this Agreement.
12. Jurisdiction, Venue and Waiver of Jury Trial.
12.1 The forum having the proper jurisdiction and venue to adjudicate any
claim, dispute or default which may arise out of the execution and delivery of
this Agreement and the performance of the transactions contemplated hereby shall
be the Circuit Court of the City of Richmond, Virginia, and the proper appellate
courts of the Commonwealth of Virginia, and the United States District Court for
the Eastern District of Virginia, Richmond Division, and proper appellate courts
of the United States, unless the Lender in its sole discretion chooses to bring
suit on its own behalf in some other court of competent jurisdiction. The Lender
and Borrower expressly submit and consent to such jurisdiction and venue and
specifically waive any and all rights it may have to contest the jurisdiction
and/or venue of the above mentioned forums and to demand any other forum. The
Borrower and Lender hereby waive personal service of any and all legal process
upon it and consents and agrees that all such service may be made by Certified
Mail directed to the Borrower and the Lender as the case may be, at its address
set forth at the beginning of this Agreement, Attention: President, and service
so made shall be deemed to be completed and effective service of process on the
earlier of the date the return receipt therefor is signed or five Business Days
after the same shall have been deposited in the United States mail, certified
and postage prepaid.
12.2 THE BORROWER AND THE LENDER WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ON ANY MATTER ARISING OUT OF THIS AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED HEREBY.
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE BORROWER
AND THE LENDER, AND THE BORROWER AND THE LENDER HEREBY REPRESENT THAT NO
REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE
THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE
BORROWER AND LENDER FURTHER REPRESENT THAT THEY HAVE BEEN REPRESENTED IN THE
SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THAT IT HAVE HAD THE OPPORTUNITY
TO DISCUSS THIS WAIVER WITH SUCH COUNSEL.
13. Administration and Collection Costs. All costs and expenses,
including, without limitation, reasonable attorneys' fee and legal expenses and
the cost of annual financing statement, judgment and tax lien searches, incurred
by the Lender in connection with obtaining or enforcing payment of any of the
Obligations or foreclosing the Lender's security interest in any of the
Collateral or lien against the Borrower's real estate, whether through judicial
proceedings or otherwise, or in collecting, enforcing or protecting its
interests under this Agreement, or under any other
21
<PAGE>
instruments or documents delivered pursuant hereto, or in defending or
prosecuting any actions or proceedings arising out of or relating to the
Lender's transactions with the Borrower, shall be paid by the Borrower to the
Lender, upon demand, and the Lender may take judgment against the Borrower for
all such costs, expenses and fees in addition to all other amounts due from
Borrower hereunder.
14. Expenses. The Borrower shall pay to the Lender all reasonable expenses
of the Lender incurred in connection with the preparation of this Agreement
(including all Exhibits and any and all amendments or modifications hereto) and
the closing and making of the Revolving Loans, including reasonable fees and
expenses of the Lender's counsel, and all filing, recording and other costs
connected with the perfection of the Lender's security interests and liens
pursuant to Section 3 hereof. All such costs and expenses until paid shall be
included in the Obligations or deducted from any amount due the Borrower. The
Borrower agrees that the attorneys retained by the Lender shall represent only
the interests of the Lender.
15. Waivers and Releases. The Borrower and each endorser, guarantor and
surety for any of the Obligations hereby, except as may otherwise be provided
herein (a) waives notice of nonpayment, demand, presentment, protest and notice
of protest with respect to any of the Obligations, the Collateral, or notice of
acceptance hereof, or of any other action taken in reliance hereon, notice and
opportunity to be heard before exercise by the Lender of the remedies of
self-help, set-off, or other summary procedures permitted by law or by any
agreement with the Borrower, and all other demands and notices of any
description, except such as are expressly provided for herein, and (b) releases
the Lender from all claims for loss or damage caused by any act or failure to
act on the part of the Lender, its officers, attorneys, agents and employees,
except any such act or failure to act which arises out of the gross negligence
or willful misconduct of the Lender, its officers, attorneys, agents or
employees.
16. Miscellaneous.
16.1 All notices, consents, requests, demands, or other communications
provided for in this agreement shall be in writing and shall be delivered by
hand, sent prepaid by Federal Express (or a comparable overnight delivery
service) by facsimile or sent by the United States mail, certified, postage
prepaid, return receipt requested, to the Lender or the Borrower, as the case
may be, at their respective addresses set forth at the beginning of this
agreement and to the attention of LOAN ADMINISTRATION DIVISION in the case of
the Lender and to the attention of the person as set forth in Schedule A
attached hereto, in the case of the Borrower. Any notice, request, demand or
other communication delivered or sent in the foregoing manner shall be deemed
given or made (as the case may be) upon the earliest of (a) the date it is
actually received, (b) on the Business Day after the day on which it is
delivered by hand, (c) on the Business Day after the day on which it is properly
delivered to Federal Express (or a comparable overnight delivery service), or
(d) on the third Business Day after the day on which it is deposited in the
United States mail. The Borrower or the Lender may change its address by
notifying the other party of the new address in any manner permitted herein.
Rejection or other refusal to accept or the inability to deliver because of a
changed address of which no notice was given shall not affect the date of such
notice, election or demand sent in accordance with the foregoing provisions.
16.2 If, at any time after payment in full by the Borrower of all
Obligations and termination of the Lender's liens, any payments on the
Obligations previously made by the Borrower or any other person must be
disgorged by the Lender for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy, or reorganization of the Borrower or
such other person), this Agreement and the Lender's liens granted hereunder
shall be reinstated as to all disgorged payments as though such payments had not
been made, and the Borrower shall sign and deliver to the Lender all documents
and things necessary to reperfect all terminated liens.
16.3 Unless sooner terminated by the Lender under the terms of this
Agreement, the term of this Agreement (the "Term") shall be the period set forth
on Schedule A attached hereto. The Term shall automatically renew from year to
year thereafter unless the Borrower terminates the Agreement by giving the
Lender 60 days prior written notice. The Borrower shall pay annually to the
Lender a fee (the "Annual Fee") in the amount set forth on Schedule A attached
hereto. If the Borrower elects to terminate this Agreement prior to the end of
the initial or any renewal Term, Borrower shall give the Lender not less that 60
days prior written notice of its intent to terminate and pay to the Lender, in
addition to the Obligations then due under this Agreement, a prepayment premium
equal to the amount set forth in the prepayment section of Schedule A attached
hereto. In the event that Lender utilizes its discretion in effecting a change
under Schedule A ss.2.1a which reduces the advance percentages contained therein
or Lender utilizes its discretion in effecting a change under any other
provision of this Agreement which is to the detriment of Borrower,
22
<PAGE>
provided that Borrower has not contributed to or requested such change and
provided further that Borrower shall have notified Lender in writing within 3
Business Days of implementation of such change that it disputes Lender's
utilization of commercially reasonable business standards consistent with
Lender's past practices, to the extent applicable thereto, in effecting such
change (as to any such change other than Schedule A ss.2.1a), Borrower may
within 120 days from the date of implementation of such change repay to Lender
all Obligations owing without the prepayment premium set forth on Schedule A.
Borrower's failure to effect the repayment of all Obligations owing to Lender
under the preceding sentence shall eliminate the right for the remainder of the
Term of this Agreement and during any Renewal Term of this Agreement.
The termination of this Agreement shall not affect the rights of either
party or the Obligations arising prior to the effective date of such
termination, and the provisions hereof and the security interests granted to the
Lender hereunder shall continue in full force and effect, notwithstanding the
fact that the Borrower's account may from time to time temporarily have a credit
balance, until all of the Obligations and other liabilities of the Borrower,
including, without limitation, the Borrower's liability for F.I.C.A. and
withholding taxes, have been paid in full or the Borrower has furnished the
Lender with an indemnification satisfactory to it with respect thereto. All
representations, warranties, covenants, waivers and agreements contained herein
shall survive the termination hereof unless otherwise provided.
16.4 This Agreement and Schedule A annexed hereto together with any
addendum or other schedule attached hereto shall constitute the entire agreement
of the parties hereto and no provision of this Agreement, including the
provisions of this Section, may be modified, deleted or amended in any manner
except by agreement in writing executed by the parties. All terms of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective successors and assigns, provided,
however, that the Borrower shall not assign or transfer its rights hereunder
without the prior written consent of the Lender.
16.5 This Agreement shall be construed and enforced in accordance with the
laws of the Commonwealth of Virginia without regard to its rules with respect to
choice of law. All references in this Agreement to the single number and neuter
gender shall be deemed to mean and include the plural number and all genders,
and vice versa, unless the context shall otherwise require.
16.6 The underlined headings contained herein are for convenience only and
shall not affect the interpretation of this Agreement.
16.7 A carbon, photographic or other reproduction of this Agreement or any
financing statement signed by the Borrower in connection with this Agreement
shall be sufficient as a financing statement.
16.8 This Agreement may be executed in more than one counterpart, each of
which shall be deemed an original.
16.9 All claims, liabilities and obligations of the parties arising out of
or in connection with the Obligations and the transactions contemplated by this
Agreement shall be fully and finally released and extinguished upon payment in
full of all of the Borrower's Obligations hereunder and the termination of this
Agreement.
16.10 The terms and conditions contained in any Addendum hereto shall be
incorporated herein by reference.
16.11 Lender acknowledges that it will, during the term of this Agreement,
be receiving from Borrower and Guarantor and/or their advisors various written
and oral information and material regarding the assets, liabilities, business,
prospects, projections and financial condition of Borrower and/or Guarantor
which may be non public, confidential or proprietary in nature (such information
is referred to herein as "Data").
The term "Data" shall not include:
(a) information that is now publicly available;
(b) information that subsequently becomes publicly available through
disclosure other than by Lender, but only after it has become
publicly available;
23
<PAGE>
(c) information which Lender obtains from some third party which is not
a third party identified to Lender in writing by Borrower or
Guarantor as being under a confidentiality agreement with Borrower
or Guarantor respecting such information;
(d) information which Lender, at the time of disclosure by the Borrower
or Guarantor, already has in its possession as evidenced by Lender's
written records;
(e) information which Lender is obligated under law, subpoena or other
judicial order or decree or similar legal process to disclose to a
governmental body, court or litigant, though if so obligated, Lender
shall make known to said governmental body, court or litigant the
proprietary nature of said information and shall use reasonable
efforts to make any applicable claim of confidentiality with respect
thereto.
Lender confirms that it will keep the Data confidential, will use it solely in
connection with its evaluation of the financing of the Borrower and Guarantor
and will not disclose the Data to any third party not affiliated with, or
representing, advising or working with Lender or Borrower and/or Guarantor
without the specific prior approval of the Company or its advisors.
24
<PAGE>
The Borrower and the Lender each have caused this Agreement to be duly
executed and delivered by its proper and duly authorized officer as of the day
and year first above written.
ATTEST: TECHNOLOGY FLAVORS & FRAGRANCES, INC.
/s/ A. Gary Frumberg By: /s/ Joseph A. Gemmo
- ---------------------------- ---------------------------------------
Joseph A. Gemmo
Title: Chief Financial Officer, Vice
President and Secretary
/s/ Denise Whignant FOOTHILL CAPITAL CORPORATION
- ----------------------------
By: /s/ George F. Green
---------------------------------------
George F. Green
Title: Senior Vice President
Seen & Acknowledged:
Technology Flavors & Fragrances, Inc.
an Ontario corporation, Guarantor
By: /s/ A. Gary Frumberg
------------------------------------
Title: Executive Vice President
Technology Flavors & Fragrances S.A, Guarantor
By: /s/ A. Gary Frumberg
------------------------------------
Title: Executive Vice President
25
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 29TH day of June, 1999, before me, the undersigned officer,
personally appeared Joseph A. Gemmo, Chief Financial Officer, Vice President and
Secretary of Technology Flavors & Fragrances, Inc., an Delaware corporation,
known to me (or satisfactorily proven) to be the person whose name is subscribed
to within the instrument and acknowledged that he executed the same on behalf of
said corporation for the purposes therein contained as his free act and deed and
the free act and deed of said corporation.
In Witness Whereof, I hereunder set my hand and official seal.
/s/ William Delehanty
---------------------------------
Notary Public
My Commission Expires:
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 29th day of June, 1999, before me, the undersigned officer,
personally appeared A. Gary Frumberg, President of Technology Flavors &
Fragrances, Inc., an Ontario corporation, known to me (or satisfactorily proven)
to be the person whose name is subscribed to within the instrument and
acknowledged that he executed the same on behalf of said corporation for the
purposes therein contained as his free act and deed and the free act and deed of
said corporation.
In Witness Whereof, I hereunder set my hand and official seal.
/s/ William Delehanty
---------------------------------
Notary Public
My Commission Expires:
26
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On this ___day of June, 1999, before me, the undersigned officer,
personally appeared _______________, President of Technology Flavors &
Fragrances S.A., known to me (or satisfactorily proven) to be the person whose
name is subscribed to within the instrument and acknowledged that he executed
the same on behalf of said corporation for the purposes therein contained as his
free act and deed and the free act and deed of said corporation.
In Witness Whereof, I hereunder set my hand and official seal.
--------------------------------
Notary Public
My Commission Expires:
27
<PAGE>
SCHEDULE A TO LOAN AND SECURITY AGREEMENT BETWEEN
TECHNOLOGY FLAVORS & FRAGRANCES, INC.
AND FOOTHILL CAPITAL CORPORATION DATED JUNE 29, 1999
Invoice Eligibility Days (ss. 1.7): One Hundred Twenty (120) days from the
invoice date on sales and shipments to customers within the United States and
Canada and One Hundred Fifty (150) days from the invoice date on sales and
shipments to customers located other than in the United States or Canada.
Guarantors (ss. 1.15): Technology Flavors & Fragrances, Inc. (Canada) and
Technology Flavors & Fragrances, S.A. (Chile).
Limit on Purchase of Equipment (ss. 1.24(b): As set forth on 6.30 (b)
Eligible Receivables Percentage (ss. 2.1(a)): Eighty-Five Percent (85%) of
Eligible Receivables other than Eligible Receivables-Canadian at the time of the
initial funding under this Agreement, provided however, that the advance
percentage may be adjusted from time to time by Lender in its sole and absolute
discretion; Fifty-Seven Percent (57%) of Eligible Receivables-Canadian at the
time of the initial funding under this Agreement provided however that the
advance percentage will be adjusted from time to time by Lender in its sole and
absolute discretion based upon fluctuations in the currency exchange rate and
may be adjusted from time to time by Lender in its sole and absolute discretion
for reasons other than fluctuations in the currency exchange rate. Lender shall
provide Borrower with prior written notice of any change in the advance
percentages.
Eligible Inventory Percentage (ss. 2.1(b)): Fifty-Five Percent (55%) of Eligible
Inventory.
Eligible Government Accounts Percentage (ss. 2.1(c)): Not Applicable
Revolving Loan Secured By Eligible Inventory (ss. 2.2(b)): Up to a maximum
amount of $1,700,000.00, which amount shall be based upon a monthly reporting by
Borrower to Lender and upon the additional condition that Borrower has in place
and operational, an inventory record keeping system which is acceptable to
Lender.
Revolving Loans Maximum Principal (ss. 2.2(c)): $3,000,000.00 of which
$500,000.00 in the aggregate and subject to availability may be advanced to
utilized by Borrower for the repurchase of Borrower's stock.
Interest Rate on Revolving Loans (ss. 2.2(e)): Three quarters of one percent
(0.75%) in excess of the Reference Rate; provided however that if Borrower
achieves Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
in any fiscal year beginning December 31, 1999, then as of the confirmation by
Lender of such achievement after review of the Financial Statement to be
provided by Borrower, the Interest Rate on Revolving Loans shall be the
Reference Rate plus 1.25% if EBITA is $100,000.00 or less, the Reference Rate
plus .75% if EBITDA is between $100,001.00 and $500,000.00, the Reference Rate
plus .50% if EBITDA is between $500,001.00 and $800,000.00 and the Reference
Rate plus .25% if EBITDA is greater than $800,001.00.
Interest Payment Date on Revolving Loans (ss. 2.2(e)): First day of each month
commencing on July 1, 1999.
Default Rate of Interest on Revolving Loans (ss. 2.2(f)): Five and three
quarters percent (5.75%) in excess of the Reference Rate.
Float Days (ss. 2.2(g)): Two (2) Business Days.
Service Fee (ss. 2.2(h)): $1,000.00 for each calendar month during the term of
the loan, payable in advance on the first business day of each month, commencing
on July 1, 1999.
Location of Collateral (ss. 5.12 & ss. 6.1): 10 Edison Street East, Amityville,
New York 11701, c/o Newport/St. Paul Cold Storage Company, 2233 Maxwell Avenue,
Newport, Minnesota 55055, c/o Hall's Warehouse Corp. 501 Kentile Road, S.
Plainfield, New Jersey 07080, 1550 Enterprise Road, Mississauga, Ontario, Canada
L4W 4P4,
<PAGE>
9111 South LaCienga Boulevard, Inglewood, California 90301 and Av. Chile Espana
497, Santiago, Chile, South America.
Location of Books of Account and Records (ss. 5.12 & ss. 6.1): 10 Edison Street
East, Amityville, New York 11701
Field Examination and Audit Fees: (ss. 6.28): $750.00 per man per day plus out
of pocket expenses, with an annual cap on audit fees of $10,000.00 (excluding
the audit fee charged by Lender for its initial due diligence audit) assuming no
Event of Default under any of the Loan Documents has occurred, otherwise the
annual cap shall not apply. Notwithstanding the foregoing, Lender shall visit
and inspect the inventory located at Newport/St. Paul Cold Storage Company, 2233
Maxwell Avenue, Newport, Minnesota 55055 ("Newport") and Hall's Warehouse Corp.
501 Kentile Road, S. Plainfield, New Jersey 07080 ("Hall's") on or before the
scheduled audit. The costs and expenses for such visit and inspection shall be
in addition to and not included in the foregoing annual cap. Furthermore, in the
event that Lender shall determine in its reasonable discretion that future
audits will be required for the Newport and Hall's locations, such future audits
will be at the additional expense of Borrower and not otherwise subject to the
aforementioned annual cap. However, Borrower shall have the right to exclude the
inventory located at the Newport and Hall's locations from eligibility in the
event that it determines that it does not wish to incur the additional audit
charges.
Executive Management (ss. 7.8): Philip Rosner, A. Gary Frumberg and Joseph A.
Gemmo
Funding Fee (ss. 8.1(a)): $26,250.00
Notification Designee (ss. 16.1): Philip Rosner and Joseph A. Gemmo
Term (ss. 16.3): Three (3) years
Prepayment Premium (ss. 16.3): Two percent (2%) of the Revolving Loan as set
forth in Section 2.2(c) during the first twelve (12) months after the date
hereof and one percent (1%) of the Revolving Loan as set forth in Section 2.2(c)
during the thirteenth (13th) month through twenty-four (24) months after the
date hereof and one half of one Percent (0.50%) of the Revolving Loan as set
forth in Section 2.2(c) after the twenty-fifth (25th) month after the closing
date and at any time during each and every renewal term, except that no
prepayment premium shall be assessed after the 12th month after the date hereof
if the prepayment is the result of the company obtaining conventional lines of
credit with Fleet Bank or at any time if Borrower obtains a credit facility from
any Wells Fargo Corporation affiliated company or bank.
Annual Fee (ss. 16.3): Three quarters of one percent (0.75%) on the first annual
anniversary of the loan and one half of one percent (0.50%) on each and every
annual anniversary thereafter.
2
<PAGE>
Additional schedules to the Loan and Security Agreement has been prepared and
executed by all parties and is included with this Schedule A as an integral part
of the Loan and Security Agreement terms and conditions.
TECHNOLOGY FLAVORS FOOTHILL CAPITAL CORPORATION
& FRAGRANCES, INC.
By: /s/ Joseph A. Gemmo By: /s/ George F. Green
------------------------------ ------------------------------
Joseph A. Gemmo Its: Senior Vice President
Chief Financial Officer, Vice
President And Secretary
Seen and Acknowledged:
TECHNOLOGY FLAVORS TECHNOLOGY FLAVORS
& FRAGRANCES, INC. & FRAGRANCES S.A, Guarantor
an Ontario corporation, Guarantor
By: /s/ A. Gary Frumberg By: /s/ A. Gary Frumberg
------------------------------ ------------------------------
Its: Executive Vice President Its: Executive Vice President
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 29TH day of June, 1999, before me, the undersigned officer,
personally appeared Joseph A. Gemmo, Chief Financial Officer, Vice President and
Secretary of Technology Flavors & Fragrances, Inc., an Delaware corporation,
known to me (or satisfactorily proven) to be the person whose name is subscribed
to within the instrument and acknowledged that he executed the same on behalf of
said corporation for the purposes therein contained as his free act and deed and
the free act and deed of said corporation.
In Witness Whereof, I hereunder set my hand and official seal.
/s/ William Delehanty
--------------------------------
Notary Public
My Commission Expires:
3
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 29TH day of June, 1999, before me, the undersigned officer,
personally appeared A. Gary Frumberg, President of Technology Flavors &
Fragrances, Inc., an Ontario corporation, known to me (or satisfactorily proven)
to be the person whose name is subscribed to within the instrument and
acknowledged that he executed the same on behalf of said corporation for the
purposes therein contained as his free act and deed and the free act and deed of
said corporation.
In Witness Whereof, I hereunder set my hand and official seal.
/s/ William Delehanty
------------------------------------
Notary Public
My Commission Expires:
STATE OF )
) ss.:
COUNTY OF )
On this ____day of June, 1999, before me, the undersigned officer,
personally appeared _____________, President of Technology Flavors & Fragrances
S.A., known to me (or satisfactorily proven) to be the person whose name is
subscribed to within the instrument and acknowledged that he executed the same
on behalf of said corporation for the purposes therein contained as his free act
and deed and the free act and deed of said corporation.
In Witness Whereof, I hereunder set my hand and official seal.
------------------------------------
Notary Public
My Commission Expires:
4
Exhibit 10.2
UNCONDITIONAL GUARANTY
THIS GUARANTY is made as of this 29th day of June, 1999, by Technology
Flavors & Fragrances, Inc. an Ontario corporation having a business address of
1550 Enterprise Road, Suite 107, Mississauga, Ontario, Canada L4W 4P4
(hereinafter the "Guarantor") in favor of Foothill Capital Corporation (the
"Lender") pursuant to, and in order to induce Lender to extend credit to
Technology Flavors & Fragrances, Inc., having an address of 10 Edison Street
East, Amityville, New York 11701, (the "Borrower"), pursuant to that certain
Loan and Security Agreement of even date herewith between the Lender and the
Borrower, as the same has been or may hereafter be amended, modified, extended,
renewed, supplemented or replaced from time to time, (the "Loan Agreement"),
which shall be fair and sufficient consideration for the execution of this
Guaranty.
Section 1. Definitions. All capitalized words and terms used herein shall
have the meanings assigned to them in the Loan Agreement unless otherwise
defined herein.
Section 2. Guaranty.
(a) To induce the Lender to extend credit to the Borrower pursuant
to the Loan Agreement, the Guarantor hereby irrevocably and unconditionally
guarantees to the Lender, its successors and assigns (i) the full and prompt
payment when due, whether by acceleration or otherwise, with such interest as
may accrue thereon either before or after maturity thereof, of all of the
Obligations, including, without limitation, the Revolving Loans, together with
all renewals, modifications, consolidations, and extensions thereof, (ii) the
full and prompt payment and performance of all terms, conditions and covenants
contained in the Loan Agreement and (iii) the full and prompt performance of any
and all other obligations of the Borrower under any other documents or
instruments referred to in the Loan Agreement or now or hereafter evidencing,
securing, or otherwise relating to the Obligations or the Loan Documents. The
Guarantor hereby agrees that if any of the Obligations, duties and covenants are
not paid by the Borrower in accordance with their respective terms or if any and
all sums which are now or may hereafter become due from the Borrower to the
Lender under or pursuant to any of the Obligations or the Loan Documents are not
paid by the Borrower in accordance with their terms, the Guarantor will
immediately make such payments. The Guarantor hereby further agrees to pay the
Lender all reasonable expenses (including, without limitation, reasonable
attorneys' fees and court costs) paid or incurred by the Lender in endeavoring
(x) to collect any indebtedness evidenced by any of the Obligations or the Loan
Documents, or any portion thereof, (y) to enforce any of the Obligations of the
Borrower guaranteed hereby, or (z) to enforce this Guaranty. This Guaranty shall
be a continuing Guaranty of all the Obligations and all of the duties and
covenants of the Borrower created pursuant to any and all of the Loan Documents,
including, without limitation, any and all advances, debts, obligations,
covenants and liabilities heretofore, now or hereafter made, incurred or created
under and pursuant to any of the Loan Documents whether voluntary or
involuntary, absolute or contingent, liquidated or unliquidated, determined or
undetermined, and whether recovery upon such obligations, duties and covenants
may be or hereafter become unenforceable.
(b) As an additional inducement to the Lender to extend credit to
the Borrower, the Guarantor, if a stockholder of the Borrower, hereby covenants
and agrees not to transfer, assign, sell, convey or otherwise dispose of, grant
any option, warrant or other right with respect to, pledge, hypothecate or
otherwise encumber any of the capital stock of the Borrower now or hereafter
owned by the Guarantor without the prior written consent of the Lender, which
consent will not be unreasonably withheld.
Section 3. Guaranty Unconditional. The obligations of the Guarantor
hereunder are irrevocable, absolute and unconditional, irrespective of the
value, genuineness, validity, regularity or enforceability of any of the
Obligations or any term or provision of any of the Loan Documents or any other
document relating to the Obligations or the Loan Documents or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor.
Section 4. Subordination and Waiver of Subrogation.
(a) The Guarantor hereby subordinates all indebtedness of the
Borrower to the Guarantor, whether now existing or hereafter arising (the
"Subordinated Indebtedness"), to the full and prompt payment of the Obligations.
Any amounts received by the Guarantor as a payment on the Subordinated
Indebtedness, other than
<PAGE>
payments on Subordinated Indebtedness permitted under a subordination agreement
approved by the Lender, shall be retained and held in trust by the Guarantor for
the benefit of the Lender.
(b) The Guarantor agrees that no payment made hereunder by the
Guarantor shall entitle it, at any time, to be subrogated to the rights of the
Lender or any other Guarantor with respect to any of the Obligations, duties and
covenants created under and pursuant to any of the Loan Documents and the
Guarantor forever waives any rights to enforce any remedy of the Lender, until
payment and performance in full of the Obligations and all duties and covenants
created under and pursuant to the Loan Documents, which the Lender may now have,
or may hereafter have, against the Borrower, any other Guarantor or any other
person and forever waives any benefit of, or any right to participation in, any
security interest or collateral whatsoever now or hereafter held by the Lender.
Section 5. Representations and Warranties. The Guarantor represents and
warrants to the Lender that:
(a) The Guarantor has full power and authority to make and perform
this Guaranty and this Guaranty has been duly executed and delivered by the
Guarantor and constitutes the valid and legally binding obligation of the
Guarantor enforceable against the Guarantor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
enforcement is sought by proceedings in equity or at law).
(b) The making and performance by the Guarantor of this Guaranty
does not and will not (i) contravene any existing provision of law or regulation
or any order, decree, writ or injunction of any court or administrative body or
(ii) result in a breach of or constitute a default or require any consent under
any material contractual restriction binding on the Guarantor or on any of the
Guarantor's properties.
(c) The Guarantor will receive substantial benefit from the
extensions of credit to the Borrower pursuant to the Loan Documents.
(d) No consents, approvals, licenses or authorizations of, or filing
or registrations (collectively the "Consents") with, any governmental authority
are required under applicable federal or state law for the making and
performance by the Guarantor of this Guaranty, except for those Consents which
are not material to the Guarantor.
(e) There is no action, suit investigation or proceeding in any
court or before any arbitrator or regulatory commission, board, administrative
agency or other governmental authority pending or, to the knowledge of the
Guarantor, threatened which, if determined adversely to the Guarantor, would
materially and adversely affect its assets and properties or the Guarantor's
ability to perform the Guarantor's obligations hereunder. The Guarantor has
provided the Lender with information relating to all litigation in which the
Guarantor is a party, none of which the Guarantor deems likely to have a
material and adverse affect upon the Guarantor's assets and properties.
(f) Except as previously disclosed to the Lender in writing, the
Guarantor is not in default in the payment of the principal of or interest on
any indebtedness for borrowed money and is not in default under any instrument
under and subject to which any indebtedness has been incurred and, to the
knowledge of the Guarantor, no event has occurred and is continuing under the
provisions of any such agreement which with the lapse of time or the giving of
notice, or both, would constitute an event of default thereunder, which default
would have a material adverse effect on the Guarantor's assets, the validity of
the Guaranty or the ability of the Guarantor to perform the Guarantor's
obligations hereunder.
(g) The Guarantor is not insolvent (as defined in Section 101(31) of
the United States Bankruptcy Code), unable to pay debts as they mature or
engaged in business with unreasonably small capital; the Guarantor has filed all
federal, state, local and foreign tax returns which are required to be filed by
the Guarantor, and the Guarantor has paid all federal, State, local and foreign
taxes shown to be due on such tax returns or which have been assessed against
the Guarantor; the Guarantor is not or has not been the subject of any
bankruptcy, reorganization, insolvency, readjustment of debt, trusteeship,
receivership, dissolution or liquidation law, statute or proceeding.
2
<PAGE>
Section 6. Consents. The Guarantor hereby consents and agrees that any or
all of the following actions may be taken or things done without notice to the
Guarantor and without affecting, diminishing or releasing the liability of the
Guarantor under this Guaranty:
(a) The time for the Borrower's performance of or compliance with
any of the Obligations all duties or covenants created under or pursuant to any
of the Loan Documents may be accelerated, renewed, modified, released or
extended or such performance or compliance may be waived by the Lender,
including, without limitation, the time of payment of the Obligations.
(b) The rate of interest under the Loan Agreement or other evidence
of indebtedness may be increased or decreased.
(c) Any of the acts referred to in any documents, instruments or
certificates evidencing or securing the Obligations or referred to in any of the
Loan Documents may be performed, in accordance with their terms, by the Borrower
or any other party for and or on behalf of the Borrower.
(d) As described therein or herein, the terms of any of the
documents, instruments or certificates evidencing or securing any of the
Obligations or the terms of the Loan Documents may be modified, extended or
renewed for any period for the purpose of adding any provisions thereto or
changing in any manner the rights of the Lender or of the Borrower thereunder.
(e) The Lender may grant releases, compromises and indulgences with
respect to any of the Obligations or any of the Loan Documents to any persons or
entities now or hereafter liable thereunder or hereunder.
(f) The Lender may release any guarantor or endorser of any of the
Obligations, the Loan Documents or any other covenant, obligation or duty
guaranteed hereby or referred to herein.
(g) The Lender may take or fail to take any action of any type
whatsoever without releasing the Guarantor's obligations hereunder or affecting
this Guaranty in any way or affording the Guarantor any recourse against the
Lender.
(h) Any property constituting security of any kind or nature
whatsoever now or hereafter held by the Lender or by any person, firm, trustee
or corporation on the Lender's behalf, or for its account, may be surrendered or
exchanged or substituted for collateral of like kind or of any kind, or such
property or security may be otherwise dealt with, and the Lender's interest
thereunder may be released or remain in effect, all as the Lender, in its sole
discretion, may deem desirable.
(i) The Lender may resort to the Guarantor for payment and
performance of any of the Obligations or any of the obligations, duties and
covenants created under and pursuant to any of the Loan Documents whether or not
the Lender shall have resorted to any property now or hereafter securing any of
the undertakings thereunder or any other party primarily or secondarily liable
on any of the Obligations or any of the obligations, duties and covenants
created under and pursuant to any of the Loan Documents.
Section 7. Credit Information. The Guarantor assumes the responsibility
for being and keeping itself informed of the financial condition of the Borrower
and of all other circumstances bearing upon the risk of non-payment and
non-performance of the Obligations and of any obligations, duties and covenants
created under and pursuant to any of the Loan Documents; and, the Lender shall
have no duty to advise the Guarantor of information known to the Lender
regarding such condition or any such circumstances.
Section 8. Tolling of Statute of Limitations. The Guarantor agrees that
payment or performance of any of the Obligations or other acts which toll any
statute of limitations applicable to the Obligations or to any of the Loan
Documents shall also toll the statute of limitations applicable to the liability
of the Guarantor under this Guaranty.
Section 9. Waivers. The Guarantor unconditionally waives:
3
<PAGE>
(a) diligence, presentment, demand for payment, protest, notice of
dishonor and notice of default;
(b) the benefit of any act or omission by the Lender which directly
or indirectly results in or aids the discharge of the Borrower or the Borrower's
payment and performance of the Obligations or any of the obligations, duties and
covenants created under or pursuant to any of the Loan Documents by operation of
law or otherwise, other than any gross negligence of willful misconduct of
Lender;
(c) notice of acceptance of this Guaranty and the incurring of the
Obligations, or any of the obligations, duties and covenants created under or
pursuant to any of the Loan Documents;
(d) the provisions of Section 49-25 and 49-26 of the Code of
Virginia of 1950, as amended;
(e) any defense that may arise by reason of lack of authority of the
Guarantor of the incapacity or lack of authority, death or disability of any
other person or entity or the failure of the Lender to file or enforce a claim
against the estate (in bankruptcy or other proceeding) of the Borrower, the
Guarantor or any other person or entity;
(f) any defense based on the failure of the Lender to give notice of
the existence, creation or incurring of any new or additional indebtedness or
obligation or any action or non-action on the part of any other person
whatsoever in connection with any of the obligations hereby guaranteed;
(g) any duty on the part of the Lender to disclose to the Guarantor
any facts the Lender may now or hereafter know with regard to the Borrower;
(h) any defense based on lack of due diligence by the Lender in
collection, protection or realization upon any Collateral securing the
Obligations; and
(i) any and all rights of subrogation, reimbursement, contribution,
indemnification, exoneration and all other rights and claims which the Guarantor
may now or hereafter have against the Borrower, or against any other person
directly or indirectly, contingently or noncontingently, liable for or obligated
upon any of the Obligations ("Other Obligated Party"), arising on account of
this Guaranty or any sums paid by the Guarantor or collected by the Lender
pursuant to this Guaranty. In furtherance, and not in limitation, of the
preceding waiver, the Guarantor agrees that any sums paid by the Guarantor or
collected by the Lender pursuant to this Guaranty shall be deemed a contribution
to the capital of the Borrower or Other Obligated Party, as the case may be, and
shall not constitute the Guarantor a creditor of the Borrower or such Other
Obligated Party.
Section 10. Certain Rights, Remedies, Etc.
(a) In the event of any demand or default on this Guaranty or the
Obligations: (1) all Obligations shall become due and payable, together with
interest accrued to the date of payment, without notice, at the option of the
Lender; (2) the Guarantor shall reimburse the Lender for any reasonable
expenses, costs and attorneys' fees which the Lender may incur in connection
with the collection of any monies due under this Guaranty or in connection with
the enforcement of any right under this Guaranty.
(b) In pursuing its rights under and pursuant to any of the
Obligations or any of the obligations, duties and covenants created under and
pursuant to the Loan Documents or under this Guaranty, the Lender need not join
the Guarantor in any suit against the Borrower under the Loan Documents or join
the Borrower in any suit against the Guarantor hereunder. The Guarantor hereby
waives any right to require the Lender to give notice of the terms, time and
place of any public or private sale of any Collateral now or hereafter securing
the Obligations or obligations, duties and covenants created under and pursuant
to the Loan Documents or to comply with any other provision of Section 9-504 of
the Uniform Commercial Code as enacted by the Commonwealth of Virginia.
Section 11. No Set-Off. No act or omission of any kind or at any time on
the part of the Lender in respect to any matter whatsoever shall in any way
affect or impair the rights of the Lender to enforce any right, power or benefit
under this Guaranty and no set-off, claim, reduction or diminution of any
obligation or any defense of any kind or
4
<PAGE>
nature which the Guarantor has or may have against the Lender shall be available
against the Lender in any suit or action brought by the Lender to enforce any
right, power of benefit provided by this Guaranty, provided that nothing herein
shall prevent the assertion by the Guarantor of any such claim by separate suit
or counterclaim. Nothing in this Guaranty shall be construed as a waiver by the
Guarantor of any rights or claims which the Guarantor may have against the
Lender hereunder or otherwise, but any recovery upon such rights and claims
shall be had from the Lender separately, it being the intent of this Guaranty
that the Guarantor shall be unconditionally and absolutely obligated to perform
fully all the Guarantor's obligations, covenants and agreements hereunder for
the benefit of the Lender.
Section 12. Notices. All notices, demands, requests for modification,
consents or approvals under this Guaranty shall be given in accordance with
Section 16.1 of the Loan Agreement, to the Guarantor at the address specified on
the signature page hereof.
Section 13. Reinstatement. The liability of the Guarantor hereunder shall
be reinstated and revived and the rights of the Lender shall continue if and to
the extent that for any reason any payment by or on behalf of the Borrower or
the Guarantor is rescinded or must be otherwise restored by the Lender, whether
as a result of any proceedings in bankruptcy or reorganization or otherwise, and
all decisions as to whether any such payment must be rescinded or restored shall
be made in good faith by the Lender in its sole discretion; provided, however,
that if the Lender chooses to contest any such matter at the request of the
Guarantor, the Guarantor agrees to indemnify, defend and hold the Lender
harmless with respect to all costs (including, without limitation, attorneys'
fees) of such litigation.
Section 14. No Waiver; Amendments, Etc. No failure on the part of the
Lender to exercise, no delay in exercising and no course of dealing with respect
to, any right hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law. This
Guaranty may not be amended or modified except by written agreement of the
Guarantor and the Lender and no consent or waiver hereunder shall be valid as
against the Lender unless in writing and signed by the Lender.
Section 15. Insolvency. The voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially all the assets
and liabilities, the receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, or other proceeding affecting the Borrower
or the disaffirmance of the Obligations or any obligation, duty or covenant
created pursuant to any of the Loan Documents in any such proceeding shall not
release or discharge the Guarantor from this Guaranty.
Section 16. Jurisdiction, Venue and Waiver of Jury Trial.
(a) The forum having the proper jurisdiction and venue to adjudicate
any claim, dispute or default which may arise out of the execution and delivery
of this Guaranty and the performance of the Guarantor's obligations hereunder
shall be the Circuit Court of the City of Richmond, Virginia, and the proper
appellate courts of the Commonwealth of Virginia, or the United States District
Court of the Eastern District of Virginia, Richmond Division, and the proper
appellate courts of the United States, unless the Lender in its sole discretion
chooses to bring suit on its own behalf in some other court of competent
jurisdiction. The Guarantor and Lender expressly submit and consent to such
jurisdiction and venue and specifically waive any and all rights it may have to
contest the jurisdiction and/or venue of the above mentioned forums and to
demand any other forums. The Guarantor and Lender waive personal service of any
and all legal process upon them and consent and agree that all such service may
be made by Registered Mail directed to the Guarantor or Lender, as the case may
be, at the address for notices set forth at the end of this Agreement, and
service so made shall be deemed to be completed on the date the return receipt
therefor is signed.
(b) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, LENDER AND
GUARANTOR WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ON ANY MATTER ARISING OUT OF THIS GUARANTY AND THE GUARANTOR'S
OBLIGATIONS HEREUNDER.
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE LENDER AND
GUARANTOR, AND LENDER AND GUARANTOR HEREBY REPRESENT THAT NO REPRESENTATIONS OF
FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL
BY JURY OR IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE LENDER AND GUARANTOR
5
<PAGE>
FURTHER REPRESENTS THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS
AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF THEIR OWN FREE WILL, AND THAT THEY HAVE HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL.
Section 17. Entire Agreement. This Guaranty constitutes the entire
agreement of the Lender and the Guarantor, and supersedes all prior agreements
and understandings, both written and oral, between the Guarantor and the Lender
with respect to the subject matter hereof.
Section 18. Severability. The invalidity or unenforceability of any
phrase, sentence, clause or section in this Guaranty shall not affect the
validity or enforceability of the remaining portions of this Guaranty, or any
hereof.
Section 19. Construction. This Guaranty shall be construed and enforced in
accordance with the laws of the Commonwealth of Virginia without regard to its
rules with respect to choice of law. All references in this Guaranty to the
singular number and neuter gender shall be deemed to mean and include the plural
number and all genders, and vice versa, unless the context shall otherwise
require.
The Guarantor has executed this Guaranty as of the date first above
written.
GUARANTOR:
Technology Flavors & Fragrances, Inc., an Ontario corporation
By: /s/ Joseph A. Gemmo
--------------------------------------
Joseph A. Gemmo
Vice President/Chief Financial Officer
Address for Notices:
1550 Enterprise Road
Suite 107
Mississauga, Ontario, Canada L4W 4P4
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 29th day of June, 1999, before me, the undersigned officer,
personally appeared Joseph A. Gemmo, Vice President and Chief Financial Officer
of Technology Flavors & Fragrances, Inc., an Ontario corporation, known to me
(or satisfactorily proven) to be the person whose name is subscribed to within
the instrument and acknowledged that he executed the same on behalf of said
corporation for the purposes therein contained as his free act and deed and the
free act and deed of said corporation.
In Witness Whereof, I hereunder set my hand and official seal.
/s/ William Delehanty
--------------------------------
Notary Public
My Commission Expires:
6
Exhibit 10.3
UNCONDITIONAL GUARANTY
THIS GUARANTY is made as of this 29th day of June, 1999, by Technology
Flavors & Fragrances S. A., having a business address of Av. Chile Espana
485-497, Santiago, Chile, South America (individually and collectively the
"Guarantor") in favor of Foothill Capital Corporation (the "Lender") pursuant
to, and in order to induce Lender to extend credit to Technology Flavors &
Fragrances, Inc., having an address of 10 Edison Street East, Amityville, New
York 11701, (the "Borrower"), pursuant to that certain Loan and Security
Agreement of even date herewith between the Lender and the Borrower, as the same
has been or may hereafter be amended, modified, extended, renewed, supplemented
or replaced from time to time, (the "Loan Agreement"), which shall be fair and
sufficient consideration for the execution of this Guaranty.
Section 1. Definitions. All capitalized words and terms used herein shall
have the meanings assigned to them in the Loan Agreement unless otherwise
defined herein.
Section 2. Guaranty.
(a) To induce the Lender to extend credit to the Borrower pursuant
to the Loan Agreement, the Guarantor hereby irrevocably and unconditionally
guarantees to the Lender, its successors and assigns (i) the full and prompt
payment when due, whether by acceleration or otherwise, with such interest as
may accrue thereon either before or after maturity thereof, of all of the
Obligations, including, without limitation, the Revolving Loans, together with
all renewals, modifications, consolidations, and extensions thereof, (ii) the
full and prompt payment and performance of all terms, conditions and covenants
contained in the Loan Agreement and (iii) the full and prompt performance of any
and all other obligations of the Borrower under any other documents or
instruments referred to in the Loan Agreement or now or hereafter evidencing,
securing, or otherwise relating to the Obligations or the Loan Documents. The
Guarantor hereby agrees that if any of the Obligations, duties and covenants are
not paid by the Borrower in accordance with their respective terms or if any and
all sums which are now or may hereafter become due from the Borrower to the
Lender under or pursuant to any of the Obligations or the Loan Documents are not
paid by the Borrower in accordance with their terms, the Guarantor will
immediately make such payments. The Guarantor hereby further agrees to pay the
Lender all reasonable expenses (including, without limitation, reasonable
attorneys' fees and court costs) paid or incurred by the Lender in endeavoring
(x) to collect any indebtedness evidenced by any of the Obligations or the Loan
Documents, or any portion thereof, (y) to enforce any of the Obligations of the
Borrower guaranteed hereby, or (z) to enforce this Guaranty. This Guaranty shall
be a continuing Guaranty of all the Obligations and all of the duties and
covenants of the Borrower created pursuant to any and all of the Loan Documents,
including, without limitation, any and all advances, debts, obligations,
covenants and liabilities heretofore, now or hereafter made, incurred or created
under and pursuant to any of the Loan Documents whether voluntary or
involuntary, absolute or contingent, liquidated or unliquidated, determined or
undetermined, and whether recovery upon such obligations, duties and covenants
may be or hereafter become unenforceable.
(b) As an additional inducement to the Lender to extend credit to
the Borrower, the Guarantor, if a stockholder of the Borrower, hereby covenants
and agrees not to transfer, assign, sell, convey or otherwise dispose of, grant
any option, warrant or other right with respect to, pledge, hypothecate or
otherwise encumber any of the capital stock of the Borrower now or hereafter
owned by the Guarantor without the prior written consent of the Lender, which
consent will not be unreasonably withheld.
Section 3. Guaranty Unconditional. The obligations of the Guarantor
hereunder are irrevocable, absolute and unconditional, irrespective of the
value, genuineness, validity, regularity or enforceability of any of the
Obligations or any term or provision of any of the Loan Documents or any other
document relating to the Obligations or the Loan Documents or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor.
Section 4. Subordination and Waiver of Subrogation.
(a) The Guarantor hereby subordinates all indebtedness of the
Borrower to the Guarantor, whether now existing or hereafter arising (the
"Subordinated Indebtedness"), to the full and prompt payment of the Obligations.
Any amounts received by the Guarantor as a payment on the Subordinated
Indebtedness, other than
<PAGE>
payments on Subordinated Indebtedness permitted under a subordination agreement
approved by the Lender, shall be retained and held in trust by the Guarantor for
the benefit of the Lender.
(b) The Guarantor agrees that no payment made hereunder by the
Guarantor shall entitle it, at any time, to be subrogated to the rights of the
Lender or any other Guarantor with respect to any of the Obligations, duties and
covenants created under and pursuant to any of the Loan Documents and the
Guarantor forever waives any rights to enforce any remedy of the Lender, until
payment and performance in full of the Obligations and all duties and covenants
created under and pursuant to the Loan Documents, which the Lender may now have,
or may hereafter have, against the Borrower, any other Guarantor or any other
person and forever waives any benefit of, or any right to participation in, any
security interest or collateral whatsoever now or hereafter held by the Lender.
Section 5. Representations and Warranties. The Guarantor represents and
warrants to the Lender that:
(a) The Guarantor has full power and authority to make and perform
this Guaranty and this Guaranty has been duly executed and delivered by the
Guarantor and constitutes the valid and legally binding obligation of the
Guarantor enforceable against the Guarantor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether
enforcement is sought by proceedings in equity or at law).
(b) The making and performance by the Guarantor of this Guaranty
does not and will not (i) contravene any existing provision of law or regulation
or any order, decree, writ or injunction of any court or administrative body or
(ii) result in a breach of or constitute a default or require any consent under
any material contractual restriction binding on the Guarantor or on any of the
Guarantor's properties.
(c) The Guarantor will receive substantial benefit from the
extensions of credit to the Borrower pursuant to the Loan Documents.
(d) No consents, approvals, licenses or authorizations of, or filing
or registrations (collectively the "Consents") with, any governmental authority
are required under applicable federal or state law for the making and
performance by the Guarantor of this Guaranty, except for those Consents which
are not material to the Guarantor.
(e) There is no action, suit investigation or proceeding in any
court or before any arbitrator or regulatory commission, board, administrative
agency or other governmental authority pending or, to the knowledge of the
Guarantor, threatened which, if determined adversely to the Guarantor, would
materially and adversely affect its assets and properties or the Guarantor's
ability to perform the Guarantor's obligations hereunder. The Guarantor has
provided the Lender with information relating to all litigation in which the
Guarantor is a party, none of which the Guarantor deems likely to have a
material and adverse affect upon the Guarantor's assets and properties.
(f) Except as previously disclosed to the Lender in writing, the
Guarantor is not in default in the payment of the principal of or interest on
any indebtedness for borrowed money and is not in default under any instrument
under and subject to which any indebtedness has been incurred and, to the
knowledge of the Guarantor, no event has occurred and is continuing under the
provisions of any such agreement which with the lapse of time or the giving of
notice, or both, would constitute an event of default thereunder, which default
would have a material adverse effect on the Guarantor's assets, the validity of
the Guaranty or the ability of the Guarantor to perform the Guarantor's
obligations hereunder.
(g) The Guarantor is not insolvent (as defined in Section 101(31) of
the United States Bankruptcy Code), unable to pay debts as they mature or
engaged in business with unreasonably small capital; the Guarantor has filed all
federal, state, local and foreign tax returns which are required to be filed by
the Guarantor, and the Guarantor has paid all federal, State, local and foreign
taxes shown to be due on such tax returns or which have been assessed against
the Guarantor; the Guarantor is not or has not been the subject of any
bankruptcy, reorganization, insolvency, readjustment of debt, trusteeship,
receivership, dissolution or liquidation law, statute or proceeding.
2
<PAGE>
Section 6. Consents. The Guarantor hereby consents and agrees that any or
all of the following actions may be taken or things done without notice to the
Guarantor and without affecting, diminishing or releasing the liability of the
Guarantor under this Guaranty:
(a) The time for the Borrower's performance of or compliance with
any of the Obligations all duties or covenants created under or pursuant to any
of the Loan Documents may be accelerated, renewed, modified, released or
extended or such performance or compliance may be waived by the Lender,
including, without limitation, the time of payment of the Obligations.
(b) The rate of interest under the Loan Agreement or other evidence
of indebtedness may be increased or decreased.
(c) Any of the acts referred to in any documents, instruments or
certificates evidencing or securing the Obligations or referred to in any of the
Loan Documents may be performed, in accordance with their terms, by the Borrower
or any other party for and or on behalf of the Borrower.
(d) As described therein or herein, the terms of any of the
documents, instruments or certificates evidencing or securing any of the
Obligations or the terms of the Loan Documents may be modified, extended or
renewed for any period for the purpose of adding any provisions thereto or
changing in any manner the rights of the Lender or of the Borrower thereunder.
(e) The Lender may grant releases, compromises and indulgences with
respect to any of the Obligations or any of the Loan Documents to any persons or
entities now or hereafter liable thereunder or hereunder.
(f) The Lender may release any guarantor or endorser of any of the
Obligations, the Loan Documents or any other covenant, obligation or duty
guaranteed hereby or referred to herein.
(g) The Lender may take or fail to take any action of any type
whatsoever without releasing the Guarantor's obligations hereunder or affecting
this Guaranty in any way or affording the Guarantor any recourse against the
Lender.
(h) Any property constituting security of any kind or nature
whatsoever now or hereafter held by the Lender or by any person, firm, trustee
or corporation on the Lender's behalf, or for its account, may be surrendered or
exchanged or substituted for collateral of like kind or of any kind, or such
property or security may be otherwise dealt with, and the Lender's interest
thereunder may be released or remain in effect, all as the Lender, in its sole
discretion, may deem desirable.
(i) The Lender may resort to the Guarantor for payment and
performance of any of the Obligations or any of the obligations, duties and
covenants created under and pursuant to any of the Loan Documents whether or not
the Lender shall have resorted to any property now or hereafter securing any of
the undertakings thereunder or any other party primarily or secondarily liable
on any of the Obligations or any of the obligations, duties and covenants
created under and pursuant to any of the Loan Documents.
Section 7. Credit Information. The Guarantor assumes the responsibility
for being and keeping itself informed of the financial condition of the Borrower
and of all other circumstances bearing upon the risk of non-payment and
non-performance of the Obligations and of any obligations, duties and covenants
created under and pursuant to any of the Loan Documents; and, the Lender shall
have no duty to advise the Guarantor of information known to the Lender
regarding such condition or any such circumstances.
Section 8. Tolling of Statute of Limitations. The Guarantor agrees that
payment or performance of any of the Obligations or other acts which toll any
statute of limitations applicable to the Obligations or to any of the Loan
Documents shall also toll the statute of limitations applicable to the liability
of the Guarantor under this Guaranty.
Section 9. Waivers. The Guarantor unconditionally waives:
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(a) diligence, presentment, demand for payment, protest, notice of
dishonor and notice of default;
(b) the benefit of any act or omission by the Lender which directly
or indirectly results in or aids the discharge of the Borrower or the Borrower's
payment and performance of the Obligations or any of the obligations, duties and
covenants created under or pursuant to any of the Loan Documents by operation of
law or otherwise, other than any gross negligence of willful misconduct of
Lender;
(c) notice of acceptance of this Guaranty and the incurring of the
Obligations, or any of the obligations, duties and covenants created under or
pursuant to any of the Loan Documents;
(d) the provisions of Section 49-25 and 49-26 of the Code of
Virginia of 1950, as amended;
(e) any defense that may arise by reason of lack of authority of the
Guarantor of the incapacity or lack of authority, death or disability of any
other person or entity or the failure of the Lender to file or enforce a claim
against the estate (in bankruptcy or other proceeding) of the Borrower, the
Guarantor or any other person or entity;
(f) any defense based on the failure of the Lender to give notice of
the existence, creation or incurring of any new or additional indebtedness or
obligation or any action or non-action on the part of any other person
whatsoever in connection with any of the obligations hereby guaranteed;
(g) any duty on the part of the Lender to disclose to the Guarantor
any facts the Lender may now or hereafter know with regard to the Borrower;
(h) any defense based on lack of due diligence by the Lender in
collection, protection or realization upon any Collateral securing the
Obligations; and
(i) any and all rights of subrogation, reimbursement, contribution,
indemnification, exoneration and all other rights and claims which the Guarantor
may now or hereafter have against the Borrower, or against any other person
directly or indirectly, contingently or noncontingently, liable for or obligated
upon any of the Obligations ("Other Obligated Party"), arising on account of
this Guaranty or any sums paid by the Guarantor or collected by the Lender
pursuant to this Guaranty. In furtherance, and not in limitation, of the
preceding waiver, the Guarantor agrees that any sums paid by the Guarantor or
collected by the Lender pursuant to this Guaranty shall be deemed a contribution
to the capital of the Borrower or Other Obligated Party, as the case may be, and
shall not constitute the Guarantor a creditor of the Borrower or such Other
Obligated Party.
Section 10. Certain Rights, Remedies, Etc.
(a) In the event of any demand or default on this Guaranty or the
Obligations: (1) all Obligations shall become due and payable, together with
interest accrued to the date of payment, without notice, at the option of the
Lender; (2) the Guarantor shall reimburse the Lender for any reasonable
expenses, costs and attorneys' fees which the Lender may incur in connection
with the collection of any monies due under this Guaranty or in connection with
the enforcement of any right under this Guaranty.
(b) In pursuing its rights under and pursuant to any of the
Obligations or any of the obligations, duties and covenants created under and
pursuant to the Loan Documents or under this Guaranty, the Lender need not join
the Guarantor in any suit against the Borrower under the Loan Documents or join
the Borrower in any suit against the Guarantor hereunder. The Guarantor hereby
waives any right to require the Lender to give notice of the terms, time and
place of any public or private sale of any Collateral now or hereafter securing
the Obligations or obligations, duties and covenants created under and pursuant
to the Loan Documents or to comply with any other provision of Section 9-504 of
the Uniform Commercial Code as enacted by the Commonwealth of Virginia.
Section 11. No Set-Off. No act or omission of any kind or at any time on
the part of the Lender in respect to any matter whatsoever shall in any way
affect or impair the rights of the Lender to enforce any right, power or benefit
under this Guaranty and no set-off, claim, reduction or diminution of any
obligation or any defense of any kind or
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nature which the Guarantor has or may have against the Lender shall be available
against the Lender in any suit or action brought by the Lender to enforce any
right, power of benefit provided by this Guaranty, provided that nothing herein
shall prevent the assertion by the Guarantor of any such claim by separate suit
or counterclaim. Nothing in this Guaranty shall be construed as a waiver by the
Guarantor of any rights or claims which the Guarantor may have against the
Lender hereunder or otherwise, but any recovery upon such rights and claims
shall be had from the Lender separately, it being the intent of this Guaranty
that the Guarantor shall be unconditionally and absolutely obligated to perform
fully all the Guarantor's obligations, covenants and agreements hereunder for
the benefit of the Lender.
Section 12. Notices. All notices, demands, requests for modification,
consents or approvals under this Guaranty shall be given in accordance with
Section 16.1 of the Loan Agreement, to the Guarantor at the address specified on
the signature page hereof.
Section 13. Reinstatement. The liability of the Guarantor hereunder shall
be reinstated and revived and the rights of the Lender shall continue if and to
the extent that for any reason any payment by or on behalf of the Borrower or
the Guarantor is rescinded or must be otherwise restored by the Lender, whether
as a result of any proceedings in bankruptcy or reorganization or otherwise, and
all decisions as to whether any such payment must be rescinded or restored shall
be made in good faith by the Lender in its sole discretion; provided, however,
that if the Lender chooses to contest any such matter at the request of the
Guarantor, the Guarantor agrees to indemnify, defend and hold the Lender
harmless with respect to all costs (including, without limitation, attorneys'
fees) of such litigation.
Section 14. No Waiver; Amendments, Etc. No failure on the part of the
Lender to exercise, no delay in exercising and no course of dealing with respect
to, any right hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law. This
Guaranty may not be amended or modified except by written agreement of the
Guarantor and the Lender and no consent or waiver hereunder shall be valid as
against the Lender unless in writing and signed by the Lender.
Section 15. Insolvency. The voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially all the assets
and liabilities, the receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, or other proceeding affecting the Borrower
or the disaffirmance of the Obligations or any obligation, duty or covenant
created pursuant to any of the Loan Documents in any such proceeding shall not
release or discharge the Guarantor from this Guaranty.
Section 16. Jurisdiction, Venue and Waiver of Jury Trial.
(a) The forum having the proper jurisdiction and venue to adjudicate
any claim, dispute or default which may arise out of the execution and delivery
of this Guaranty and the performance of the Guarantor's obligations hereunder
shall be the Circuit Court of the City of Richmond, Virginia, and the proper
appellate courts of the Commonwealth of Virginia, or the United States District
Court of the Eastern District of Virginia, Richmond Division, and the proper
appellate courts of the United States, unless the Lender in its sole discretion
chooses to bring suit on its own behalf in some other court of competent
jurisdiction. The Guarantor and Lender expressly submit and consent to such
jurisdiction and venue and specifically waive any and all rights it may have to
contest the jurisdiction and/or venue of the above mentioned forums and to
demand any other forums. The Guarantor and Lender waive personal service of any
and all legal process upon them and consent and agree that all such service may
be made by Registered Mail directed to the Guarantor or Lender, as the case may
be, at the address for notices set forth at the end of this Agreement, and
service so made shall be deemed to be completed on the date the return receipt
therefor is signed.
(b) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, LENDER AND
GUARANTOR WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ON ANY MATTER ARISING OUT OF THIS GUARANTY AND THE GUARANTOR'S
OBLIGATIONS HEREUNDER.
THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY THE LENDER AND
GUARANTOR, AND LENDER AND GUARANTOR HEREBY REPRESENT THAT NO REPRESENTATIONS OF
FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL
BY JURY OR IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THE LENDER AND GUARANTOR
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FURTHER REPRESENTS THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS
AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,
SELECTED OF THEIR OWN FREE WILL, AND THAT THEY HAVE HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL.
Section 17. Entire Agreement. This Guaranty constitutes the entire
agreement of the Lender and the Guarantor, and supersedes all prior agreements
and understandings, both written and oral, between the Guarantor and the Lender
with respect to the subject matter hereof.
Section 18. Severability. The invalidity or unenforceability of any
phrase, sentence, clause or section in this Guaranty shall not affect the
validity or enforceability of the remaining portions of this Guaranty, or any
hereof.
Section 19. Construction. This Guaranty shall be construed and enforced in
accordance with the laws of the Commonwealth of Virginia without regard to its
rules with respect to choice of law. All references in this Guaranty to the
singular number and neuter gender shall be deemed to mean and include the plural
number and all genders, and vice versa, unless the context shall otherwise
require.
The Guarantor has executed this Guaranty as of the date first above
written.
GUARANTOR:
Technology Flavors & Fragrances S.A.
By: /s/ Joseph A. Gemmo
--------------------------------------
Joseph A. Gemmo
Vice President/Chief Financial Officer
Address for Notices:
Av. Chile Espana 485-497
Santiago, Chile, South America
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 29th day of June, 1999, before me, the undersigned officer,
personally appeared Joseph A. Gemmo, Vice President/Chief Financial Officer of
Technology Flavors & Fragrances S.A., known to me (or satisfactorily proven) to
be the person whose name is subscribed to within the instrument and acknowledged
that he executed the same on behalf of said corporation for the purposes therein
contained as his free act and deed and the free act and deed of said
corporation.
In Witness Whereof, I hereunder set my hand and official seal.
/s/ William Delehanty
------------------------------
Notary Public
My Commission Expires:
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