SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 9, 1997
Health-Chem Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-6787 13-2682801
(Commission File Number) (IRS Employer Identification
No.)
1212 Avenue of the Americas, New York, NY 10036
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 398-
0700
Item 5. Other Events
On January 9, 1997, Health-Chem Corporation (the "Company")
obtained an aggregate of up to $15 million in senior secured
financing from IBJ Schroder Bank & Trust Company (the "Bank"),
individually and as agent for various other financial
institutions. Pursuant to a Revolving Credit Term Loan and
Security Agreement dated as of January 9, 1997 (the "Loan
Agreement"), the Company will be provided with up to $7 million
in term loans and up to $8 million in revolving credit. The
revolving credit line will bear interest at the Bank's prime rate
and the term loans will bear interest at the Bank's prime rate
plus .375%. The financing is secured by a pledge of
substantially all the assets of the Company and its subsidiaries.
Proceeds from borrowings under the Loan Agreement have been
used by the Company to repay outstanding indebtedness under an
aggregate $7.75 million facility with comparable terms with The
First National Bank of Maryland and will also be used to
repurchase, repay and/or redeem up to $7 million of the Company's
10 3/8% Convertible Subordinated Debentures due April 15, 1999,
as market conditions warrant, and for general working capital
purposes.
The terms of the financing are more fully described in the
Loan Agreement, a copy of which is annexed as an exhibit hereto
and incorporated herein by reference.
2
Item 7. Exhibits
Page
1. Revolving Credit, Term Loan and Security Agreement, dated
January 9, 1997 between Health-Chem Corporation, Herculite
Products, Inc., Transderm Laboratories Corporation, Hercon
Environmental Corporation, Pacific Combining Corporation
and Hercon Laboratories Corporation and IBJ Schroder Bank
& Trust Company as Lender and Agent.
2. Press release, dated January 13, 1997, by the Company.
3
SIGNATURE
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
HEALTH-CHEM CORPORATION
Date: January 17, 1997 By:/s/ Robert D. Speiser
Robert D. Speiser
Executive Vice President
4
784683.5/DDB/25254/001 January 15,1997
REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
IBJ SCHRODER BANK & TRUST COMPANY
(AS LENDER AND AS AGENT)
WITH
HEALTH-CHEM CORPORATION
HERCULITE PRODUCTS INCORPORATED
TRANSDERM LABORATORIES CORPORATION
HERCON ENVIRONMENTAL CORPORATION
PACIFIC COMBINING CORPORATION
AND
HERCON LABORATORIES CORPORATION
(BORROWERS)
January 9, 1997
TABLE OF CONTENTS
I. DEFINITIONS 1
1.1. Accounting Terms 1
1.2. General Terms 1
1.3. Uniform Commercial Code Terms 18
1.4. Certain Matters of Construction 18
II. ADVANCES, PAYMENTS 18
2.1. (a) Revolving Advances 18
(b) Discretionary Rights 18
2.2. Procedure for Revolving Advances Borrowing 19
2.3. Disbursement of Advance Proceeds 19
2.4. Term Loan 19
2.5. Maximum Advances 20
2.6. Repayment of Advances 20
2.7. Repayment of Excess Advances 21
2.8. Statement of Account 21
2.9. Additional Payments 21
2.10. Manner of Borrowing and Payment 21
2.11. Mandatory Prepayments 23
2.12. Use of Proceeds 24
2.13. Defaulting Lender 24
III. INTEREST AND FEES 25
3.1. Interest 25
3.2. INTENTIONALLY OMITTED 25
3.3. (a) Closing Fee 25
(b) Facility Fee 25
3.4. (a) Collateral Evaluation Fee 26
(b) Collateral Monitoring Fee 26
3.5. Computation of Interest and Fees 26
3.6. Maximum Charges 26
3.7. Increased Costs 26
3.8. 27
3.9. Capital Adequacy 27
IV. COLLATERAL: GENERAL TERMS 28
4.1. Security Interest in the Collateral 28
4.2. Perfection of Security Interest 28
4.3. Disposition of Collateral 28
4.4. Preservation of Collateral 29
4.5. Ownership of Collateral 29
4.6. Defense of Agent's and Lenders' Interests 29
4.7. Books and Records 30
4.8. Financial Disclosure 30
4.9. Compliance with Laws 31
4.10. Inspection of Premises 31
4.11. Insurance 31
4.12. Failure to Pay Insurance 32
4.13. Payment of Taxes 32
4.14. Payment of Leasehold Obligations 33
4.15. Receivables 33
(a) Nature of Receivables 33
(b) Solvency of Customers 33
(c) Locations of Borrower 33
(d) Collection of Receivables 34
(e) Notification of Assignment of
Receivables 34
(f) Power of Agent to Act on Borrowers'
Behalf 34
(g) No Liability 35
(h) Establishment of a Lockbox Account,
Dominion Account 35
(i) Adjustments 36
4.16. Inventory 36
4.17. Maintenance of Equipment 36
4.18. Exculpation of Liability 36
4.19. Environmental Matters 36
4.20. Financing Statements 39
V. REPRESENTATIONS AND WARRANTIES 39
5.1. Authority 39
5.2. Formation and Qualification 39
5.3. Survival of Representations and Warranties 39
5.4. Tax Returns 40
5.5. Financial Statements 40
5.6. Corporate Name 41
5.7. O.S.H.A. and Environmental Compliance 41
5.8. Solvency; No Litigation, Violation, Indebted
ness or Default 41
5.9. Patents, Trademarks, Copyrights and Licenses 43
5.10. Licenses and Permits 43
5.11. Default of Indebtedness 44
5.12. No Default 44
5.13. No Burdensome Restrictions 44
5.14. No Labor Disputes 44
5.15. Margin Regulations 44
5.16. Investment Company Act 44
5.17. Disclosure 44
5.18. Intentionally Omitted 44
5.19. Swaps 45
5.20. Conflicting Agreements 45
5.21. Application of Certain Laws and
Regulations 45
5.22. Business and Property of Borrower 45
VI. AFFIRMATIVE COVENANTS 45
6.1. Payment of Fees 45
6.2. Conduct of Business and Maintenance of Exis
tence and Assets 45
6.3. Violations 46
6.4. Government Receivables 46
6.5. Net Worth 46
6.6. Current Ratio 46
6.7. Fixed Charge Coverage 46
6.8. Minimum EBITDA 47
6.9. Execution of Supplemental Instruments 47
6.10. Payment of Indebtedness 48
6.11. Standards of Financial Statements 48
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6.12. SEC Filings 48
6.13. Mortgage. By February 1, 1997, Agent
shall have received in form and substance
satisfactory to Lenders (i) an executed
Mortgage and (ii) a title policy for the
owned Real Property and (iii) surveys.
VII. NEGATIVE COVENANTS 48
7.1. Merger, Consolidation, Acquisition and Sale
of Assets 48
7.2. Creation of Liens 48
7.3. Guarantees 48
7.4. Investments 49
7.5. Loans 49
7.6. Capital Expenditures 49
7.7. Dividends 49
7.8. Indebtedness 49
7.9. Nature of Business 49
7.10. Transactions with Affiliates 50
7.11. Leases 50
7.12. Subsidiaries 50
7.13. Fiscal Year and Accounting Changes 50
7.14. Pledge of Credit 50
7.15. Amendment of Articles of
Incorporation, By-Laws 50
7.16. Compliance with ERISA 50
7.17. Prepayment of Indebtedness 51
7.18. Debenture 51
VIII. CONDITIONS PRECEDENT. 51
8.1. Conditions to Initial Advances 51
(a) Note 51
(b) Filings, Registrations and Recordings 51
(c) Corporate Proceedings of Borrowers 52
(d) Incumbency Certificates of Borrowers 52
(e) Certificates 52
(f) Good Standing Certificates 52
(g) Legal Opinion 52
(h) No Litigation 53
(i) Financial Condition Certificates 53
(j) Collateral Examination 53
(k) Fees 53
(l) Pro Forma Financial Statements 53
(m) Guaranties, Pledge Agreement, Other
Documents 53
(n) Insurance 53
(o) Title Insurance 53
(p) Environmental Reports 54
(q) Payment Instructions 54
(r) Blocked Accounts 54
(s) Consents 54
(t) No Adverse Material Change 54
(u) Leasehold Agreements 54
(v) Mortgage 54
(w) Debenture 54
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(x) Contract Review 54
(y) Closing Certificate 55
(z) Undrawn Availability 55
(aa) Other 55
8.2. Conditions to Each Advance 55
(a) Representations and Warranties 55
(b) No Default 55
(c) Maximum Advances 55
IX. INFORMATION AS TO BORROWER 55
9.1. Disclosure of Material Matters 56
9.2. Schedules 56
9.3. Environmental Reports 56
9.4. Litigation 56
9.5. Material Occurrences 56
9.6. Government Receivables 57
9.7. Annual Financial Statements 57
9.8. INTENTIONALLY OMMITED 57
9.9. Monthly Financial Statements 57
9.10. Other Reports 58
9.11. Additional Information 58
9.12. Projected Operating Budget 58
9.13. Variances From Operating Budget 58
9.14. Notice of Suits, Adverse Events 59
9.15. ERISA Notices and Requests 59
9.16. Additional Documents 60
X. EVENTS OF DEFAULT 60
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT 63
11.1. Rights and Remedies 63
11.2. Agent's Discretion 64
11.3. Setoff 64
11.4. Rights and Remedies not Exclusive 64
XII. WAIVERS AND JUDICIAL PROCEEDINGS 64
12.1. Waiver of Notice 64
12.2. Delay 64
12.3. Jury Waiver 65
XIII. EFFECTIVE DATE AND TERMINATION 65
13.1. Term 65
13.2. Termination 65
XIV. REGARDING AGENT 66
14.1. Appointment 66
14.2. Nature of Duties 66
14.3. Lack of Reliance on Agent and
Resignation 67
14.4. Certain Rights of Agent 68
14.5. Reliance 68
14.6. Notice of Default 68
14.7. Indemnification 68
14.8. Agent in its Individual Capacity 69
14.9. Delivery of Documents 69
14.10. Borrowers' Undertaking to Agent 69
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XV. BORROWING AGENCY 69
15.1. Borrowing Agency Provisions 69
15.2. Waiver of Subrogation 70
XVI. MISCELLANEOUS 70
16.1. Governing Law 70
16.2. Entire Understanding 71
16.3. Successors and Assigns;
Participations; New Lenders 72
16.4. Application of Payments 74
16.5. Indemnity 74
16.6. Notice 74
16.7. Survival 75
16.8. Severability 75
16.9. Expenses 76
16.10. Injunctive Relief 76
16.11. Consequential Damages 76
16.12. Captions 76
16.13. Counterparts; Telecopied Signatures 76
16.14. Construction 76
16.15. Confidentiality 77
16.16. Publicity 77
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REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT
Revolving Credit, Term Loan and Security Agreement dated
January 9, 1997 among HEALTH-CHEM CORPORATION, a corporation
organized under the laws of the State of Delaware ("Holdings"),
HERCULITE PRODUCTS, INC., a corporation organized under the laws
of the State of New York ("HPI), TRANSDERM LABORATORIES
CORPORATION, a corporation organized under the laws of the State
of Delaware ("TLC"), HERCON ENVIRONMENTAL CORPORATION, a
corporation organized under the laws of the State of Delaware
("HEC"), PACIFIC COMBINING CORPORATION, a corporation organized
under the laws of the State of California ("PCC") and HERCON
LABORATORIES CORPORATION, a corporation organized under the laws
of the State of Delaware ("HLC") (Holdings, HPI, TLC, HEC, PCC
and HLC, each a "Borrower" and collectively "Borrowers"), the
financial institutions which are now or which hereafter become a
party hereto (collectively, the "Lenders" and individually a
"Lender") and IBJ SCHRODER BANK & TRUST COMPANY ("IBJS"), a New
York banking corporation, as agent for Lenders (IBJS, in such
capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings
herein contained, Borrowers, Lenders and Agent hereby agree as
follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the
Note, or any certificate, report or other document made or
delivered pursuant to this Agreement, accounting terms not
defined in Section 1.2 or elsewhere in this Agreement and
accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under
GAAP; provided, however, whenever such accounting terms are used
for the purposes of determining compliance with financial
covenants in this Agreement, such accounting terms shall be
defined in accordance with GAAP applied in preparation of the
audited financial statements of Borrowers for the fiscal year
ended December 31, 1995.
1.2 General Terms. For purposes of this Agreement the
following terms shall have the following meanings:
"Accountants" shall have the meaning set forth in
Section 9.7 hereof.
"Advances" shall mean and include the Revolving
Advances as well as the Term Loan.
"Advance Rates" shall have the meaning set forth
in Section 2.1(a) hereof.
"Affiliate" of any Person shall mean (a) any
Person (other than a Subsidiary) which, directly or indirectly,
is in control of, is controlled by, or is under common control
with such Person, or (b) any Person who is a director or officer
(i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person described in clause (a) above. For purposes
of this definition, control of a Person shall mean the power,
direct or indirect, (x) to vote 5% or more of the securities
having ordinary voting power for the election of directors of
such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by contract or
otherwise.
"Agent" shall have the meaning set forth in the
preamble to this Agreement and shall include its successors and
assigns.
"Alternate Base Rate" shall mean, for any day, a
rate per annum equal to the higher of (i) the Base Rate in
effect on such day and (ii) the Federal Funds Rate in effect on
such day plus 1/2 of 1%.
"Authority" shall have the meaning set forth in
Section 4.19(d).
"Base Rate" shall mean the base commercial lending
rate of IBJS as publicly announced to be in effect from time to
time, such rate to be adjusted automatically, without notice, on
the effective date of any change in such rate. This rate of
interest is determined from time to time by IBJS as a means of
pricing some loans to its customers and is neither tied to any
external rate of interest or index nor does it necessarily
reflect the lowest rate of interest actually charged by IBJS to
any particular class or category of customers of IBJS.
"Blocked Accounts" shall have the meaning set
forth in Section 4.15(h).
"Borrower" or "Borrowers" shall have the meaning
set forth in the preamble to this Agreement and shall extend to
all permitted successors and assigns of such Persons.
"Borrowers on a Consolidated Basis" shall mean the
consolidation in accordance with GAAP of the accounts or other
items of Holdings and its Subsidiaries.
"Borrowers' Account" shall have the meaning set
forth in Section 2.8.
"Borrowing Agent" shall mean Holdings.
"Business Day" shall mean any day other than a day
on which commercial banks in New York are authorized or required
by law to close.
"Cash Flow" for any period, shall mean the sum of
(i) Earnings Before Interest and Taxes for such period plus (ii)
depreciation and amortization and all other non-cash charges,
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which were deducted in determining net income for such period
plus (iii) tax refunds for any prior year actually received,
minus (iv)(a) scheduled repayments of the Term Loan to the
extent actually paid during the period, and (b) non cash credits
which were taken into account in determining Earnings Before
Interest and Taxes for such period.
"CERCLA" shall mean the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended, 42 U.S.C. 9601 et seq.
"Change of Control" shall mean (a) the occurrence
of any event (whether in one or more transactions) which results
in a transfer of control of any Borrower to a Person who is not
an Original Owner or (b) any merger or consolidation of or with
any Borrower to a Person who is not a Borrower or sale of all or
substantially all of the property or assets of any Borrower to a
Person who is not a Borrower. For purposes of this definition,
"control of Borrower" shall mean the power, direct or indirect
(x) to vote 30% or more of the securities having ordinary voting
power for the election of directors of any Borrower or (y) to
direct or cause the direction of the management and policies of
any Borrower by contract or otherwise.
"Change of Ownership" shall mean the occurrence of
one or more of the following events:
(a) the direct or indirect sale, lease, exchange
or other transfer of all or substantially all of the assets of
Holdings to any Person or entity or group of Persons or entities
acting in concert as a partnership or other group (a "Group of
Persons") other than a Person described in clause (a) of the
definition of Affiliate;
(b) the consummation of any consolidation or
merger of Holdings with or into another corporation with the
effect that the stockholders of Holdings immediately prior to
the date of the consolidation or merger hold immediately after
such merger or consolidation less than 51% of the combined
voting power of the outstanding voting securities of the
surviving entity of such merger, or the corporation resulting
from such consolidation, ordinarily having the right to vote in
the election of directors (apart from rights accruing under
special circumstances) immediately after such merger or
consolidation;
(c) the stockholders of Holdings shall approve
any plan or proposal for the liquidation or dissolution of
Holdings;
(d) a Person or Group of Persons acting in
concert as a partnership, limited partnership, syndicate or
other group, except for the Speiser Family, shall, as a result
of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, have become the direct or
indirect beneficial owner (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as amended) of
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securities of Holdings representing more than 15% of the
combined voting power of the then outstanding securities of
Holdings ordinarily (and apart from rights accruing under
special circumstances) having the right to vote in the election
of the directors; or
(e) a Person or Group of Persons, together with
any Affiliates thereof, shall succeed in having a sufficient
number of its nominees elected to the Board of Directors of
Holdings such that such nominees, when added to any existing
directors remaining on the Board of Directors of Holdings after
such election who are Affiliates of such Person or Group of
Persons, will constitute a majority of the Board of Directors of
Holdings.
"Charges" shall mean all taxes, charges, fees,
imposts, levies or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales,
use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance,
stamp, occupation and property taxes, custom duties, fees,
assessments, liens, claims and charges of any kind whatsoever,
together with any interest and any penalties, additions to tax
or additional amounts, imposed by any taxing or other authority,
domestic or foreign (including, without limitation, the Pension
Benefit Guaranty Corporation or any environmental agency or
superfund), upon the Collateral, any Borrower or any of its
Affiliates.
"Closing Date" shall mean January 9, 1997 or such
other date as may be agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of
1986, as amended from time to time and the regulations
promulgated thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Real Property;
(f) all Subsidiary Stock;
(g) all of each Borrower's right, title and
interest in and to (i) its respective goods and other property
including, but not limited to, all merchandise returned or
rejected by Customers, relating to or securing any of the
Receivables; (ii) all of each Borrower's rights as a consignor,
a consignee, an unpaid vendor, mechanic, artisan, or other
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lienor, including stoppage in transit, setoff, detinue,
replevin, reclamation and repurchase; (iii) all additional
amounts due to any Borrower from any Customer relating to the
Receivables; (iv) other property, including warranty claims,
relating to any goods securing this Agreement; (v) all of each
Borrower's contract rights, rights of payment which have been
earned under a contract right, instruments, documents, chattel
paper, warehouse receipts, deposit accounts, money and
securities; (vi) if and when obtained by any Borrower, all real
and personal property of third parties in which such Borrower
has been granted a lien or security interest as security for the
payment or enforcement of Receivables; and (vii) any other
goods, personal property or real property now owned or hereafter
acquired in which any Borrower has expressly granted a security
interest or may in the future grant a security interest to Agent
hereunder, or in any amendment or supplement hereto or thereto,
or under any other agreement between Agent and any Borrower;
(h) all of each Borrower's ledger sheets,
ledger cards, files, correspondence, records, books of account,
business papers, computers, computer software (owned by any
Borrower or in which it has an interest), computer programs,
tapes, disks and documents relating to (a), (b), (c), (d), (e),
(f) or (g) of this Paragraph; and
(i) all proceeds and products of (a), (b),
(c), (d), (e), (f), (g) and (h) in whatever form, including, but
not limited to: cash, deposit accounts (whether or not
comprised solely of proceeds), certificates of deposit,
insurance proceeds (including hazard, flood and credit
insurance), negotiable instruments and other instruments for the
payment of money, chattel paper, security agreements, documents,
eminent domain proceeds, condemnation proceeds and tort claim
proceeds.
"Commitment Percentage" of any Lender shall mean
the percentage set forth below such Lender's name on the
signature page hereof as same may be adjusted upon any
assignment by a Lender pursuant to Section 16.3(b) hereof.
"Commitment Transfer Supplement" shall mean a
document in the form of Exhibit 16.3 hereto, properly completed
and otherwise in form and substance satisfactory to Agent by
which the Purchasing Lender purchases and assumes a portion of
the obligation of Lenders to make Advances under this Agreement.
"Consents" shall mean all filings and all
licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and other
third parties, domestic or foreign, necessary to carry on any
Borrower's business, including, without limitation, any Consents
required under all applicable federal, state or other applicable
law.
"Contract Rate" shall mean, as applicable, the
Revolving Interest Rate or the Term Loan Rate.
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"Controlled Group" shall mean all members of a
controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which,
together with any Borrower, are treated as a single employer
under Section 414 of the Code.
"Current Assets" at a particular date, shall mean
all cash, cash equivalents, accounts and inventory of Borrowers
on a Consolidated Basis and all other items which would, in
conformity with GAAP, be included under current assets on a
balance sheet of Borrowers on a Consolidated Basis as at such
date; provided, however, that such amounts shall not include (a)
any amounts for any Indebtedness owing by an Affiliate of any
Borrower, unless such Indebtedness arose in connection with the
sale of goods or rendition of services in the ordinary course of
business and would otherwise constitute current assets in
conformity with GAAP, (b) any shares of stock issued by an
Affiliate of any Borrower, or (c) the cash surrender value of
any life insurance policy.
"Current Liabilities" at a particular date, shall
mean all amounts which would, in conformity with GAAP, be
included under current liabilities on a balance sheet of
Borrowers on a Consolidated Basis, as at such date, but in any
event including, without limitation, the amounts of (a) all
Indebtedness of Borrowers on a Consolidated Basis payable on
demand, or, at the option of the Person to whom such
Indebtedness is owed, not more than twelve (12) months after
such date, (b) any payments in respect of any Indebtedness of
any Borrower (whether installment, serial maturity, sinking fund
payment or otherwise) required to be made not more than twelve
(12) months after such date, (c) all reserves in respect of
liabilities or Indebtedness payable on demand or, at the option
of the Person to whom such Indebtedness is owed, not more than
twelve (12) months after such date, the validity of which is not
contested at such date, and (d) all accruals for federal or
other taxes measured by income payable within a twelve (12)
month period.
"Customer" shall mean and include the account
debtor with respect to any Receivable and/or the prospective
purchaser of goods, services or both with respect to any
contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with
any Borrower, pursuant to which such Borrower is to deliver any
personal property or perform any services.
"Debentures" shall mean the 10-3/8% Convertible
Subordinated Debentures due April 15, 1999 as in effect on the
Closing Date.
"Default" shall mean an event which, with the
giving of notice or passage of time or both, would constitute an
Event of Default.
"Default Rate" shall have the meaning set forth in
Section 3.1 hereof.
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"Defaulting Lender" shall have the meaning set
forth in Section 2.13(a) hereof.
"Depository Accounts" shall have the meaning set
forth in Section 4.15(h) hereof.
"Documents" shall have the meaning set forth in
Section 8.1(c) hereof.
"Dollar" and the sign "$" shall mean lawful money
of the United States of America.
"Early Termination Date" shall have the meaning
set forth in Section 13.1 hereof.
"Earnings Before Interest and Taxes" shall mean
for any period the sum of (i) net income (or loss) of Borrowers
on a Consolidated Basis for such period (excluding extraordinary
gains and losses, plus (ii) all interest expense of Borrowers on
a Consolidated Basis for such period, plus (iii) all charges
against income of Borrowers on a Consolidated Basis for such
period for federal, state and local taxes actually paid.
"EBITDA" shall mean for any period the sum of (i)
Earnings Before Interest and Taxes for such period plus (ii)
depreciation expenses of Borrowers on a Consolidated Basis for
such period, plus (iii) amortization expenses of Borrowers on a
Consolidated Basis for such period.
"Eligible Inventory" shall mean and include
Inventory excluding work in process, with respect to each
Borrower valued at the lower of cost or market value, determined
on a first-in-first-out basis, which is not, in Agent's opinion,
obsolete, slow moving or unmerchantable and which Agent, in its
sole discretion, shall not deem ineligible Inventory, based on
such considerations as Agent may from time to time deem
appropriate including, without limitation, whether the Inventory
is subject to a perfected, first priority security interest in
favor of Agent and whether the Inventory conforms to all
standards imposed by any governmental agency, division or
department thereof which has regulatory authority over such
goods or the use or sale thereof.
"Eligible Receivables" shall mean and include with
respect to each Borrower, each Receivable of such Borrower
arising in the ordinary course of such Borrower's business and
which Agent, in its sole credit judgment, shall deem to be an
Eligible Receivable, based on such considerations as Agent may
from time to time deem appropriate. A Receivable shall not be
deemed eligible unless such Receivable is subject to Agent's
first priority perfected security interest and no other Lien
(other than Permitted Encumbrances), and is evidenced by an
invoice or other documentary evidence satisfactory to Agent. In
addition, no Receivable shall be an Eligible Receivable if:
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(a) it arises out of a sale made by any Borrower
to an Affiliate of any Borrower or to a Person controlled by an
Affiliate of any Borrower;
(b) it is due or unpaid more than ninety (90)
days after the original invoice date;
(c) fifty percent (50%) or more of the
Receivables from such Customer are not deemed Eligible
Receivables hereunder. Such percentage may, in Agent's sole
discretion, be increased or decreased from time to time;
(d) any covenant, representation or warranty
contained in this Agreement with respect to such Receivable has
been breached;
(e) the Customer shall (i) apply for, suffer, or
consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property or call a meeting of its
creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations
of its present business, (iii) make a general assignment for the
benefit of creditors, (iv) commence a voluntary case under any
state or federal bankruptcy laws (as now or hereafter in
effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a
petition seeking to take advantage of any other law providing
for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, any petition which is filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any
action for the purpose of effecting any of the foregoing;
(f) the sale is to a Customer outside the
continental United States of America, unless the sale is on
letter of credit, guaranty or acceptance terms, in each case
acceptable to Agent in its sole discretion;
(g) the sale to the Customer is on a bill-and-
hold, guaranteed sale, sale-and-return, sale on approval,
consignment or any other repurchase or return basis or is
evidenced by chattel paper;
(h) Agent believes, in its sole judgment, that
collection of such Receivable is insecure or that such
Receivable may not be paid by reason of the Customer's financial
inability to pay;
(i) the Customer is the United States of America,
any state or any department, agency or instrumentality of any of
them, unless Borrower assigns its right to payment of such
Receivable to Agent pursuant to the Assignment of Claims Act of
1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41
U.S.C. Sub-Section 15 et seq.) or has otherwise complied with
other applicable statutes or ordinances;
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(j) the goods giving rise to such Receivable have
not been shipped and delivered to and accepted by the Customer
or the services giving rise to such Receivable have not been
performed by the applicable Borrower and accepted by the
Customer or the Receivable otherwise does not represent a final
sale;
(k) the Receivables of the Customer exceed a
credit limit determined by Agent, in its sole discretion, to the
extent such Receivable exceeds such limit;
(l) the Receivable is subject to any offset,
deduction, defense, dispute, or counterclaim, the Customer is
also a creditor or supplier of a Borrower or the Receivable is
contingent in any respect or for any reason;
(m) the applicable Borrower has made any
agreement with any Customer for any deduction therefrom, except
for discounts or allowances made in the ordinary course of
business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face value of
each respective invoice related thereto;
(n) shipment of the merchandise or the rendition
of services has not been completed;
(o) any return, rejection or repossession of the
merchandise has occurred;
(p) such Receivable is not payable to a Borrower;
or
(q) such Receivable is not otherwise satisfactory
to Agent as determined in good faith by Agent in the exercise of
its discretion in a reasonable manner.
"Environmental Complaint" shall have the meaning
set forth in Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state
and local environmental, land use, zoning, health, chemical use,
safety and sanitation laws, statutes, ordinances and codes
relating to the protection of the environment and/or governing
the use, storage, treatment, generation, transportation,
processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines,
interpretations, decisions, orders and directives of federal,
state and local governmental agencies and authorities with
respect thereto.
"Equipment" shall mean and include as to each
Borrower all of such Borrower's goods (other than Inventory)
whether now owned or hereafter acquired and wherever located
including, without limitation, all equipment, machinery,
apparatus, motor vehicles, fittings, furniture, furnishings,
fixtures, parts, accessories and all replacements and
substitutions therefor or accessions thereto.
-9-
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time and the rules
and regulations promulgated thereunder.
"Event of Default" shall mean the occurrence of
any of the events set forth in Article X hereof.
"Excess Cash Flow" of Borrowers on a Consolidated
Basis for any fiscal period shall mean (a) Cash Flow for such
period minus (b) the sum of (i) capital expenditures (net of
Indebtedness incurred to finance such expenditures) in an amount
for such period not to exceed the amount permitted under Section
7.6 to the extent actually paid and (ii) Subordinated Debt
Payments.
"Federal Funds Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or if such
day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or if such rate is not
so published for any day which is a Business Day, the average of
quotations for such day on such transactions received by IBJS
from three Federal funds brokers of recognized standing selected
by IBJS.
"Fixed Charge Coverage" shall mean and include,
with respect to any fiscal period, the ratio of (a) EBITDA minus
capital expenditures made during such period minus all taxes
actually paid during such period to (b) all Senior Debt Payments
plus all Subordinated Debt Payments to the extent not financed
with Advances during such period.
"Formula Amount" shall have the meaning set forth
in Section 2.1(a).
"GAAP" shall mean generally accepted accounting
principles in the United States of America in effect from time
to time.
"General Intangibles" shall mean and include as to
each Borrower all of such Borrower's general intangibles,
whether now owned or hereafter acquired including, without
limitation, all choses in action, causes of action, corporate or
other business records, inventions, designs, patents, patent
applications, equipment formulations, manufacturing procedures,
quality control procedures, trademarks, service marks, trade
secrets, goodwill, copyrights, design rights, registrations,
licenses, franchises, customer lists, tax refunds, tax refund
claims, computer programs, all claims under guaranties, security
interests or other security held by or granted to such Borrower
to secure payment of any of the Receivables by a Customer all
rights of indemnification and all other intangible property of
every kind and nature (other than Receivables).
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"Governmental Body" shall mean any nation or
government, any state or other political subdivision thereof or
any entity exercising the legislative, judicial, regulatory or
administrative functions of or pertaining to a government.
"Guarantor" shall mean, jointly and severally,
each of the Persons on Schedule 1.2 (A).
"Guaranty" shall mean the guaranty of the
obligations of Borrowers executed by Guarantor in favor of Agent
for the ratable benefit of Lenders.
"Hazardous Discharge" shall have the meaning set
forth in Section 4.19(d) hereof.
"Hazardous Substance" shall mean, without
limitation, any flammable explosives, radon, radioactive
materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or
Toxic Substances or related materials as defined in CERCLA, the
Hazardous Materials Transportation Act, as amended (49 U.S.C.
Sections 1801, et seq.), RCRA, Articles 15 and 27 of the New
York State Environmental Conservation Law or any other
applicable Environmental Law and in the regulations adopted
pursuant thereto.
"Hazardous Wastes" shall mean all waste materials
subject to regulation under CERCLA, RCRA or applicable state
law, and any other applicable Federal and state laws now in
force or hereafter enacted relating to hazardous waste disposal.
"Holdings" shall mean Health-Chem Corporation, a
corporation organized under the laws of the State of Delaware.
"Indebtedness" of a Person at a particular date
shall mean all obligations of such Person which in accordance
with GAAP would be classified upon a balance sheet as
liabilities (except capital stock and surplus earned or
otherwise) and in any event, without limitation by reason of
enumeration, shall include all indebtedness, debt and other
similar monetary obligations of such Person whether direct or
guaranteed, and all premiums, if any, due at the required
prepayment dates of such indebtedness, and all indebtedness
secured by a Lien on assets owned by such Person, whether or not
such indebtedness actually shall have been created, assumed or
incurred by such Person. Any indebtedness of such Person
resulting from the acquisition by such Person of any assets
subject to any Lien shall be deemed, for the purposes hereof, to
be the equivalent of the creation, assumption and incurring of
the indebtedness secured thereby, whether or not actually so
created, assumed or incurred.
"Indenture" shall mean the Indenture dated as of
April 15, 1981 between Holdings and Bankers Trust Company.
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"Inventory" shall mean and include as to each
Borrower all of such Borrower's now owned or hereafter acquired
goods, merchandise and other personal property, wherever
located, to be furnished under any contract of service or held
for sale or lease, all raw materials, work in process, finished
goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in such
Borrower's business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of
title or other documents representing them.
"Inventory Advance Rate" shall have the meaning
set forth in Section 2.1(a)(ii) hereof.
"Key Pharmaceutical Litigation" shall mean United
States District Court Action for the District of Delaware, Civil
Action 95-479.
"Lender and "Lenders" shall have the meaning
ascribed to such term in the preamble to this Agreement and
shall include each Person which is a transferee, successor or
assign of any Lender.
"Lien" shall mean any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien
(whether statutory or otherwise), Charge, claim or encumbrance,
or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any
asset of any kind or nature whatsoever including, without
limitation, any conditional sale or other title retention
agreement, any lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement
to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"Material Adverse Effect" shall mean a material
adverse effect on (a) the condition, operations, assets,
business or prospects of the applicable Person or Persons, (b)
Borrowers' ability to pay the Obligations in accordance with the
terms thereof, (c) the value of the Collateral, or Agent's Liens
on the Collateral or the priority of any such Lien or (d) the
practical realization of the benefits of Agent's and each
Lender's rights and remedies under this Agreement and the Other
Documents.
"Maximum Loan Amount" shall mean $15,000,000 less
repayments of the Term Loan.
"Maximum Revolving Advance Amount" shall mean
$8,000,000.
"Maximum Term Loan Amount" shall mean $7,000,000,
less repayments of the Term Loan; provided, however, until such
time as (i) the Key Pharmaceutical litigation is resolved in
such a way as to be immaterial on the future operations and
prospects of Borrowers on a Consolidated Basis, in Agent's
reasonable sole discretion, and (ii) Lender receives an
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appropriate Mortgage on the owned Real Property, (together with
a title insurance policy as described in Section 8.1(o)) the
Maximum Term Loan Amount shall be $4,000,000.
"Mortgage" shall mean the mortgage on the owned
Real Property securing the original principal amount of
$15,000,000 together with all extensions, renewals, amendments,
supplements, modifications, substitutions and replacements
thereto and thereof.
"Multiemployer Plan" shall mean a "multiemployer
plan" as defined in Sections 3(37) and 4001(a)(3) of ERISA.
"Net Worth" at a particular date, shall mean all
amounts which would be included under shareholders' equity on a
balance sheet of the Borrowers on a Consolidated Basis
determined in accordance with GAAP as at such date.
"Note" shall mean collectively, the Term Note and
the Revolving Credit Note.
"Obligations" shall mean and include any and all
of each Borrower's Indebtedness and/or liabilities to Agent or
Lenders or any corporation that directly or indirectly controls
or is controlled by or is under common control with Agent or any
Lender of every kind, nature and description, direct or
indirect, secured or unsecured, joint, several, joint and
several, absolute or contingent, due or to become due, now
existing or hereafter arising, contractual or tortious,
liquidated or unliquidated, regardless of how such indebtedness
or liabilities arise or by what agreement or instrument they may
be evidenced or whether evidenced by any agreement or
instrument, including, but not limited to, any and all of any
Borrower's Indebtedness and/or liabilities under this Agreement,
the Other Documents or under any other agreement between Agent
or Lenders and any Borrower and all obligations of any Borrower
to Agent or Lenders to perform acts or refrain from taking any
action.
"Original Owners" shall mean the Speiser Family or
any Borrower.
"Other Documents" shall mean the Mortgage, the
Note, the Guaranty, the Stock Pledge, the Questionnaire and any
and all other agreements, instruments and documents, including,
without limitation, guaranties, pledges, powers of attorney,
consents, and all other writings heretofore, now or hereafter
executed by any Borrower and/or delivered by any Borrower to
Agent or any Lender in respect of the transactions contemplated
by this Agreement.
"Parent" of any Person shall mean a corporation or
other entity owning, directly or indirectly at least 50% of the
shares of stock or other ownership interests having ordinary
voting power to elect a majority of the directors of the Person,
or other Persons performing similar functions for any such
Person.
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"Participant" shall mean each Person who shall be
granted the right by any Lender to participate in any of the
Advances and who shall have entered into a participation
agreement in form and substance satisfactory to such Lender.
"Payment Office" shall mean initially One State
Street, New York, New York 10004; thereafter, such other office
of Agent, if any, which it may designate by notice to Borrowing
Agent and to each Lender to be the Payment Office.
"Permitted Encumbrances" shall mean (a) Liens in
favor of Agent for the benefit of Agent and Lenders; (b) Liens
for taxes, assessments or other governmental charges not
delinquent or being contested in good faith and by appropriate
proceedings and with respect to which proper reserves have been
taken by Borrowers; provided, that, the Lien shall have no
effect on the priority of the Liens in favor of Agent or the
value of the assets in which Agent has such a Lien and a stay of
enforcement of any such Lien shall be in effect; (c) Liens
disclosed in the financial statements referred to in Section
5.5, the existence of which Agent has consented to in writing;
(d) deposits or pledges to secure obligations under worker's
compensation, social security or similar laws, or under
unemployment insurance; (e) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of
money), leases, statutory obligations, surety and appeal bonds
and other obligations of like nature arising in the ordinary
course of any Borrower's business; (f) judgment Liens that have
been stayed or bonded and mechanics', workers', materialmen's or
other like Liens arising in the ordinary course of any
Borrower's business with respect to obligations which are not
due or which are being contested in good faith by the applicable
Borrower; (g) Liens placed upon fixed assets hereafter acquired
to secure a portion of the purchase price thereof, provided that
(x) any such lien shall not encumber any other property of the
Borrowers and (y) the aggregate amount of Indebtedness secured
by such Liens incurred as a result of such purchases during any
fiscal year shall not exceed the amount provided for in Section
7.6; and (h) Liens disclosed on Schedule 1.2(B).
"Person" shall mean any individual, sole
proprietorship, partnership, corporation, business trust, joint
stock company, trust, unincorporated organization, association,
limited liability company, institution, public benefit
corporation, joint venture, entity or government (whether
Federal, state, county, city, municipal or otherwise, including
any instrumentality, division, agency, body or department
thereof).
"Plan" shall mean any employee benefit plan within
the meaning of Section 3(3) of ERISA, maintained for employees
of Borrowers or any member of the Controlled Group or any such
Plan to which any Borrower or any member of the Controlled Group
is required to contribute on behalf of any of its employees.
"Pro Forma Balance Sheet" shall have the meaning
set forth in Section 5.5(a) hereof.
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"Pro Forma Financial Statements" shall have the
meaning set forth in Section 5.5(b) hereof.
"Projections" shall have the meaning set forth in
Section 5.5(b) hereof.
"Purchasing Lender" shall have the meaning set
forth in Section 15.3 hereof.
"Questionnaire" shall mean the Documentation
Information Questionnaire and the responses thereto provided by
Borrowers and delivered to Agent.
"RCRA" shall mean the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq., as same may be amended
from time to time.
"Real Property" shall mean all of each Borrower's
right, title and interest in and to the owned and leased
premises identified on Schedule 4.19 hereto.
"Receivables" shall mean and include as to each
Borrower all of such Borrower's accounts, contract rights,
instruments (including those evidencing indebtedness owed to
Borrowers by their Affiliates), documents, chattel paper,
general intangibles relating to accounts, drafts and
acceptances, and all other forms of obligations owing to such
Borrower arising out of or in connection with the sale or lease
of Inventory or the rendition of services, all guarantees and
other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically
sold or assigned to Agent hereunder.
"Receivables Advance Rate" shall have the meaning
set forth in Section 2.1(a)(i) hereof.
"Release" shall have the meaning set forth in
Section 5.7(c)(i) hereof.
"Reportable Event" shall mean a reportable event
described in Section 4043(b) of ERISA or the regulations
promulgated thereunder.
"Required Lenders" shall mean Lenders holding at
least fifty-one percent (51%) of the Advances and, if no
Advances are outstanding, Lenders holding fifty-one percent
(51%) of the Commitments.
"Revolving Advances" shall mean Advances made
other than the Term Loan.
"Revolving Credit Note" shall mean, collectively,
the promissory notes referred to in Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean an interest
rate per annum equal to the Alternate Base Rate.
-15-
"SEC" shall mean the United States Securities and
Exchange Commission.
"Senior Debt Payments" shall mean and include all
cash actually expended by Borrowers to make (a) interest
payments on any Advances hereunder, plus, (b) scheduled
principal payments on the Term Loan, plus (c) payments for all
fees, commissions and charges set forth herein and with respect
to any Advances, plus (d) capitalized lease payments, plus (e)
payments with respect to any other Indebtedness for borrowed
money.
"Settlement Date" shall mean the Closing Date and
thereafter Wednesday of each week unless such day is not a
Business Day in which case it shall be the next succeeding
Business Day.
"Speiser Family" shall mean, Marvin M. Speiser and
any Person with whom he has shared voting or dispositive power
as defined in his most recent pre-Closing Date Schedule 13D
filing with the SEC.
"Subordinated Debt" shall mean the outstanding
principal balance of the Debentures.
"Subordinated Debt Payments" shall mean all cash
actually expended to make payments of principal and interest on
the Debentures.
"Subsidiary" shall mean a corporation or other
entity of whose shares of stock or other ownership interests
having ordinary voting power (other than stock or other
ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the directors
of such corporation, or other Persons performing similar
functions for such entity, are owned, directly or indirectly, by
such Person.
"Subsidiary Stock" shall mean all of the issued
and outstanding shares of stock owned by Holdings or any of its
direct or indirect Subsidiaries as described in Schedule 1.2(C).
"Tangible Net Worth" shall mean, at a particular
date, (a) the aggregate amount of all assets of Borrowers on a
Consolidated Basis as may be properly classified as such in
accordance with GAAP consistently applied excluding such other
assets as are properly classified as intangible assets under
GAAP, less (b) the aggregate amount of all liabilities of the
Borrowers on a consolidated basis.
"Term" shall have the meaning set forth in Section
13.1 hereof.
"Term Loan" shall mean the Advances made pursuant
to Section 2.4 hereof.
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"Term Loan Rate" shall mean an interest rate per
annum equal to the sum of the Alternate Base Rate plus three-
eighths (.375%) of one percent.
"Term Note" shall mean, collectively, the
promissory notes described in Section 2.4 hereof.
"Termination Event" shall mean (i) a Reportable
Event with respect to any Plan or Multiemployer Plan; (ii) the
withdrawal of any Borrower or any member of the Controlled Group
from a Plan or Multiemployer Plan during a plan year in which
such entity was a "substantial employer" as defined in Section
4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section
4041(c) of ERISA; (iv) the institution by the PBGC of
proceedings to terminate a Plan or Multiemployer Plan; (v) any
event or condition (a) which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan or Multiemployer Plan, or
(b) that may result in termination of a Multiemployer Plan
pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205
of ERISA, of any Borrower or any member of the Controlled Group
from a Multiemployer Plan.
"Toxic Substance" shall mean and include any
material present on the Real Property or the Leasehold Interests
which has been shown to have significant adverse effect on human
health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. 2601 et seq.,
applicable state law, or any other applicable Federal or state
laws now in force or hereafter enacted relating to toxic
substances. "Toxic Substance" includes but is not limited to
asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.
"Transactions" shall have the meaning set forth in
Section 5.5 hereof.
"Transferee" shall have the meaning set forth in
Section 15.3(b) hereof.
"Undrawn Availability" at a particular date shall
mean an amount equal to (a) the lesser of (i) the Formula Amount
or (ii) the Maximum Revolving Advance Amount, minus (b) the sum
of (i) the outstanding amount of Advances (other than the Term
Loan) plus (ii) all amounts due and owing to Borrowers' trade
creditors which are outstanding more than sixty (60) days past
the due date, plus (iii) fees and expenses related to this
transaction for which Borrowers are liable but which have not
been paid or charged to Borrowers' Account.
"Week" shall mean the time period commencing with
the opening of business on a Wednesday and ending on the end of
business the following Tuesday.
-17-
1.3. Uniform Commercial Code Terms. All terms used
herein and defined in the Uniform Commercial Code as adopted in
the State of New York shall have the meaning given therein
unless otherwise defined herein.
1.4. Certain Matters of Construction. The terms
"herein", "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any
particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in
the context, terms used herein in the singular also include the
plural and vice versa. All references to statutes and related
regulations shall include any amendments of same and any
successor statutes and regulations. Unless otherwise provided,
all references to any instruments or agreements to which Agent
is a party, including, without limitation, references to any of
the Other Documents, shall include any and all modifications or
amendments thereto and any and all extensions or renewals
thereof.
II. ADVANCES, PAYMENTS.
2.1. (a) Revolving Advances. Subject to the terms and
conditions set forth in this Agreement, each Lender, severally
and not jointly, will make Revolving Advances to Borrowers in
aggregate amounts outstanding at any time equal to such Lender's
Commitment Percentage of the lesser of (x) the Maximum Revolving
Advance Amount or (y) an amount equal to the sum of:
(i) up to 85%, subject to the provisions of
Section 2.1(b) hereof ("Receivables Advance Rate"), of Eligible
Receivables, plus
(ii) up to the lesser of (A) 50%, subject to the
provisions of Section 2.1(b) hereof ("Inventory Advance Rate"),
of the value of the Eligible Inventory (the Receivables Advance
Rate and the Inventory Advance Rate shall be referred to
collectively, as the "Advance Rates") or (B) $4,000,000 in the
aggregate at any one time, minus
(iii) such reserves as Agent may reasonably deem
proper and necessary from time to time.
The amount derived from the sum of (x) Sections
2.1(a)(y)(i) and (ii) minus (y) Section 2.1 (a)(y)(iii) at any
time and from time to time shall be referred to as the "Formula
Amount". The Revolving Advances shall be evidenced by the
secured promissory notes ("Revolving Credit Note") substantially
in the form attached hereto as Exhibit 2.1(a).
(b) Discretionary Rights. The Advance Rates may
be increased or decreased by Agent at any time and from time to
time in the exercise of its reasonable discretion. Each
Borrower consents to any such increases or decreases and
acknowledges that decreasing the Advance Rates or increasing the
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reserves may limit or restrict Advances requested by Borrowing
Agent.
2.2. Procedure for Revolving Advances Borrowing.
Borrowing Agent on behalf of any Borrower may
notify Agent prior to 11:00 a.m. on a Business Day of a
Borrower's request to incur, on that day, a Revolving Advance
hereunder. Should any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or
any other agreement with Agent or Lenders, or with respect to
any other Obligation, become due, same shall be deemed a request
for a Revolving Advance as of the date such payment is due, in
the amount required to pay in full such interest, fee, charge or
Obligation under this Agreement or any other agreement with
Agent or Lenders, and such request shall be irrevocable.
2.3. Disbursement of Advance Proceeds. All Advances
shall be disbursed from whichever office or other place Agent
may designate from time to time and, together with any and all
other Obligations of Borrowers to Agent or Lenders, shall be
charged to Borrowers' Account on Agent's books. During the
Term, Borrowers may use the Revolving Advances by borrowing,
prepaying and reborrowing, all in accordance with the terms and
conditions hereof. The proceeds of each Revolving Advance
requested by Borrowers or deemed to have been requested by
Borrowers under Section 2.2 hereof shall, with respect to
requested Revolving Advances to the extent Lenders make such
Revolving Advances, be made available to the applicable Borrower
on the day so requested by way of credit to such Borrower's
operating account at IBJS, or such other bank as Borrowing Agent
may designate following notification to Agent, in immediately
available federal funds or other immediately available funds or,
with respect to Revolving Advances deemed to have been requested
by any Borrower, be disbursed to Agent to be applied to the
outstanding Obligations giving rise to such deemed request.
2.4. Term Loan. Subject to the terms and conditions
set forth in this Agreement, each Lender, severally and not
jointly, shall from time to time during the period commencing on
the Closing Date and ending on the date which is thirty (30)
months after the Closing Date (the "Borrowing Period") make
Advances to Borrower to finance Borrower's repayment of
outstanding Debentures and of the indebtedness owing to First
National Bank of Maryland on the Closing Date ("Term Loans").
Each such Term Loan shall be advanced by each Lender in a sum
equal to such Lender's Commitment Percentage of an amount not to
exceed (i) $2,000,000 on the Closing Date, and, thereafter (ii)
the Maximum Term Loan Amount less previous borrowings under this
Section 2.4. The total amount of all Term Loans shall not
exceed the Maximum Term Loan Amount. All Term Loans must be in
amounts of not less than $500,000. Once repaid, a Term Loan may
not be reborrowed. The sum of all Term Loans made during the
Borrowing Period will be amortized on the basis of a seventy-two
(72) month amortization schedule (with the monthly amortization
-19-
amount being adjusted upon each Term Loan being advanced). The
Term Loans shall be, with respect to principal, payable in
monthly installments calculated in accordance with the
immediately preceding sentence commencing on the first Business
Day of the month following the date on which (x) the aggregate
outstanding principal amount of all Term Loans equals at least
$3,000,000, or (y) eighteen (18) months from the Closing Date,
whichever occurs first, and on the first day of each month
thereafter, subject to acceleration upon the occurrence of an
Event of Default under this Agreement or termination of this
Agreement. Each Lender's Commitment Percentage of the Term
Loans shall be evidenced by and subject to the terms of those
certain secured promissory notes, in substantially the form
attached hereto as Exhibit 2.4 (collectively, the "Term Note").
2.5. Maximum Advances. The aggregate balance of
Revolving Advances outstanding at any time shall not exceed the
lesser of (a) Maximum Revolving Advance Amount or (b) the
Formula Amount.
2.6. Repayment of Advances.
(a) The Revolving Advances shall be due and
payable in full on the last day of the Term subject to earlier
prepayment as herein provided. The Term Loan shall be due and
payable as provided in Section 2.4 hereof and in the Term Note.
(b) Each Borrower recognizes that the amounts
evidenced by checks, notes, drafts or any other items of payment
relating to and/or proceeds of Collateral may not be collectible
by Agent on the date received. In consideration of Agent's
agreement to conditionally credit Borrowers' Account as of the
Business Day on which Agent receives those items of payment,
each Borrower agrees that, in computing the charges under this
Agreement, all items of payment shall be deemed applied by Agent
on account of the Obligations one (1) Business Day after the
Business Day Agent receives such payments via wire transfer or
electronic depository check. Agent is not, however, required to
credit Borrowers' Account for the amount of any item of payment
which is unsatisfactory to Agent and Agent may charge Borrowers'
Account for the amount of any item of payment which is returned
to Agent unpaid.
(c) All payments of principal, interest and other
amounts payable hereunder, or under any of the related
agreements shall be made to Agent at the Payment Office not
later than 1:00 P.M. (New York Time) on the due date therefor in
lawful money of the United States of America in federal funds or
other funds immediately available to Agent. Agent shall have
the right to effectuate payment on any and all Obligations due
and owing hereunder by charging Borrowers' Account or by making
Advances as provided in Section 2.2 hereof.
(d) Borrowers shall pay principal, interest, and
all other amounts payable hereunder, or under any related
agreement, without any deduction whatsoever, including, but not
limited to, any deduction for any setoff or counterclaim.
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2.7. Repayment of Excess Advances. The aggregate
balance of Advances outstanding at any time in excess of the
maximum amount of Advances permitted hereunder shall be
immediately due and payable without the necessity of any demand,
at the Payment Office, whether or not a Default or Event of
Default has occurred.
2.8. Statement of Account. Agent shall maintain, in
accordance with its customary procedures, a loan account
("Borrowers' Account") in the name of Borrowers in which shall
be recorded the date and amount of each Advance made by Lenders
and the date and amount of each payment in respect thereof;
provided, however, the failure by Agent to record the date and
amount of any Advance shall not adversely affect Agent or any
Lender. Each month, Agent shall send to Borrowing Agent a
statement showing the accounting for the Advances made, payments
made or credited in respect thereof, and other transactions
between Lenders and Borrowers, during such month. The monthly
statements shall be deemed correct and binding upon Borrowers in
the absence of manifest error and shall constitute an account
stated between Lenders and Borrowers unless Agent receives a
written statement of Borrowers' specific exceptions thereto
within thirty (30) days after such statement is received by
Borrowing Agent. The records of Agent with respect to the loan
account shall be conclusive evidence absent manifest error of
the amounts of Advances and other charges thereto and of
payments applicable thereto.
2.9. Additional Payments. Any sums expended by Agent
or any Lender due to any Borrower's failure to perform or comply
with its obligations under this Agreement or any Other Document
including, without limitation, any Borrower's obligations under
Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be
charged to Borrowers' Account as a Revolving Advance and added
to the Obligations.
2.10. Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances and of
the Term Loan shall be advanced according to the applicable
Commitment Percentages of Lenders.
(b) Each payment (including each prepayment) by
Borrowers on account of the principal of and interest on the
Revolving Advances, shall be applied to the Revolving Advances
pro rata according to the applicable Commitment Percentages of
Lenders. Each payment (including each prepayment) by Borrowers
on account of the principal of and interest on the Term Note,
shall be made from or to, or applied to that portion of the Term
Loan evidenced by the Term Note pro rata according to the
Commitment Percentages of Lenders. Except as expressly provided
herein, all payments (including prepayments) to be made by
Borrower on account of principal, interest and fees shall be
made without set off or counterclaim and shall be made to Agent
on behalf of the Lenders to the Payment Office, in each case on
or prior to 1:00 P.M., New York time, in Dollars and in
immediately available funds.
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(c) (i) Notwithstanding anything to the
contrary contained in Sections 2.10(a) and (b) hereof,
commencing with the first Business Day following the Closing
Date, each borrowing of Revolving Advances shall be advanced by
Agent and each payment any Borrower on account of Revolving
Advances shall be applied first to those Revolving Advances made
by Agent. On or before 1:00 P.M., New York time, on each
Settlement Date commencing with the first Settlement Date
following the Closing Date, Agent and Lenders shall make certain
payments as follows: (I) if the aggregate amount of new
Revolving Advances made by Agent during the preceding Week (if
any) exceeds the aggregate amount of repayments applied to
outstanding Revolving Advances during such preceding Week, then
each Lender shall provide Agent with funds in an amount equal to
its applicable Commitment Percentage of the difference between
(w) such Revolving Advances and (x) such repayments and (II) if
the aggregate amount of repayments applied to outstanding
Revolving Advances during such Week exceeds the aggregate amount
of new Revolving Advances made during such Week, then Agent
shall provide each Lender with funds in an amount equal to its
applicable Commitment Percentage of the difference between (y)
such repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn
interest at the applicable Contract Rate on outstanding Advances
which it has funded.
(iii) Promptly following each Settlement
Date, Agent shall submit to each Lender a certificate with
respect to payments received and Advances made during the Week
immediately preceding such Settlement Date. Such certificate of
Agent shall be conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "benefitted
Lender") shall at any time receive any payment of all or part of
its Advances, or interest thereon, or receive any Collateral in
respect thereof (whether voluntarily or involuntarily or by set-
off) in a greater proportion than any such payment to and
Collateral received by any other Lender, if any, in respect of
such other Lender's Advances, or interest thereon, and such
greater proportionate payment or receipt of Collateral is not
expressly permitted hereunder, such benefitted Lender shall
purchase for cash from the other Lenders a participation in such
portion of each such other Lender's Advances, or shall provide
such other Lender with the benefits of any such Collateral, or
the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of
such Collateral or proceeds ratably with each of Lenders;
provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefitted
Lender, such purchase shall be rescinded, and the purchase price
and benefits returned, to the extent of such recovery, but
without interest. Each Lender so purchasing a portion of
another Lender's Advances may exercise all rights of payment
(including, without limitation, rights of set-off) with respect
to such portion as fully as if such Lender were the direct
holder of such portion.
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(e) Unless Agent shall have been notified by
telephone, confirmed in writing, by any Lender that such Lender
will not make the amount which would constitute its applicable
Commitment Percentage of the Advances available to Agent, Agent
may (but shall not be obligated to) assume that such Lender
shall make such amount available to Agent and, in reliance upon
such assumption, make available to Borrowers a corresponding
amount. Agent will promptly notify Borrowers of its receipt of
any such notice from a Lender. If such amount is made available
to Agent on a date after a Settlement Date, such Lender shall
pay to Agent on demand an amount equal to the product of (i) the
daily average Federal Funds Rate (computed on the basis of a
year of 360 days) during such period as quoted by Agent, times
(ii) such amount, times (iii) the number of days from and
including such Settlement Date to the date on which such amount
becomes immediately available to Agent. A certificate of Agent
submitted to any Lender with respect to any amounts owing under
this paragraph (e) shall be conclusive, in the absence of
manifest error. If such amount is not in fact made available to
Agent by such Lender within three (3) Business Days after such
Settlement Date, Agent shall be entitled to recover such an
amount, with interest thereon at the rate per annum then
applicable to such Revolving Advances hereunder, on demand from
Borrowers; provided, however, that Agent's right to such
recovery shall not prejudice or otherwise adversely affect
Borrowers' rights (if any) against such Lender.
2.11. Mandatory Prepayments.
(a) When any Borrower sells or otherwise disposes
of any Collateral other than Inventory in the ordinary course of
business, Borrowers shall repay the Advances in an amount equal
to the net proceeds of such sale (i.e., gross proceeds less the
reasonable costs of such sales or other dispositions), such
repayments to be made promptly but in no event more than one (1)
Business Day following receipt of such net proceeds, and until
the date of payment, such proceeds shall be held in trust for
Agent. The foregoing shall not be deemed to be implied consent
to any such sale otherwise prohibited by the terms and
conditions hereof. Such repayments shall be applied first, to
the outstanding principal installments on the Term Loan in the
inverse order of the maturities thereof and, second, to the
remaining Advances in such order as Agent may determine, subject
to Borrowers' ability to reborrow Revolving Advances in
accordance with the terms hereof.
(b) Borrowers shall prepay the outstanding amount
of the Advances in an amount equal to 25% of Excess Cash Flow
for each fiscal year commencing on or after January 1, 1998,
payable upon delivery of the financial statements to Agent
referred to in and required by Section 9.7 for such fiscal year
but in any event not later than one hundred twenty (120) days
after the end of each such fiscal year, which amount shall be
applied first, to the outstanding principal installments in the
inverse order of the maturities thereof and, second, to the
remaining Advances in such order as Agent may determine subject
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to Borrowers' ability to reborrow Revolving Advances in
accordance with the terms hereof. In the event that the
financial statement is not so delivered, then a calculation
based upon estimated amounts shall be made by Agent upon which
calculation Borrowers shall make the prepayment required by this
Section 2.11(b), subject to adjustment when the financial
statement is delivered to Agent as required hereby. The
calculation made by Agent shall not be deemed a waiver of any
rights Agent or Lenders may have as a result of the failure by
Borrowers to deliver such financial statement.
2.12. Use of Proceeds. Borrowers shall apply the
proceeds of Advances to (i) repay existing indebtedness owed to
The First National Bank of Maryland, (ii) pay fees and expenses
relating to this transaction, and (iii) to provide for their
working capital needs.
2.13. Defaulting Lender.
(a) Notwithstanding anything to the contrary
contained herein, in the event any Lender (x) has refused (which
refusal constitutes a breach by such Lender of its obligations
under this Agreement) to make available its portion of any
Advance or (y) notifies either Agent or Borrowing Agent that it
does not intend to make available its portion of any Advance (if
the actual refusal would constitute a breach by such Lender of
its obligations under this Agreement) (each, a "Lender
Default"), all rights and obligations hereunder of such Lender
(a "Defaulting Lender") as to which a Lender Default is in
effect and of the other parties hereto shall be modified to the
extent of the express provisions of this Section 2.13 while such
Lender Default remains in effect.
(b) Advances shall be incurred pro rata from
Lenders (the "Non-Defaulting Lenders") which are not Defaulting
Lenders based on their respective Commitment Percentages, and no
Commitment Percentage of any Lender or any pro rata share of any
Advances required to be advanced by any Lender shall be
increased as a result of such Lender Default. Amounts received
in respect of principal of any type of Advances shall be applied
to reduce the applicable Advances of each Lender pro rata based
on the aggregate of the outstanding Advances of that type of all
Lenders at the time of such application; provided, that, such
amount shall not be applied to any Advances of a Defaulting
Lender at any time when, and to the extent that, the aggregate
amount of Advances of any Non-Defaulting Lender exceeds such Non-
Defaulting Lender's Commitment Percentage of all Advances then
outstanding.
(c) A Defaulting Lender shall not be entitled to
give instructions to Agent or to approve, disapprove, consent to
or vote on any matters relating to this Agreement and the Other
Documents. All amendments, waivers and other modifications of
this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the
definition of "Required Lenders", a Defaulting Lender shall be
deemed not to be a Lender and not to have Advances outstanding.
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(d) Other than as expressly set forth in this
Section 2.13, the rights and obligations of a Defaulting Lender
(including the obligation to indemnify Agent) and the other
parties hereto shall remain unchanged. Nothing in this Section
2.13 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall
alter such obligations, shall operate as a waiver of any default
by such Defaulting Lender hereunder, or shall prejudice any
rights which any Borrower, Agent or any Lender may have against
any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.
(e) In the event a Defaulting Lender
retroactively cures to the satisfaction of Agent the breach
which caused a Lender to become a Defaulting Lender, such
Defaulting Lender shall no longer be a Defaulting Lender and
shall be treated as a Lender under this Agreement.
III. INTEREST AND FEES.
3.1. Interest. Interest on Advances shall be payable in
arrears on the first day of each month. Interest charges shall
be computed on the actual principal amount of Advances
outstanding during the month at a rate per annum equal to (i)
with respect to Revolving Advances, the Revolving Interest Rate
and (ii) with respect to the Term Loan, the Term Loan Rate (as
applicable, the "Contract Rate"). Whenever, subsequent to the
date of this Agreement, the Alternate Base Rate is increased or
decreased, the applicable Contract Rate shall be similarly
changed without notice or demand of any kind by an amount equal
to the amount of such change in the Alternate Base Rate during
the time such change or changes remain in effect. Upon and
after the occurrence of an Event of Default, and during the
continuation thereof, the Obligations shall bear interest at the
applicable Contract Rate plus three (3%) percent per annum (the
"Default Rate").
3.2. INTENTIONALLY OMITTED.
3.3. (a) Closing Fee. Upon the execution of this
Agreement, Borrowers shall pay to Agent for the ratable benefit
of Lenders a closing fee of $75,000 less that portion of the
commitment fee of $35,000 heretofore paid by Borrowers to Agent
remaining after application of such fee to out of pocket
expenses.
(b) Facility Fee. If, for any month during the
Term, the average daily unpaid balance of the Advances for each
day of such month does not equal the Maximum Loan Amount, then
Borrowers shall pay to Agent for the ratable benefit of Lenders
a fee at a rate equal to three-eights of one percent (.375%) per
annum on the amount by which the Maximum Loan Amount exceeds
such average daily unpaid balance. Such fee shall be payable to
Agent in arrears on the first day of each month.
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3.4. (a) Collateral Evaluation Fee. Borrowers shall
pay Agent a collateral evaluation fee equal to $1,250 per month
commencing on the first day of the month following the Closing
Date and on the first day of each month thereafter during the
Term. The collateral evaluation fee shall be deemed earned in
full on the date when same is due and payable hereunder and
shall not be subject to rebate or proration upon termination of
this Agreement for any reason.
(b) Collateral Monitoring Fee. Borrowers shall
pay to Agent on the first day of each month following any month
in which Agent performs any collateral monitoring - namely any
field examination, collateral analysis or other business
analysis, the need for which is to be determined by Agent and
which monitoring is undertaken by Agent or for Agent's benefit -
a collateral monitoring fee in an amount equal to $600 per day
for each person employed to perform such monitoring, plus all
costs and disbursements incurred by Agent in the performance of
such examination or analysis.
3.5. Computation of Interest and Fees. Interest and
fees hereunder shall be computed on the basis of a year of 360
days and for the actual number of days elapsed. If any payment
to be made hereunder becomes due and payable on a day other than
a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and interest thereon shall be
payable at the applicable Contract Rate during such extension.
3.6. Maximum Charges. In no event whatsoever shall
interest and other charges charged hereunder exceed the highest
rate permissible under law. In the event interest and other
charges as computed hereunder would otherwise exceed the highest
rate permitted under law, such excess amount shall be first
applied to any unpaid principal balance owed by Borrowers, and
if the then remaining excess amount is greater than the
previously unpaid principal balance, Lenders shall promptly
refund such excess amount to Borrowers and the provisions hereof
shall be deemed amended to provide for such permissible rate.
3.7. Increased Costs. In the event that any applicable
law, treaty or governmental regulation, or any change therein or
in the interpretation or application thereof, or compliance by
any Lender (for purposes of this Section 3.7, the term "Lender"
shall include Agent or any Lender and any corporation or bank
controlling Agent or any Lender) with any request or directive
(whether or not having the force of law) from any central bank
or other financial, monetary or other authority, shall:
(a) subject Agent or any Lender to any tax of any
kind whatsoever with respect to this Agreement or change the
basis of taxation of payments to Agent or any Lender of
principal, fees, interest or any other amount payable hereunder
or under any Other Documents (except for changes in the rate of
tax on the overall net income of Agent or any Lender by the
jurisdiction in which it maintains its principal office);
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(b) impose, modify or hold applicable any
reserve, special deposit, assessment or similar requirement
against assets held by, or deposits in or for the account of,
advances or loans by, or other credit extended by, any office of
Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve
System; or
(c) impose on Agent or any Lender any other
condition with respect to this Agreement, any Other Documents;
and the result of any of the foregoing is to increase the cost
to Agent or any Lender of making, renewing or maintaining its
Advances hereunder by an amount that Agent or such Lender deems
to be material or to reduce the amount of any payment (whether
of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be
material, then, in any case Borrowers shall pay Agent or such
Lender within ninety (90) days after receipt by Borrowing Agent
of written notice of the imposition of such additional cost or
reduced amount, such additional amount as will compensate Agent
or such Lender for such additional cost or such reduction, as
the case may be. Agent or such Lender shall certify the amount
of such additional cost or reduced amount to Borrowers, and such
certification shall be conclusive absent manifest error.
3.8. INTENTIONALLY OMITTED.
3.9. Capital Adequacy.
(a) In the event that Agent or any Lender shall
have determined that any applicable law, rule, regulation or
guideline regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by Agent or any Lender (for purposes of this Section
3.9, the term "Lender" shall include Agent or any Lender and any
corporation or bank controlling Agent or any Lender) with any
request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the
rate of return on Agent or any Lender's capital as a consequence
of its obligations hereunder to a level below that which Agent
or such Lender could have achieved but for such adoption, change
or compliance (taking into consideration Agent's and each
Lender's policies with respect to capital adequacy) by an amount
deemed by Agent or any Lender to be material, then, from time to
time, Borrowers shall pay to Agent or such Lender, within 90
days after receipt by Borrowing Agent of written notice thereof,
such additional amount or amounts as will compensate Agent or
such Lender for such reduction. In determining such amount or
amounts, Agent or such Lender may use any reasonable averaging
or attribution methods. The protection of this Section 3.9
shall be available to Agent and each Lender regardless of any
possible contention of invalidity or inapplicability with
respect to the applicable law, regulation or condition.
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(b) A certificate of Agent or such Lender setting
forth such amount or amounts as shall be necessary to compensate
Agent or such Lender with respect to Section 3.9(a) hereof when
delivered to Borrowers shall be conclusive absent manifest
error.
IV. COLLATERAL: GENERAL TERMS
4.1. Security Interest in the Collateral. To secure the
prompt payment and performance to Agent and each Lender of the
Obligations, each Borrower hereby assigns, pledges and grants to
Agent for the ratable benefit of Agent and each Lender a
continuing security interest in and to all of its Collateral,
whether now owned or existing or hereafter acquired or arising
and wheresoever located. Each Borrower shall mark its books and
records as may be necessary or appropriate to evidence, protect
and perfect Agent's security interest and shall cause its
financial statements to reflect such security interest.
4.2 Perfection of Security Interest. Each Borrower
shall take all action that may be necessary or desirable, or
that Agent may request, so as at all times to maintain the
validity, perfection, enforceability and priority of Agent's
security interest in the Collateral or to enable Agent to
protect, exercise or enforce its rights hereunder and in the
Collateral, including, but not limited to, (i) immediately
discharging all Liens other than Permitted Encumbrances, (ii)
obtaining landlords' or mortgagees' lien waivers, (iii)
delivering to Agent, endorsed or accompanied by such instruments
of assignment as Agent may specify, and stamping or marking, in
such manner as Agent may specify, any and all chattel paper,
instruments, letters of credits and advices thereof and
documents evidencing or forming a part of the Collateral, (iv)
entering into warehousing, lockbox and other custodial
arrangements satisfactory to Agent, and (v) executing and
delivering financing statements, instruments of pledge,
mortgages, notices and assignments, in each case in form and
substance satisfactory to Agent, relating to the creation,
validity, perfection, maintenance or continuation of Agent's
security interest under the Uniform Commercial Code or other
applicable law. Agent is hereby authorized to file financing
statements signed by Agent instead of Borrower in accordance
with Section 9-402(2) of Uniform Commercial Code as adopted in
the State of New York. All charges, expenses and fees Agent may
incur in doing any of the foregoing, and any local taxes
relating thereto, shall be charged to Borrowers' Account as a
Revolving Advance and added to the Obligations, or, at Agent's
option, shall be paid to Agent for the ratable benefit of
Lenders immediately upon demand.
4.3 Disposition of Collateral. Each Borrower will
safeguard and protect all Collateral for Agent's general account
and make no disposition thereof whether by sale, lease or
otherwise except (a) the sale of Inventory in the ordinary
course of business and (b) the disposition or transfer of
obsolete and worn-out Equipment in the ordinary course of
business during any fiscal year having an aggregate fair market
value of not more than $250,000 for all such dispositions or
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transfers by all Borrowers and only to the extent that (i) the
proceeds of any such disposition are used to acquire replacement
Equipment which is subject to Agent's first priority security
interest or (ii) the proceeds of which are remitted to Agent as
a prepayment on the Term Loan.
4.4. Preservation of Collateral. Following the
occurrence of a Default or Event of Default, in addition to the
rights and remedies set forth in Section 11.1 hereof, Agent: (a)
may at any time take such steps as Agent deems necessary to
protect Agent's interest in and to preserve the Collateral,
including the hiring of such security guards or the placing of
other security protection measures as Agent may deem
appropriate; (b) may employ and maintain at any of Borrower's
premises a custodian who shall have full authority to do all
acts necessary to protect Agent's interests in the Collateral;
(c) may lease warehouse facilities to which Agent may move all
or part of the Collateral; (d) may use any Borrower's owned or
leased lifts, hoists, trucks and other facilities or equipment
for handling or removing the Collateral; and (e) shall have, and
is hereby granted, a right of ingress and egress to the places
where the Collateral is located, and may proceed over and
through any of Borrower's owned or leased property. Each
Borrower shall cooperate fully with all of Agent's efforts to
preserve the Collateral and will take such actions to preserve
the Collateral as Agent may direct. All of Agent's expenses of
preserving the Collateral, including any expenses relating to
the bonding of a custodian, shall be charged to Borrowers'
Account as a Revolving Advance and added to the Obligations.
4.5. Ownership of Collateral. With respect to the
Collateral, at the time the Collateral becomes subject to
Agent's security interest: (a) each Borrower shall be the sole
owner of and fully authorized and able to sell, transfer, pledge
and/or grant a first priority security interest in each and
every item of the its respective Collateral to Agent; and,
except for Permitted Encumbrances the Collateral shall be free
and clear of all Liens and encumbrances whatsoever; (b) each
document and agreement executed by each Borrower or delivered to
Agent or any Lender in connection with this Agreement shall be
true and correct in all respects; (c) all signatures and
endorsements of each Borrower that appear on such documents and
agreements shall be genuine and each Borrower shall have full
capacity to execute same; and (d) each Borrower's Equipment and
Inventory shall be located as set forth on Schedule 4.5 and
shall not be removed from such location(s) without the prior
written consent of Agent except with respect to the sale of
Inventory in the ordinary course of business and Equipment to
the extent permitted in Section 4.3 hereof.
4.6. Defense of Agent's and Lenders' Interests. Until
(a) payment and performance in full of all of the Obligations
and (b) termination of this Agreement, Agent's interests in the
Collateral shall continue in full force and effect. During such
period no Borrower shall, without Agent's prior written consent,
pledge, sell (except Inventory in the ordinary course of
business and Equipment to the extent permitted in Section 4.3
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hereof), assign, transfer, create or suffer to exist a Lien upon
or encumber or allow or suffer to be encumbered in any way
except for Permitted Encumbrances, any part of the Collateral.
Each Borrower shall defend Agent's interests in the Collateral
against any and all Persons whatsoever. At any time following
demand by Agent for payment of all Obligations, Agent shall have
the right to take possession of the indicia of the Collateral
and the Collateral in whatever physical form contained,
including without limitation: labels, stationery, documents,
instruments and advertising materials. If Agent exercises this
right to take possession of the Collateral, Borrowers shall,
upon demand, assemble it in the best manner possible and make it
available to Agent at a place reasonably convenient to Agent.
In addition, with respect to all Collateral, Agent and Lenders
shall be entitled to all of the rights and remedies set forth
herein and further provided by the Uniform Commercial Code or
other applicable law. Each Borrower shall, and Agent may, at
its option, instruct all suppliers, carriers, forwarders,
warehouses or others receiving or holding cash, checks,
Inventory, documents or instruments in which Agent holds a
security interest to deliver same to Agent and/or subject to
Agent's order and if they shall come into any Borrower's
possession, they, and each of them, shall be held by such
Borrower in trust as Agent's trustee, and such Borrower will
immediately deliver them to Agent in their original form
together with any necessary endorsement.
4.7. Books and Records. Each Borrower shall (a) keep
proper books of record and account in which full, true and
correct entries will be made of all dealings or transactions of
or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges,
levies and claims; and (c) on a reasonably current basis set up
on its books, from its earnings, allowances against doubtful
Receivables, advances and investments and all other proper
accruals (including without limitation by reason of enumeration,
accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of
properties), which should be set aside from such earnings in
connection with its business. All determinations pursuant to
this subsection shall be made in accordance with, or as required
by, GAAP consistently applied in the opinion of such independent
public accountant as shall then be regularly engaged by
Borrowers.
4.8. Financial Disclosure. Each Borrower hereby
irrevocably authorizes and directs all accountants and auditors
employed by such Borrower at any time during the Term to exhibit
and deliver to Agent and each Lender copies of any of the
Borrower's financial statements, trial balances or other
accounting records of any sort in the accountant's or auditor's
possession, and to disclose to Agent and each Lender any
information such accountants may have concerning such Borrower's
financial status and business operations. Each Borrower hereby
authorizes all federal, state and municipal authorities to
furnish to Agent and each Lender copies of reports or
examinations relating to such Borrower, whether made by such
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Borrower or otherwise; however, Agent and each Lender will
attempt to obtain such information or materials directly from
such Borrower prior to obtaining such information or materials
from such accountants or such authorities.
4.9. Compliance with Laws. Each Borrower shall comply
with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to its
respective Collateral or any part thereof or to the operation of
such Borrower's business the non-compliance with which could
reasonably be expected to have a Material Adverse Effect on such
Borrower. The Collateral at all times shall be maintained in
accordance with the requirements of all insurance carriers which
provide insurance with respect to the Collateral so that such
insurance shall remain in full force and effect.
4.10. Inspection of Premises. At all reasonable times
Agent and each Lender shall have full access to and the right to
audit, check, inspect and make abstracts and copies from each
Borrower's books, records, audits, correspondence and all other
papers relating to the Collateral and the operation of each
Borrower's business. Agent, any Lender and their agents may
enter upon any of Borrower's premises at any time during
business hours and at any other reasonable time, and from time
to time, for the purpose of inspecting the Collateral and any
and all records pertaining thereto and the operation of such
Borrower's business.
4.11. Insurance. Each Borrower shall bear the full risk
of any loss of any nature whatsoever with respect to the
Collateral. At each Borrower's own cost and expense in amounts
and with carriers acceptable to Agent, each Borrower shall (a)
keep all its insurable properties and properties in which each
Borrower has an interest insured against the hazards of fire,
flood, sprinkler leakage, those hazards covered by extended
coverage insurance and such other hazards, and for such amounts,
as is customary in the case of companies engaged in businesses
similar to such Borrower's including, without limitation,
business interruption insurance;, (b) maintain a bond in such
amounts as is customary in the case of companies engaged in
businesses similar to such Borrower insuring against larceny,
embezzlement or other criminal misappropriation of insured's
officers and employees who may either singly or jointly with
others at any time have access to the assets or funds of such
Borrower either directly or through authority to draw upon such
funds or to direct generally the disposition of such assets; (c)
maintain public and product liability insurance against claims
for personal injury, death or property damage suffered by
others; (d) maintain all such worker's compensation or similar
insurance as may be required under the laws of any state or
jurisdiction in which Borrower is engaged in business; (e)
furnish Agent with (i) copies of all policies and evidence of
the maintenance of such policies by the renewal thereof at least
thirty (30) days before any expiration date, and (ii)
appropriate loss payable endorsements in form and substance
satisfactory to Agent, naming Agent as a co-insured and loss
payee as its interests may appear with respect to all insurance
coverage referred to in clauses (a), and (c) above, and
providing (A) that all proceeds thereunder shall be payable to
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Agent, (B) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in
such policy, and (C) that such policy and loss payable clauses
may not be cancelled, amended or terminated unless at least
thirty (30) days' prior written notice is given to Agent. In
the event of any loss thereunder, the carriers named therein
hereby are directed by Agent and the applicable Borrower to make
payment for such loss to Agent and not to such Borrower and
Agent jointly. If any insurance losses are paid by check, draft
or other instrument payable to any Borrower and Agent jointly,
Agent may endorse such Borrower's name thereon and do such other
things as Agent may deem advisable to reduce the same to cash.
Upon the occurrence and during the continuation of an Event of
Default, Agent is hereby authorized to adjust and compromise
claims under insurance coverage referred to in clauses (a) and
(b) above. All loss recoveries received by Agent upon any such
insurance may be applied to the Obligations, in such order as
Agent in its sole discretion shall determine. Any surplus shall
be paid by Agent to Borrowers or applied as may be otherwise
required by law. Any deficiency thereon shall be paid by
Borrowers to Agent, on demand. Anything hereinabove to the
contrary notwithstanding, and subject to the fulfillment of the
conditions set forth below, Agent shall remit to Borrowers
insurance proceeds received by Agent during any calendar year
under insurance policies procured and maintained by Borrowers
which insure Borrowers' insurable properties. The agreement of
Agent to remit insurance proceeds in the manner above provided
shall be subject in each instance to satisfaction of each of the
following conditions: (x) No Event of Default or Default shall
then have occurred, and (y) Borrowers shall use such insurance
proceeds to repair, replace or restore the insurable property
which was the subject of the insurable loss and for no other
purpose. Borrowers shall provide Agent with evidence reasonably
satisfactory to Agent that the insurance proceeds will be used
by Borrowers to repair, replace or restore the insured property
which was the subject of the insurable loss.
4.12. Failure to Pay Insurance. If any Borrower fails
to obtain insurance as hereinabove provided, or to keep the same
in force, Agent, if Agent so elects, may obtain such insurance
and pay the premium therefor for Borrowers' Account, and charge
Borrowers' Account therefor and such expenses so paid shall be
part of the Obligations.
4.13. Payment of Taxes. Each Borrower will pay, when
due, all taxes, assessments and other Charges lawfully levied or
assessed upon such Borrower or any of the Collateral including,
without limitation, real and personal property taxes,
assessments and charges and all franchise, income, employment,
social security benefits, withholding, and sales taxes. If any
tax by any governmental authority is or may be imposed on or as
a result of any transaction between any Borrower and Agent or
any Lender which Agent or any Lender may be required to withhold
or pay or if any taxes, assessments, or other Charges remain
unpaid after the date fixed for their payment, or if any claim
shall be made which, in Agent's or any Lender's opinion, may
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possibly create a valid Lien on the Collateral, Agent may
without notice to Borrowers pay the taxes, assessments or other
Charges and each Borrower hereby indemnifies and holds Agent and
each Lender harmless in respect thereof. Agent will not pay any
taxes, assessments or Charges to the extent that any Borrower
has contested or disputed those taxes, assessments or Charges in
good faith, by expeditious protest, administrative or judicial
appeal or similar proceeding provided that any related tax lien
is stayed and sufficient reserves are established to the
reasonable satisfaction of Agent to protect Agent's security
interest in or Lien on the Collateral. The amount of any
payment by Agent under this Section 4.13 shall be charged to
Borrowers' Account as a Revolving Advance and added to the
Obligations and, until Borrowers shall furnish Agent with an
indemnity therefor (or supply Agent with evidence satisfactory
to Agent that due provision for the payment thereof has been
made), Agent may hold without interest any balance standing to
Borrowers' credit and Agent shall retain its security interest
in any and all Collateral held by Agent.
4.14. Payment of Leasehold Obligations. Each Borrower
shall at all times pay, when and as due, its rental obligations
under all leases under which it is a tenant, and shall otherwise
comply, in all material respects, with all other terms of such
leases and keep them in full force and effect and, at Agent's
request will provide evidence of having done so.
4.15. Receivables.
(a) Nature of Receivables. Each of the
Receivables shall be a bona fide and valid account representing
a bona fide indebtedness incurred by the Customer therein named,
for a fixed sum as set forth in the invoice relating thereto
(provided immaterial or unintentional invoice errors shall not
be deemed to be a breach hereof) with respect to an absolute
sale or lease and delivery of goods upon stated terms of a
Borrower, or work, labor or services theretofore rendered by a
Borrower as of the date each Receivable is created. Same shall
be due and owing in accordance with the applicable Borrower's
standard terms of sale without dispute, setoff or counterclaim
except as may be stated on the accounts receivable schedules
delivered by Borrowers to Agent.
(b) Solvency of Customers. Each Customer, to the
best of each Borrower's knowledge, as of the date each
Receivable is created, is and will be solvent and able to pay
all Receivables on which the Customer is obligated in full when
due or with respect to such Customers of any Borrower who are
not solvent such Borrower has set up on its books and in its
financial records bad debt reserves adequate to cover such
Receivables.
(c) Locations of Borrower. Each Borrower's chief
executive office is located at 1212 Avenue of the Americas, New
York, New York 1003. Until written notice is given to Agent by
Borrowing Agent of any other office at which any Borrower keeps
its records pertaining to Receivables, all such records shall be
kept at such executive office or at Aberdeen Road, Emigsville,
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PA 17318 and, with respect to PCC, at 3055 E. Fruitland Avenue,
Los Angeles, CA 90058.
(d) Collection of Receivables. Until any
Borrower's authority to do so is terminated by Agent (which
notice Agent may give at any time following the occurrence of an
Event of Default or a Default or when Agent in its sole
discretion deems it to be in Lenders' best interest to do so),
each Borrower will, at such Borrower's sole cost and expense,
but on Agent's behalf and for Agent's account, collect as
Agent's property and in trust for Agent all amounts received on
Receivables, and shall not commingle such collections with any
Borrower's funds or use the same except to pay Obligations.
Each Borrower shall, upon request, deliver to Agent, or deposit
in the Blocked Account, in original form and on the date of
receipt thereof, all checks, drafts, notes, money orders,
acceptances, cash and other evidences of Indebtedness.
(e) Notification of Assignment of Receivables.
At any time following the occurrence of an Event of Default or a
Default, Agent shall have the right to send notice of the
assignment of, and Agent's security interest in, the Receivables
to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral. Thereafter, Agent shall
have the sole right to collect the Receivables, take possession
of the Collateral, or both. Agent's actual collection expenses,
including, but not limited to, stationery and postage, telephone
and telegraph, secretarial and clerical expenses and the
salaries of any collection personnel used for collection, may be
charged to Borrowers' Account and added to the Obligations.
(f) Power of Agent to Act on Borrowers' Behalf.
Agent shall have the right to receive, endorse, assign and/or
deliver in the name of Agent or any Borrower any and all checks,
drafts and other instruments for the payment of money relating
to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so
endorsed. Each Borrower hereby constitutes Agent or Agent's
designee as such Borrower's attorney with power (i) to endorse
such Borrower's name upon any notes, acceptances, checks,
drafts, money orders or other evidences of payment or
Collateral; (ii) to sign such Borrower's name on any invoice or
bill of lading relating to any of the Receivables, drafts
against Customers, assignments and verifications of Receivables;
(iii) to send verifications of Receivables to any Customer; (iv)
to sign such Borrower's name on all financing statements or any
other documents or instruments deemed necessary or appropriate
by Agent to preserve, protect, or perfect Agent's interest in
the Collateral and to file same; (v) to demand payment of the
Receivables; (vi) to enforce payment of the Receivables by legal
proceedings or otherwise; (vii) to exercise all of Borrowers'
rights and remedies with respect to the collection of the
Receivables and any other Collateral; (viii) to settle, adjust,
compromise, extend or renew the Receivables; (ix) to settle,
adjust or compromise any legal proceedings brought to collect
Receivables; (x) to prepare, file and sign such Borrower's name
on a proof of claim in bankruptcy or similar document against
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any Customer; (xi) to prepare, file and sign such Borrower's
name on any notice of Lien, assignment or satisfaction of Lien
or similar document in connection with the Receivables; and
(xii) to do all other acts and things necessary to carry out
this Agreement. All acts of said attorney or designee are
hereby ratified and approved, and said attorney or designee
shall not be liable for any acts of omission or commission nor
for any error of judgment or mistake of fact or of law, unless
done maliciously or with gross (not mere) negligence; this power
being coupled with an interest is irrevocable while any of the
Obligations remain unpaid. Agent shall have the right at any
time following the occurrence of an Event of Default or Default,
to change the address for delivery of mail addressed to any
Borrower to such address as Agent may designate and to receive,
open and dispose of all mail addressed to any Borrower. Agent
agrees that it shall not exercise its rights under subsections
(v) through (xi) of this Section 4.15(f) until the occurrence
and during the continuance of an Event of Default.
(g) No Liability. Neither Agent nor any Lender
shall, under any circumstances or in any event whatsoever, have
any liability for any error or omission or delay of any kind
occurring in the settlement, collection or payment of any of the
Receivables or any instrument received in payment thereof, or
for any damage resulting therefrom except for its own gross
negligence and willful misconduct. Following the occurrence of
an Event of Default or Default Agent may, without notice or
consent from any Borrower, sue upon or otherwise collect, extend
the time of payment of, compromise or settle for cash, credit or
upon any terms any of the Receivables or any other securities,
instruments or insurance applicable thereto and/or release any
obligor thereof. Agent is authorized and empowered to accept,
following the occurrence of an Event of Default or Default, the
return of the goods represented by any of the Receivables,
without notice to or consent by any Borrower.
(h) Establishment of a Lockbox Account, Dominion
Account. All proceeds of Collateral shall, at the direction of
Agent, be deposited by Borrowers into a lockbox account,
dominion account or such other "blocked account" ("Blocked
Accounts") as Agent may require pursuant to an arrangement with
such bank as may be selected by Borrowers and be acceptable to
Agent. Borrowers shall issue to any such bank, an irrevocable
letter of instruction directing said bank to transfer such funds
so deposited to Agent, either to any account maintained by Agent
at said bank or by wire transfer to appropriate account(s) of
Agent. All funds deposited in such "blocked account" shall
immediately become the property of Agent and Borrower shall
obtain the agreement by such bank to waive any offset rights
against the funds so deposited. Neither Agent nor any Lender
assumes any responsibility for such "blocked account"
arrangement, including without limitation, any claim of accord
and satisfaction or release with respect to deposits accepted by
any bank thereunder. Alternatively, Agent may establish
depository accounts ("Depository Accounts") in the name of Agent
at a bank or banks for the deposit of such funds and Borrowers
shall deposit all proceeds of Collateral or cause same to be
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deposited, in kind, in such Depository Accounts of Agent in lieu
of depositing same to the Blocked Accounts.
(i) Adjustments. No Borrower will, without
Agent's consent, compromise or adjust any material amount of the
Receivables (or extend the time for payment thereof) or accept
any material returns of merchandise or grant any additional
discounts, allowances or credits thereon except for those
compromises, adjustments, returns, discounts, credits and
allowances as have been heretofore customary in the business of
such Borrower.
4.16. Inventory. To the extent Inventory held for sale
or lease has been produced by any Borrower, it has been and will
be produced by such Borrower in accordance with the Federal Fair
Labor Standards Act of 1938, as amended, and all rules,
regulations and orders thereunder.
4.17. Maintenance of Equipment. The Equipment shall be
maintained in good operating condition and repair (reasonable
wear and tear excepted) and all necessary replacements of and
repairs thereto shall be made so that the value and operating
efficiency of the Equipment shall be maintained and preserved.
No Borrower shall use or operate the Equipment in violation of
any law, statute, ordinance, code, rule or regulation. Each
Borrower shall have the right to sell Equipment to the extent
set forth in Section 4.3 hereof.
4.18. Exculpation of Liability. Nothing herein
contained shall be construed to constitute Agent or any Lender
as any Borrower's agent for any purpose whatsoever, nor shall
Agent or any Lender be responsible or liable for any shortage,
discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of
the cause thereof. Neither Agent nor any Lender, whether by
anything herein or in any assignment or otherwise, assume any of
Borrower's obligations under any contract or agreement assigned
to Agent or such Lender, and neither Agent nor any Lender shall
be responsible in any way for the performance by Borrower of any
of the terms and conditions thereof.
4.19. Environmental Matters. (a) Borrowers shall
ensure that the Real Property remains in compliance with all
Environmental Laws and they shall not place or permit to be
placed any Hazardous Substances on any Real Property except as
not prohibited by applicable law or appropriate governmental
authorities.
(b) Borrowers shall establish and maintain a
system to assure and monitor continued compliance with all
applicable Environmental Laws which system shall include
periodic reviews of such compliance.
(c) Borrowers shall (i) employ in connection with
the use of the Real Property appropriate technology necessary to
maintain compliance with any applicable Environmental Laws and
(ii) dispose of any and all Hazardous Waste generated at the
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Real Property only at facilities and with carriers that maintain
valid permits under RCRA and any other applicable Environmental
Laws. Borrowers shall use their best efforts to obtain
certificates of disposal, such as hazardous waste manifest
receipts, from all treatment, transport, storage or disposal
facilities or operators employed by Borrowers in connection with
the transport or disposal of any Hazardous Waste generated at
the Real Property.
(d) In the event any Borrower obtains, gives or
receives notice of any Release or threat of Release of a
reportable quantity of any Hazardous Substances at the Real
Property (any such event being hereinafter referred to as a
"Hazardous Discharge") or receives any notice of violation,
request for information or notification that it is potentially
responsible for investigation or cleanup of environmental
conditions at the Real Property, demand letter or complaint,
order, citation, or other written notice with regard to any
Hazardous Discharge or violation of Environmental Laws affecting
the Real Property or any Borrower's interest therein (any of the
foregoing is referred to herein as an "Environmental Complaint")
from any Person, including any state agency responsible in whole
or in part for environmental matters in the state in which the
Real Property is located or the United States Environmental
Protection Agency (any such person or entity hereinafter the
"Authority"), then Borrowing Agent shall, within five (5)
Business Days, give written notice of same to Agent detailing
facts and circumstances of which any Borrower is aware giving
rise to the Hazardous Discharge or Environmental Complaint.
Such information is to be provided to allow Agent to protect its
security interest in the Real Property and is not intended to
create nor shall it create any obligation upon Agent or any
Lender with respect thereto.
(e) Borrowers shall promptly forward to Agent
copies of any request for information, notification of potential
liability, demand letter relating to potential responsibility
with respect to the investigation or cleanup of Hazardous
Substances at any other site owned, operated or used by any
Borrower to dispose of Hazardous Substances and shall continue
to forward copies of correspondence between any Borrower and the
Authority regarding such claims to Agent until the claim is
settled. Borrowers shall promptly forward to Agent copies of
all documents and reports concerning a Hazardous Discharge at
the Real Property that any Borrower is required to file under
any Environmental Laws. Such information is to be provided
solely to allow Agent to protect Agent's security interest in
the Real Property and the Collateral.
(f) Borrowers shall respond promptly to any
Hazardous Discharge or Environmental Complaint and take all
necessary action in order to safeguard the health of any Person
and to avoid subjecting the Collateral or Real Property to any
Lien. If any Borrower shall fail to respond promptly to any
Hazardous Discharge or Environmental Complaint or any Borrower
shall fail to comply with any of the requirements of any
Environmental Laws, Agent on behalf of Lenders may, but without
the obligation to do so, for the sole purpose of protecting
Agent's interest in Collateral: (A) give such notices or (B)
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enter onto the Real Property (or authorize third parties to
enter onto the Real Property) and take such actions as Agent (or
such third parties as directed by Agent) deem reasonably
necessary or advisable, to clean up, remove, mitigate or
otherwise deal with any such Hazardous Discharge or
Environmental Complaint. All reasonable costs and expenses
incurred by Agent and Lenders (or such third parties) in the
exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or
proceedings, fines and penalties, together with interest thereon
from the date expended at the Default Rate for Revolving
Advances shall be paid upon demand by Borrowers, and until paid
shall be added to and become a part of the Obligations secured
by the Liens created by the terms of this Agreement or any other
agreement between Agent, any Lender and any Borrower.
(g) Promptly upon the written request of Agent
from time to time, Borrowers shall provide Agent, at Borrowers'
expense, with an environmental site assessment or environmental
audit report prepared by an environmental engineering firm
acceptable in the reasonable opinion of Agent, to assess with a
reasonable degree of certainty the existence of a Hazardous
Discharge and the potential costs in connection with abatement,
cleanup and removal of any Hazardous Substances found on, under,
at or within the Real Property. Any report or investigation of
such Hazardous Discharge proposed and acceptable to an
appropriate Authority that is charged to oversee the clean-up of
such Hazardous Discharge shall be acceptable to Agent. If such
estimates, individually or in the aggregate, exceed $100,000,
Agent shall have the right to require Borrowers to post a bond,
letter of credit or other security reasonably satisfactory to
Agent to secure payment of these costs and expenses.
(h) Borrowers shall defend and indemnify Agent
and Lenders and hold Agent, Lenders and their respective
employees, agents, directors and officers harmless from and
against all loss, liability, damage and expense, claims, costs,
fines and penalties, including attorney's fees, suffered or
incurred by Agent or Lenders under or on account of any
Environmental Laws, including, without limitation, the assertion
of any Lien thereunder, with respect to any Hazardous Discharge,
the presence of any Hazardous Substances affecting the Real
Property, whether or not the same originates or emerges from the
Real Property or any contiguous real estate, including any loss
of value of the Real Property as a result of the foregoing
except to the extent such loss, liability, damage and expense is
attributable to any Hazardous Discharge resulting from actions
on the part of Agent or any Lender. Borrowers' obligations
under this Section 4.19 shall arise upon the discovery of the
presence of any Hazardous Substances at the Real Property,
whether or not any federal, state, or local environmental agency
has taken or threatened any action in connection with the
presence of any Hazardous Substances. Borrowers' obligation and
the indemnifications hereunder shall survive the termination of
this Agreement.
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(i) For purposes of Section 4.19 and 5.7, all
references to Real Property shall be deemed to include all of
Borrowers' right, title and interest in and to its owned and
leased premises.
4.20. Financing Statements. Except as respects the
financing statements filed by Agent and the financing statements
described on Schedule 1.2(B), no financing statement covering
any of the Collateral or any proceeds thereof is on file in any
public office.
V. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants as follows:
5.1. Authority. Such Borrower has full power,
authority and legal right to enter into this Agreement and the
Other Documents and to perform all its respective Obligations
hereunder and thereunder. The execution, delivery and
performance of this Agreement and of the Other Documents (a) are
within such Borrower's corporate powers, have been duly
authorized, are not in contravention of law or the terms of such
Borrower's by-laws, certificate of incorporation or other appli
cable documents relating to such Borrower's formation or to the
conduct of such Borrower's business or of any material agreement
or undertaking to which such Borrower is a party or by which
such Borrower is bound, and (b) will not conflict with nor
result in any breach in any of the provisions of or constitute a
default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of such Borrower under the
provisions of any agreement, charter document, instrument, by-
law, or other instrument to which such Borrower or its property
is a party or by which it may be bound.
5.2. Formation and Qualification. (a) Such Borrower
is duly incorporated and in good standing under the laws of the
state listed on Schedule 5.2(a) and is qualified to do business
and is in good standing in the states listed on Schedule 5.2(a)
which constitute all states in which qualification and good
standing are necessary for such Borrower to conduct its business
and own its property and where the failure to so qualify could
reasonably be expected to have a Material Adverse Effect on such
Borrower. Each Borrower has delivered to Agent true and
complete copies of its certificate of incorporation and by-laws
and will promptly notify Agent of any amendment or changes
thereto.
(b) The only Subsidiaries of each Borrower are
listed on Schedule 5.2(b).
5.3. Survival of Representations and Warranties. All
representations and warranties of such Borrower contained in
this Agreement and the Other Documents shall be true at the time
of such Borrower's execution of this Agreement and the Other
Documents, and shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the
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transactions described therein or related thereto.
5.4. Tax Returns. Such Borrower's federal tax
identification number is set forth on Schedule 5.4. Each
Borrower has filed all federal, state and local tax returns and
other reports each is required by law to file and has paid all
taxes, assessments, fees and other governmental charges that are
due and payable. Federal, state and local income tax returns of
each Borrower have been examined and reported upon by the
appropriate taxing authority or closed by applicable statute and
satisfied for all fiscal years prior to and including the fiscal
year ended December 31, 1991. The provision for taxes on the
books of each Borrower are adequate for all years not closed by
applicable statutes, and for its current fiscal year, and no
Borrower has any knowledge of any deficiency or additional
assessment in connection therewith not provided for on its
books.
5.5. Financial Statements.
(a) The pro forma balance sheet of Borrowers on a
Consolidated Basis (the "Pro Forma Balance Sheet") furnished to
Agent by February 1, 1997 reflects the consummation of the
transactions contemplated under this Agreement (the
"Transactions") and is accurate, complete and correct and fairly
reflects the financial condition of Borrowers on a Consolidated
Basis as of the Closing Date after giving effect to the
Transactions, and has been prepared in accordance with GAAP,
consistently applied. The Pro Forma Balance Sheet has been
certified as accurate, complete and correct in all material
respects by the President and Chief Financial Officer of
Holdings. All financial statements referred to in this
subsection 5.5(a), including the related schedules and notes
thereto, have been prepared, in accordance with GAAP, except as
may be disclosed in such financial statements.
(b) The twelve-month cash flow projections of the
Borrowers on a Consolidated Basis and their projected balance
sheets as of the Closing Date, which projections shall be
delivered by February 1, 1997 and annexed hereto as Exhibit
5.5(b) (the "Projections") were prepared by the Chief Financial
Officer of Holdings, are based on underlying assumptions which
provide a reasonable basis for the projections contained therein
and reflect Borrowers' judgment based on present circumstances
of the most likely set of conditions and course of action for
the projected period. The cash flow Projections together with
the Pro Forma Balance Sheet, are referred to as the "Pro Forma
Financial Statements".
(c) The consolidated and consolidating balance
sheets of Holdings, its Subsidiaries and such other Persons
described therein (including the accounts of all Subsidiaries
for the respective periods during which a subsidiary
relationship existed) as of December 31, 1995, and the related
statements of income, changes in stockholder's equity, and
changes in cash flow for the period ended on such date, all
accompanied by reports thereon containing opinions without
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qualification by independent certified public accountants,
copies of which have been delivered to Agent, have been prepared
in accordance with GAAP, consistently applied (except for
changes in application in which such accountants concur and
present fairly the financial position of Holdings and its
Subsidiaries at such date and the results of their operations
for such period. Since September 30, 1996, there has been no
change in the condition, financial or otherwise, of Holdings or
its Subsidiaries as shown on the consolidated balance sheet as
of such date and no change in the aggregate value of machinery,
equipment and Real Property owned by Holdings and its
Subsidiaries, except changes in the ordinary course of business,
none of which individually or in the aggregate has been
materially adverse.
5.6. Corporate Name. No Borrower has been known by any
other corporate name in the past five years and does not sell
Inventory under any other name except as set forth on Schedule
5.6, nor has any Borrower been the surviving corporation of a
merger or consolidation or acquired all or substantially all of
the assets of any Person during the preceding five (5) years.
5.7. O.S.H.A. and Environmental Compliance.
(a) Each Borrower has duly complied with, and its
facilities, business, assets, property, leaseholds and Equipment
are in compliance in all material respects with, the provisions
of the Federal Occupational Safety and Health Act, the
Environmental Protection Act, RCRA and all other Environmental
Laws; there have been no outstanding citations, notices or
orders of non-compliance issued to any Borrower or relating to
its business, assets, property, leaseholds or Equipment under
any such laws, rules or regulations.
(b) Each Borrower has been issued all required
federal, state and local licenses, certificates or permits
relating to all applicable Environmental Laws.
(c) There are no visible signs of releases,
spills, discharges, leaks or disposal (collectively referred to
as "Releases") of Hazardous Substances at, upon, under or within
any Real Property or any premises leased by any Borrower; there
are no underground storage tanks or polychlorinated biphenyls on
the Real Property or any premises leased by any Borrower;
neither the Real Property nor any premises leased by any
Borrower has ever been used as a treatment, storage or disposal
facility of Hazardous Waste; and no Hazardous Substances are
present on the Real Property or any premises leased by Borrower,
excepting such quantities as are handled in accordance with all
applicable manufacturer's instructions and governmental
regulations and in proper storage containers and as are
necessary for the operation of the commercial business of any
Borrower or of its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness
or Default.
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(a) After giving effect to the Transactions,
Borrowers will be solvent, able to pay their debts as they
mature, have capital sufficient to carry on their business and
all businesses in which they are about to engage, and (i) as of
the Closing Date, the fair present saleable value of their
assets, calculated on a going concern basis, is in excess of the
amount of their liabilities and (ii) subsequent to the Closing
Date, the fair saleable value of its assets (calculated on a
going concern basis) will be in excess of the amount of their
liabilities.
(b) Other than as disclosed in Schedules 5.8(b)
and 5.7 and on Borrowers' Annual Reports on Form 10-K for the
year ended December 31, 1995 and subsequent Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1996 through
September 30, 1996, no Borrower has (i) any pending or
threatened litigation, arbitration, actions or proceedings which
involve the possibility of having a Material Adverse Effect on
Borrowers taken as a whole, and (ii) any liabilities nor indebt
edness for borrowed money other than the Obligations and the
Debentures.
(c) No Borrower is in violation of any applicable
statute, regulation or ordinance in any respect which could
reasonably be expected to have a Material Adverse Effect on
Borrower, nor is any Borrower in violation of any order of any
court, governmental authority or arbitration board or tribunal.
(d) No Borrower nor any member of the Controlled
Group maintains or contributes to any Plan other than those
listed on Schedule 5.8(d) hereto. Except as set forth in
Schedule 5.8(d), (i) no Plan has incurred any "accumulated
funding deficiency," as defined in Section 302(a)(2) of ERISA
and Section 412(a) of the Code, whether or not waived, and each
Borrower and each member of the Controlled Group has met all
applicable minimum funding requirements under Section 302 of
ERISA in respect of each Plan, (ii) each Plan which is intended
to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue
Service to be qualified under Section 401(a) of the Code and the
trust related thereto is exempt from federal income tax under
Section 501(a) of the Code, (iii) no Borrower nor any member of
the Controlled Group has incurred any liability to the PBGC
other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid, (iv) no Plan
has been terminated by the plan administrator thereof nor by the
PBGC, and there is no occurrence which would cause the PBGC to
institute proceedings under Title IV of ERISA to terminate any
Plan, (v) at this time, the current value of the assets of each
Plan exceeds the present value of the accrued benefits and other
liabilities of such Plan and no Borrower nor any member of the
Controlled Group knows of any facts or circumstances which would
materially change the value of such assets and accrued benefits
and other liabilities, (vi) no Borrower or any member of the
Controlled Group has breached any of the responsibilities,
obligations or duties imposed on it by ERISA with respect to any
Plan, (vii) no Borrower nor any member of a Controlled Group has
incurred any liability for any excise tax arising under Section
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4972 or 4980B of the Code, and no fact exists which could give
rise to any such liability, (viii) no Borrower nor any member of
the Controlled Group nor any fiduciary of, nor any trustee to,
any Plan, has engaged in a "prohibited transaction" described in
Section 406 of the ERISA or Section 4975 of the Code nor taken
any action which would constitute or result in a Termination
Event with respect to any such Plan which is subject to ERISA,
(ix) each Borrower and each member of the Controlled Group has
made all contributions due and payable with respect to each
Plan, (x) there exists no event described in Section 4043(b) of
ERISA, for which the thirty (30) day notice period contained in
29 CFR 2615.3 has not been waived, (xi) no Borrower nor any
member of the Controlled Group has any fiduciary responsibility
for investments with respect to any plan existing for the
benefit of persons other than employees or former employees of
any Borrower and any member of the Controlled Group, and (xii)
no Borrower nor any member of the Controlled Group has
withdrawn, completely or partially, from any Multiemployer Plan
so as to incur liability under the Multiemployer Pension Plan
Amendments Act of 1980.
5.9. Patents, Trademarks, Copyrights and Licenses. All
United States patents, patent applications, trademarks,
trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights,
tradenames, assumed names, trade secrets and licenses owned or
utilized by any Borrower are set forth on Schedule 5.9, are
valid and have been duly registered or filed with all
appropriate governmental authorities and constitute all of the
intellectual property rights which are necessary for the
operation of its business; there is no objection to or pending
challenge to the validity of any such material patent,
trademark, copyright, design right, tradename, trade secret or
license and no Borrower is aware of any grounds for any
challenge, except as set forth in Schedule 5.9 hereto. Each
United States patent, patent application, patent license,
trademark, trademark application, trademark license, service
mark, service mark application, service mark license, copyright,
copyright application and copyright license owned or held by any
Borrower and all trade secrets used by any Borrower consist of
original material or property developed by such Borrower or was
lawfully acquired by such Borrower from the proper and lawful
owner thereof. Each of such items has been maintained so as to
preserve the value thereof from the date of creation or
acquisition thereof. With respect to all software used by any
Borrower, such Borrower is in possession of all source and
object codes related to each piece of software or is the
beneficiary of a source code escrow agreement, each such source
code escrow agreement being listed on Schedule 5.9 hereto.
5.10. Licenses and Permits. Except as set forth in
Schedule 5.10, each Borrower (a) is in compliance with and (b)
has procured and is now in possession of, all material licenses
or permits required by any applicable federal, state or local
law or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct
business and where the failure to procure such licenses or
permits could have a Material Adverse Effect on such Borrower.
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5.11. Default of Indebtedness. No Borrower is in
default in the payment of the principal of or interest on any
Indebtedness or under any instrument or agreement under or
subject to which any Indebtedness has been issued and no event
has occurred under the provisions of any such instrument or
agreement which with or without the lapse of time or the giving
of notice, or both, constitutes or would constitute an event of
default thereunder.
5.12. No Default. No Borrower is in default in the
payment or performance of any of its contractual obligations and
no Default has occurred.
5.13. No Burdensome Restrictions. No Borrower is party
to any contract or agreement the performance of which could have
a Material Adverse Effect on such Borrower. No Borrower has
agreed or consented to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property,
whether now owned or hereafter acquired, to be subject to a Lien
which is not a Permitted Encumbrance.
5.14. No Labor Disputes. No Borrower is involved in any
labor dispute; there are no strikes or walkouts or union
organization of any Borrower's employees threatened or in
existence and no labor contract is scheduled to expire during
the Term other than as set forth on Schedule 5.14 hereto.
5.15. Margin Regulations. No Borrower is engaged, nor
will it engage, principally or as one of its important
activities, in the business of extending credit for the purpose
of "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation
U or Regulation G of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect.
No part of the proceeds of any Advance will be used for
"purchasing" or "carrying" "margin stock" as defined in
Regulation U of such Board of Governors.
5.16. Investment Company Act. No Borrower is an
"investment company" registered or required to be registered
under the Investment Company Act of 1940, as amended, nor is it
controlled by such a company.
5.17. Disclosure. No representation or warranty made by
any Borrower in this Agreement or in any financial statement,
report, certificate or any other document furnished in
connection herewith contains any untrue statement of a material
fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact
known to Borrowers or which reasonably should be known to
Borrowers which Borrowers have not disclosed to Agent in writing
with respect to the transactions contemplated by this Agreement
which could reasonably be expected to have a Material Adverse
Effect on any Borrower.
5.18. Intentionally Omitted
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5.19. Swaps. No Borrower is a party to, nor will it be
a party to, any swap agreement whereby such Borrower has agreed
or will agree to swap interest rates or currencies unless same
provides that damages upon termination following an event of
default thereunder are payable on an unlimited "two-way basis"
without regard to fault on the part of either party.
5.20. Conflicting Agreements. No provision of any
mortgage, indenture, contract, agreement, judgment, decree or
order binding on any Borrower or affecting the Collateral
conflicts with, or requires any Consent which has not already
been obtained to, or would in any way prevent the execution,
delivery or performance of, the terms of this Agreement or the
Other Documents.
5.21. Application of Certain Laws and Regulations. No
Borrower nor any Affiliate of any Borrower is subject to any
statute, rule or regulation which regulates the incurrence of
any Indebtedness, including without limitation, statutes or
regulations relative to common or interstate carriers or to the
sale of electricity, gas, steam, water, telephone, telegraph or
other public utility services.
5.22. Business and Property of Borrower. Upon and after
the Closing Date, Borrowers do not propose to engage in any
business other than the business described in Holdings' and
TLC's Annual Reports on Form 10-K for the year ended December
31, 1995 and activities necessary to conduct the foregoing. On
the Closing Date, each Borrower will own all the property and
possess all of the rights and Consents necessary for the conduct
of the business of such Borrower.
VI. AFFIRMATIVE COVENANTS.
Each Borrower shall, until payment in full of the
Obligations and termination of this Agreement:
6.1. Payment of Fees. Pay to Agent on demand all usual
and customary fees and expenses which Agent incurs in connection
with (a) the forwarding of Advance proceeds and (b) the
establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h). Agent
may, without making demand, charge Borrowers' Account for all
such fees and expenses.
6.2. Conduct of Business and Maintenance of Existence
and Assets. (a) Conduct continuously and operate actively its
business according to good business practices and maintain all
of its properties useful or necessary in its business in good
working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of
this Agreement), including, without limitation, all licenses,
patents, copyrights, design rights, tradenames, trade secrets
and trademarks and take all actions necessary to enforce and
protect the validity of any intellectual property right or other
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right included in the Collateral; (b) keep in full force and
effect its existence and comply in all material respects with
the laws and regulations governing the conduct of its business
where the failure to do so could reasonably be expected to have
a Material Adverse Effect on such Borrower; and (c) make all
such reports and pay all such franchise and other taxes and
license fees and do all such other acts and things as may be
lawfully required to maintain its rights, licenses, leases,
powers and franchises under the laws of the United States or any
political subdivision thereof where the failure to do so could
reasonably be expected to have a Material Adverse Effect on such
Borrower.
6.3. Violations. Promptly notify Agent in writing of
any violation of any law, statute, regulation or ordinance of
any Governmental Body, or of any agency thereof, applicable to
any Borrower which could reasonably be expected to have a
Material Adverse Effect on any Borrower.
6.4. Government Receivables. Take all steps necessary
to protect Agent's interest in the Collateral under the Federal
Assignment of Claims Act or other applicable state or local
statutes or ordinances and deliver to Agent appropriately
endorsed, any instrument or chattel paper connected with any
Receivable arising out of contracts between any Borrower and the
United States, any state or any department, agency or
instrumentality of any of them.
6.5. Net Worth. Cause to be maintained for Borrowers
on a Consolidated Basis a Net Worth in an amount (i) not less
than $5,400,000 at the end of the fiscal quarter ended June 30,
1997, (ii) more than the Net Worth amount on the last day of the
prior fiscal quarter at the end of the fiscal quarter ended
September 30, 1997 and (iii) more than the Net Worth amount on
the last day of the prior fiscal year at the end of the fiscal
year ended December 31, 1996 and at the end each fiscal year
thereafter, but in no event less that $7,000,000 in any fiscal
year.
6.6. Current Ratio. Cause to be maintained for the
fiscal quarter ended June 30, 1997 and at all times thereafter a
ratio of Current Assets to Current Liabilities of not less than
2.0 to 1.
6.7. Fixed Charge Coverage. Cause to be maintained a
Fixed Charge Coverage of not less than the amount set forth
below for any period and any rolling four quarter period ending
on the last day of each quarter set forth below.
Fiscal Period Ratio for Period
1/1/97 to 9/30/97 0.65 to 1
1/1/97 to 12/31/97 1.2 to 1
Ratio for Rolling
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Four Quarters
3/31/98 1.5 to 1
6/30/98 1.5 to 1
9/30/98 1.5 to 1
12/31/98 1.5 to 1
3/31/99 1.2 to 1
6/30/99 1.2 to 1
9/30/99 1.3 to 1
12/31/99 1.4 to 1
3/31/00 and each 1.5 to 1
Rolling Four
Fiscal Quarter
Period Ending
Thereafter
6.8. Minimum EBITDA. Cause to be maintained EBITDA of not
less than the amount set forth below for any period and any
rolling four quarter period ending on the last day of each
quarter set forth below.
Fiscal Period EBITDA for Period
1/1/97 to 6/30/97 $ 300,000
1/1/97 to 9/30/97 1,900,000
1/1/97 to 12/31/97 4,000,000
EBITDA for Rolling
Four Quarters
3/31/98 $4,400,000
6/30/98 5,000,000
9/30/98 5,500,000
12/31/98 6,500,000
3/31/99 6,900,000
6/30/99 7,200,000
9/30/99 7,500,000
12/31/99 and 8,000,000
each Rolling Four
Fiscal Quarter
Period Ending
Thereafter
6.9. Execution of Supplemental Instruments. Execute and
deliver to Agent from time to time, upon demand, such
supplemental agreements, statements, assignments and transfers,
or instructions or documents relating to the Collateral, and
such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
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6.10. Payment of Indebtedness. Pay, discharge or
otherwise satisfy at or before maturity (subject, where
applicable, to specified grace periods and, in the case of the
trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to
do so could not reasonably be expected to have a Material
Adverse Effect or when the amount or validity thereof is
currently being contested in good faith by appropriate
proceedings and each Borrower shall have provided for such
reserves as Agent may reasonably deem proper and necessary,
subject at all times to any applicable subordination arrangement
in favor of Lenders.
6.11. Standards of Financial Statements. Cause all
financial statements referred to in Sections 9.7, 9.8, 9.9,
9.10, 9.11, 9.12, 9.13 and 9.14 as to which GAAP is applicable
to be complete and correct in all material respects (subject, in
the case of interim financial statements, to normal year-end
audit adjustments) and to be prepared in reasonable detail and
in accordance with GAAP applied consistently throughout the
periods reflected therein (except as concurred in by such
reporting accountants or officer, as the case may be, and
disclosed therein).
6.12. SEC Filings. Deliver to Agent as and when filed
copies of all filings made with the SEC.
6.13. Mortgage. By February 1, 1997, Agent shall have
received in form and substance satisfactory to Lenders (i) an
executed Mortgage and (ii) a title policy for the owned Real
Property and (iii) surveys.
VII. NEGATIVE COVENANTS.
No Borrower shall, until satisfaction in full of the
Obligations and termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of Assets.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person or acquire all or a
substantial portion of the assets or stock of any Person or
permit any other Person to consolidate with or merge with it;
provided, however, any Borrower may merge or consolidate with or
into any other Borrower.
(b) Sell, lease, transfer or otherwise dispose of any
of its properties or assets, except in the ordinary course of
its business.
7.2. Creation of Liens. Create or suffer to exist any Lien
or transfer upon or against any of its property or assets now
owned or hereafter acquired, except Permitted Encumbrances.
7.3. Guarantees. Become liable upon the obligations of any
Person by assumption, endorsement or guaranty thereof or
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otherwise (other than to Lenders) except (a) as disclosed on
Schedule 7.3 and (b) the endorsement of checks in the ordinary
course of business.
7.4. Investments. Purchase or acquire obligations or stock
of, or any other interest in, any Person, except (a) obligations
issued or guaranteed by the United States of America or any
agency thereof, (b) commercial paper with maturities of not more
than 180 days and a published rating of not less than A-1 or P-1
(or the equivalent rating), (c) certificates of time deposit and
bankers' acceptances having maturities of not more than 180 days
and repurchase agreements backed by United States government
securities of a commercial bank if (i) such bank has a combined
capital and surplus of at least $500,000,000, or (ii) its debt
obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating)
by a nationally recognized investment rating agency, and (d)
U.S. money market funds that invest solely in obligations issued
or guaranteed by the United States of America or an agency
thereof.
7.5. Loans. Make advances, loans or extensions of credit
to any Person, including without limitation, any Parent,
Subsidiary or Affiliate except with respect to (i) loans and
advances to employees made against expected bonuses in an
aggregate amount not exceeding $300,000 at any time outstanding
and (ii) loans outstanding to Marvin M. Speiser on the Closing
Date, which loans aggregated $246,577.54 as of November 30,
1996, plus all accrued interest thereon.
7.6. Capital Expenditures. Contract for, purchase or make
any expenditure or commitments for fixed or capital assets
(including capitalized leases) in any fiscal year in an amount
in excess of (i) $1,500,000 in fiscal year 1997 and (ii)
$2,500,000 in each fiscal year thereafter.
7.7. Dividends. Declare, pay or make any dividend or
distribution on any shares of the common stock or preferred
stock of any Borrower (other than dividends or distributions
payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the
purchase, redemption or other retirement of any common or
preferred stock, or of any options to purchase or acquire any
such shares of common or preferred stock of any Borrower.
7.8. Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness (exclusive of trade debt) of Borrower
except in respect of Indebtedness to Lenders; and Indebtedness
incurred for capital expenditures permitted under Section 7.6
hereof.
7.9. Nature of Business. Substantially change the nature
of the business in which it is presently engaged, nor except as
specifically permitted hereby purchase or invest, directly or
indirectly, in any assets or property other than in the ordinary
course of business for assets or property which are useful in,
-49-
necessary for and are to be used in its business as presently
conducted.
7.10. Transactions with Affiliates. Directly or
indirectly, purchase, acquire or lease any property from, or
sell, transfer or lease any property to, or otherwise deal with,
any Affiliate, except: (i) transactions disclosed in the
ordinary course of business, on an arm's-length basis on terms
no less favorable than terms which would have been obtainable
from a Person other than an Affiliate; (ii) the transactions
described in the Stock Purchase And Option Agreement dated July
15, 1994, by and between Health-Chem Corporation and Marvin M.
Speiser and the transactions described in the Amended and
Restated Option Agreement dated August 30, 1991 by and between
Health Chem Corporation and Marvin M. Speiser (together the
"Option Agreements"), both Option Agreements as amended by the
Stock Purchase Agreement by and between Marvin M. Speiser and
Health-Chem Corporation dated as of March 26, 1996 and amended
as of June 28, 1996 and September 17, 1996; and (iii) the
Corporate Services Agreement and Tax Sharing Agreement, both by
and between Health-Chem Corporation and Transderm Laboratories
Corporation and both dated as of August 31, 1995.
7.11. Leases. Enter as lessee into any lease
arrangement for real or personal property (unless capitalized
and permitted under Section 7.6 hereof) if after giving effect
thereto, aggregate annual rental payments for all leased
property would exceed $750,000 in any one fiscal year.
7.12. Subsidiaries.
(a) Form any Subsidiary.
(b) Enter into any partnership, joint venture or
similar arrangement.
7.13. Fiscal Year and Accounting Changes. Change its
fiscal year from a calendar year or make any change (i) in
accounting treatment and reporting practices except as required
by GAAP or (ii) in tax reporting treatment except as required by
law.
7.14. Pledge of Credit. Now or hereafter pledge
Agent's or any Lender's credit on any purchases or for any
purpose whatsoever or use any portion of any Advance in or for
any business other than such Borrower's business as conducted on
the date of this Agreement.
7.15. Amendment of Articles of Incorporation, By-Laws.
Amend, modify or waive any material term or provision of its
Articles of Incorporation or By-Laws unless required by law.
7.16. Compliance with ERISA. (i) (x) Maintain, or
permit any member of the Controlled Group to maintain, or (y)
become obligated to contribute, or permit any member of the
Controlled Group to become obligated to contribute, to any Plan,
other than those Plans disclosed on Schedule 5.8(d), (ii)
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engage, or permit any member of the Controlled Group to engage,
in any non-exempt "prohibited transaction", as that term is
defined in section 406 of ERISA and Section 4975 of the Code,
(iii) incur, or permit any member of the Controlled Group to
incur, any "accumulated funding deficiency", as that term is
defined in Section 302 of ERISA or Section 412 of the Code, (iv)
terminate, or permit any member of the Controlled Group to
terminate, any Plan where such event could result in any
liability of any Borrower or any member of the Controlled Group
or the imposition of a lien on the property of any Borrower or
any member of the Controlled Group pursuant to Section 4068 of
ERISA, (v) assume, or permit any member of the Controlled Group
to assume, any obligation to contribute to any Multiemployer
Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal
liability to any Multiemployer Plan; (vii) fail promptly to
notify Agent of the occurrence of any Termination Event, (viii)
fail to comply, or permit a member of the Controlled Group to
fail to comply, with the requirements of ERISA or the Code or
other applicable laws in respect of any Plan, (ix) fail to meet,
or permit any member of the Controlled Group to fail to meet,
all minimum funding requirements under ERISA or the Code or
postpone or delay or allow any member of the Controlled Group to
postpone or delay any funding requirement with respect of any
Plan.
7.17. Prepayment of Indebtedness. Except as permitted
pursuant to Section 7.18 hereof, at any time, directly or
indirectly, prepay any Indebtedness (other than to Lenders), or
repurchase, redeem, retire or otherwise acquire any Indebtedness
of any Borrower.
7.18. Debenture. At any time, directly or indirectly,
pay, prepay, repurchase, redeem, retire or otherwise acquire, or
make any payment on account of any principal of, interest on or
premium payable in connection with the repayment or redemption
of the Debenture, except (i) as expressly permitted by the terms
of the Debenture as in effect on the Closing Date and (ii) to
the extent Borrowers use the proceeds of Advances for such
repayment, in an amount not exceeding the par value thereof.
VIII. CONDITIONS PRECEDENT .
8.1. Conditions to Initial Advances. The agreement of
Lenders to make the initial Advances requested to be made on the
Closing Date is subject to the satisfaction, or waiver by Agent,
immediately prior to or concurrently with the making of such
Advances, of the following conditions precedent:
(a) Note. Agent shall have received the Notes duly
executed and delivered by an authorized officer of each
Borrower;
(b) Filings, Registrations and Recordings. Each
document (including, without limitation, any Uniform Commercial
Code financing statement) required by this Agreement, any
related agreement or under law or reasonably requested by the
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Agent to be filed, registered or recorded in order to create, in
favor of Agent, a perfected security interest in or lien upon
the Collateral shall have been properly filed, registered or
recorded in each jurisdiction in which the filing, registration
or recordation thereof is so required or requested, and Agent
shall have received an acknowledgment copy, or other evidence
satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any
necessary fee, tax or expense relating thereto;
(c) Corporate Proceedings of Borrowers. Agent shall
have received a copy of the resolutions in form and substance
reasonably satisfactory to Agent, of the Board of Directors of
each Borrower authorizing (i) the execution, delivery and
performance of this Agreement, the Notes, the Mortgage, any
related agreements, and any Other Documents (collectively the
"Documents") and (ii) the granting by each Borrower of the
security interests in and liens upon the Collateral in each case
certified by the Secretary or an Assistant Secretary of each
Borrower as of the Closing Date; and, such certificate shall
state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded as of the date of such
certificate;
(d) Incumbency Certificates of Borrowers. Agent
shall have received a certificate of the Secretary or an
Assistant Secretary of each Borrower, dated the Closing Date, as
to the incumbency and signature of the officers of each Borrower
executing this Agreement, any certificate or other documents to
be delivered by it pursuant hereto, together with evidence of
the incumbency of such Secretary or Assistant Secretary;
(e) Certificates. Agent shall have received a copy
of the Articles or Certificate of Incorporation of each
Borrower, and all amendments thereto, certified by the Secretary
of State or other appropriate official of its jurisdiction of
incorporation together with copies of the By-Laws of each
Borrower certified as accurate and complete by the Secretary of
each Borrower;
(f) Good Standing Certificates. Agent shall have
received good standing certificates for each Borrower dated not
more than 10 days prior to the Closing Date, issued by the
Secretary of State or other appropriate official of each
Borrower's jurisdiction of incorporation and each jurisdiction
where the conduct of each Borrower's business activities or the
ownership of its properties necessitates qualification;
(g) Legal Opinion. Agent shall have received the
executed legal opinion of Bruce Schloss, Esq. in form and
substance satisfactory to Agent which shall cover such matters
incident to the transactions contemplated by this Agreement, the
Notes, and related agreements as Agent may reasonably require
and each Borrower hereby authorizes and directs such counsel to
deliver such opinions to Agent and Lenders;
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(h) No Litigation. Other than as disclosed in
Holdings' and TLC's Annual Report on Form 10-K for the year
ended December 31, 1995 and subsequent Quarterly Reports on Form
10-Q for the quarters ended March 31, 1996 through September 30,
1996, no litigation, investigation or proceeding before or by
any arbitrator or Governmental Body shall be continuing or
threatened against any Borrower or against the officers or
directors of any Borrower (A) in connection with the Other
Documents or any of the transactions contemplated thereby and
which, in the reasonable opinion of Agent, is deemed material or
(B) which could, in the reasonable opinion of Agent, have a
Material Adverse Effect; and no injunction, writ, restraining
order or other order of any nature materially adverse to
Borrower or the conduct of its business or inconsistent with the
due consummation of the Transactions shall have been issued by
any Governmental Body;
(i) Financial Condition Certificates. Agent shall
have received an executed Financial Condition Certificate in the
form of Exhibit 8.1(i).
(j) Collateral Examination. Agent shall have
completed Collateral examinations and received appraisals, the
results of which shall be satisfactory in form and substance to
Lenders, of the Receivables, Inventory, General Intangibles,
Real Property and Equipment of each Borrower and all books and
records in connection therewith;
(k) Fees. Agent shall have received all fees payable
to Agent and Lenders on or prior to the Closing Date pursuant to
Article III hereof;
(l) Pro Forma Financial Statements. Agent shall have
received a copy of the Pro Forma Financial Statements which
shall be satisfactory in all respects to Lenders;
(m) Guaranties, Pledge Agreement, Other Documents.
Agent shall have received executed copies of the Guaranty, Stock
Pledge Agreements and all Other Documents, each in form and
substance satisfactory to Lenders;
(n) Insurance. Agent shall have received in form and
substance satisfactory to Agent, certified copies of Borrowers'
casualty insurance policies, together with loss payable
endorsements on Agent's standard form of loss payee endorsement
naming Agent as loss payee, and certified copies of Borrowers'
liability insurance policies, together with endorsements naming
Agent as a co-insured;
(o) Title Insurance. Agent shall have received fully
paid mortgagee title insurance policies (or binding commitments
to issue title insurance policies, marked to Agent's
satisfaction to evidence the form of such policies to be
delivered with respect to the Mortgage), in standard ALTA form,
issued by a title insurance company satisfactory to Agent, each
in an amount equal to not less than the fair market value of the
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Real Property subject to the Mortgage, insuring the Mortgage to
create a valid Lien on the Real Property with no exceptions
which Agent shall not have approved in writing and no survey
exceptions;
(p) Environmental Reports. Agent shall have received
all environmental studies and reports prepared by independent
environmental engineering firms with respect to all Real
Property owned or leased by Borrowers;
(q) Payment Instructions. Agent shall have received
written instructions from Borrowers directing the application of
proceeds of the initial Advances made pursuant to this
Agreement;
(r) Blocked Accounts. Agent shall have received duly
executed agreements establishing the Blocked Accounts or
Depository Accounts with financial institutions acceptable to
Agent for the collection or servicing of the Receivables and
proceeds of the Collateral;
(s) Consents. Agent shall have received any and all
Consents necessary to permit the effectuation of the
transactions contemplated by this Agreement and the Other
Documents; and, Agent shall have received such Consents and
waivers of such third parties as might assert claims with
respect to the Collateral, as Agent and its counsel shall deem
necessary;
(t) No Adverse Material Change. (i) since September
30, 1996, there shall not have occurred any event, condition or
state of facts which could reasonably be expected to have a
Material Adverse Effect and (ii) no representations made or
information supplied to Lenders shall have been proven to be
inaccurate or misleading in any material respect;
(u) Leasehold Agreements. Agent shall have received
landlord, mortgagee or warehouseman agreements satisfactory to
Agent with respect to all premises leased by Borrowers at which
Inventory is located;
(v) Mortgage. Agent shall have received in form and
substance satisfactory to Lenders (i) an executed Mortgage and
(ii) a title policy for the owned Real Property and (iii)
surveys;
(w) Debenture. Agent shall have received final
executed copies of the Debenture which shall contain such term
and provisions including, without limitation, subordination
terms, satisfactory to Agent;
(x) Contract Review. Agent shall have reviewed all
material contracts of Borrowers including, without limitation,
the Tax Sharing Agreement, leases, union contracts, labor
contracts, vendor supply contracts, license agreements and
distributorship agreements and such contracts and agreements
shall be satisfactory in all respects to Agent;
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(y) Closing Certificate. Agent shall have received a
closing certificate signed by the Chief Financial Officer of
each Borrower dated as of the date hereof, stating that (i) all
representations and warranties set forth in this Agreement and
the Other Documents are true and correct on and as of such date,
(ii) Borrowers are on such date in compliance with all the terms
and provisions set forth in this Agreement and the Other
Documents and (iii) on such date no Default or Event of Default
has occurred or is continuing;
(z) Undrawn Availability. After giving effect to the
initial Advances hereunder, Borrowers shall have Undrawn
Availability of at least $1,750,000; and
(aa) Other. All corporate and other proceedings, and
all documents, instruments and other legal matters in connection
with the Transactions shall be satisfactory in form and
substance to Agent, Lenders and their counsel.
8.2. Conditions to Each Advance. The agreement of Lenders
to make any Advance requested to be made on any date (including,
without limitation, the initial Advance), is subject to the
satisfaction of the following conditions precedent as of the
date such Advance is made:
(a) Representations and Warranties. Each of the
representations and warranties made by any Borrower in or
pursuant to this Agreement and any related agreements to which
it is a party, and each of the representations and warranties
contained in any certificate, document or financial or other
statement furnished at any time under or in connection with this
Agreement or any related agreement shall be true and correct in
all material respects on and as of such date as if made on and
as of such date;
(b) No Default. No Event of Default or Default shall
have occurred and be continuing on such date, or would exist
after giving effect to the Advances requested to be made, on
such date; provided, however that Agent, in its sole discretion,
may continue to make Advances notwithstanding the existence of
an Event of Default or Default and that any Advances so made
shall not be deemed a waiver of any such Event of Default or
Default; and
(c) Maximum Advances. In the case of any Advances
requested to be made, after giving effect thereto, the aggregate
Advances shall not exceed the maximum amount of Advances
permitted under Section 2.1 hereof.
Each request for an Advance by any Borrower hereunder shall
constitute a representation and warranty by each Borrower as of
the date of such Advance that the conditions contained in this
subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWERS.
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Borrower shall, until satisfaction in full of the
Obligations and the termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon
learning thereof, report to Agent all matters materially
affecting the value, enforceability or collectibility of any
portion of the Collateral including, without limitation, any
Borrower's reclamation or repossession of, or the return to any
Borrower of, a material amount of goods or claims or disputes
asserted by any Customer or other obligor.
9.2. Schedules. Deliver to Agent on or before the
fifteenth (15th) day of each month as and for the prior month
(a) accounts receivable ageings, (b) accounts payable schedules
and (c) Inventory reports. In addition, each Borrower will
deliver to Agent at such intervals as Agent may require:
(i) confirmatory assignment schedules, (ii) copies of Customer's
invoices, (iii) evidence of shipment or delivery, and (iv) such
further schedules, documents and/or information regarding the
Collateral as Agent may require including, without limitation,
trial balances and test verifications. Agent shall have the
right to confirm and verify all Receivables by any manner and
through any medium it considers advisable and do whatever it may
deem reasonably necessary to protect its interests hereunder.
The items to be provided under this Section are to be in form
satisfactory to Agent and executed by each Borrower and
delivered to Agent from time to time solely for Agent's
convenience in maintaining records of the Collateral, and any
Borrower's failure to deliver any of such items to Agent shall
not affect, terminate, modify or otherwise limit Agent's Lien
with respect to the Collateral.
9.3. Environmental Reports. Furnish Agent, concurrently
with the delivery of the financial statements referred to in
Sections 9.7 and 9.8, with a certificate signed by the President
or executive vice president of each Borrower stating, to the
best of his knowledge, that each Borrower is in compliance in
all material respects with all federal, state and local laws
relating to environmental protection and control and
occupational safety and health. To the extent any Borrower is
not in compliance with the foregoing laws, the certificate shall
set forth with specificity all areas of non-compliance and the
proposed action Borrower will implement in order to achieve full
compliance.
9.4. Litigation. Promptly notify Agent in writing of any
litigation, suit or administrative proceeding affecting any
Borrower, whether or not the claim is covered by insurance,
which in any such case could reasonably be expected to have a
Material Adverse Effect on any Borrower.
9.5. Material Occurrences. Promptly notify Agent in
writing upon the occurrence of (a) any Event of Default or
Default; (b) any event of default under the Debenture; (c) any
event which with the giving of notice or lapse of time, or both,
would constitute an event of default under the Debenture; (d)
any event, development or circumstance whereby any financial
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statements or other reports furnished to Agent fail in any
material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating
results of any Borrower as of the date of such statements; (e)
any accumulated retirement plan funding deficiency which, if
such deficiency continued for two plan years and was not
corrected as provided in Section 4971 of the Code, could subject
any Borrower to a tax imposed by Section 4971 of the Code; (f)
each and every default by any Borrower which might result in the
acceleration of the maturity of any Indebtedness, including the
names and addresses of the holders of such Indebtedness with
respect to which there is a default existing or with respect to
which the maturity has been or could be accelerated, and the
amount of such Indebtedness; and (g) any other development in
the business or affairs of any Borrower which could reasonably
be expected to have a Material Adverse Effect; in each case
describing the nature thereof and the action Borrowers propose
to take with respect thereto.
9.6. Government Receivables. Notify Agent immediately if
any of its Receivables arise out of contracts between any
Borrower and the United States, any state, or any department,
agency or instrumentality of any of them.
9.7. Annual Financial Statements. Furnish Agent within
ninety (90) days after the end of each fiscal year of Borrowers,
financial statements of Holdings and TLC on a Consolidated Basis
and, with respect to all other Borrowers, internally generated
financial statements on a Consolidating Basis including, but not
limited to, statements of income and stockholders' equity and
cash flow from the beginning of the current fiscal year to the
end of such fiscal year and the balance sheet as at the end of
such fiscal year, all prepared in accordance with GAAP applied
on a basis consistent with prior practices, and in reasonable
detail. The financial statements of Holdings and TLC shall be
reported upon without qualification by an independent certified
public accounting firm selected by Borrowers and satisfactory to
Agent (the "Accountants"). In addition, the reports shall be
accompanied by a certificate of each Borrower's Chief Financial
Officer which shall state that, based on an examination
sufficient to permit him to make an informed statement, no
Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default, its nature, when it
occurred, whether it is continuing and the steps being taken by
Borrowers with respect to such event, and such certificate shall
have appended thereto calculations which set forth Borrowers'
compliance with the requirements or restrictions imposed by
Sections 6.5, 6.6, 6.7, 6.8 7.6 and 7.11 hereof.
9.8. INTENTIONALLY OMMITED.
9.9. Monthly Financial Statements. Furnish Agent within
thirty (30) days after the end of each month, an unaudited
balance sheet of Borrowers on a Consolidated Basis and on a
consolidating basis and unaudited statements of income and
stockholders' equity and cash flow of Borrowers on a
Consolidated Basis and on a consolidating basis reflecting
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results of operations from the beginning of the fiscal year to
the end of such month and for such month, prepared on a basis
consistent with prior practices and complete and correct in all
material respects, subject to normal year end adjustments. The
reports shall be accompanied by a certificate of each Borrower's
Chief Financial Officer of each Borrower, which shall state
that, based on an examination sufficient to permit him to make
an informed statement, no Default or Event of Default exists,
or, if such is not the case, specifying such Default or Event of
Default, its nature, when it occurred, whether it is continuing
and the steps being taken by Borrowers with respect to such
event and, such certificate shall have appended thereto
calculations which set forth Borrowers' compliance with the
requirements or restrictions imposed by Sections 6.5, 6.6, 6.7,
6.8, 7.6 and 7.11 hereof.
9.10. Other Reports. Furnish Agent as soon as
available, but in any event within ten (10) days after the
issuance thereof, (i) with copies of such financial statements,
reports and returns as each Borrower shall send to its
stockholders and (ii) copies of all notices sent pursuant to the
Debenture.
9.11. Additional Information. Furnish Agent with such
additional information as Agent shall reasonably request in
order to enable Agent to determine whether the terms, covenants,
provisions and conditions of this Agreement and the Notes have
been complied with by Borrowers including, without limitation
and without the necessity of any request by Agent, (a) copies of
all environmental audits and reviews, (b) at least thirty (30)
days prior thereto, notice of any Borrower's opening of any new
office or place of business or any Borrower's closing of any
existing office or place of business, and (c) promptly upon any
Borrower's learning thereof, notice of any labor dispute to
which any Borrower may become a party, any strikes or walkouts
relating to any of its plants or other facilities, and the
expiration of any labor contract to which any Borrower is a
party or by which any Borrower is bound.
9.12. Projected Operating Budget. Furnish Agent, no
later than one (1) day prior to the beginning of each Borrower's
fiscal years commencing with fiscal year 1997, a quarter by
quarter projected operating budget and cash flow of Borrowers on
a Consolidated Basis for such fiscal year (including an income
statement for each quarter and a balance sheet as at the end of
the last fiscal quarter), such projections to be accompanied by
a certificate signed by the President or Chief Financial Officer
of Holdings to the effect that such projections have been
prepared on the basis of sound financial planning practice
consistent with past budgets and financial statements and that
such officer has no reason to question the reasonableness of any
material assumptions on which such projections were prepared.
Notwithstanding the foregoing, Borrowers shall deliver its
operating budget for fiscal year 1997 by January 31, 1997.
9.13. Variances From Operating Budget. Furnish Agent,
concurrently with the delivery of the financial statements
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referred to in Section 9.7 and each quarterly report, a written
report summarizing all material variances from budgets submitted
by Borrowers pursuant to Section 9.12 and a discussion and
analysis by management with respect to such variances.
9.14. Notice of Suits, Adverse Events. Furnish Agent
with prompt notice of (i) any lapse or other termination of any
Consent issued to any Borrower by any Governmental Body or any
other Person that is material to the operation of any Borrower's
business, (ii) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (iii) copies of
any periodic or special reports filed by any Borrower with any
Governmental Body or Person, if such reports indicate any
material change in the business, operations, affairs or
condition of any Borrower, or if copies thereof are requested by
Lender, and (iv) copies of any material notices and other
communications from any Governmental Body or Person which
specifically relate to any Borrower.
9.15. ERISA Notices and Requests. Furnish Agent with
immediate written notice in the event that (i) any Borrower or
any member of the Controlled Group knows or has reason to know
that a Termination Event has occurred, together with a written
statement describing such Termination Event and the action, if
any, which such Borrower or member of the Controlled Group has
taken, is taking, or proposes to take with respect thereto and,
when known, any action taken or threatened by the Internal
Revenue Service, Department of Labor or PBGC with respect
thereto, (ii) any Borrower or any member of the Controlled Group
knows or has reason to know that a prohibited transaction (as
defined in Sections 406 of ERISA and 4975 of the Code) has
occurred together with a written statement describing such
transaction and the action which such Borrower or any member of
the Controlled Group has taken, is taking or proposes to take
with respect thereto, (iii) a funding waiver request has been
filed with respect to any Plan together with all communications
received by any Borrower or any member of the Controlled Group
with respect to such request, (iv) any increase in the benefits
of any existing Plan or the establishment of any new Plan or the
commencement of contributions to any Plan to which any Borrower
or any member of the Controlled Group was not previously
contributing shall occur, (v) any Borrower or any member of the
Controlled Group shall receive from the PBGC a notice of
intention to terminate a Plan or to have a trustee appointed to
administer a Plan, together with copies of each such notice,
(vi) any Borrower or any member of the Controlled Group shall
receive any favorable or unfavorable determination letter from
the Internal Revenue Service regarding the qualification of a
Plan under Section 401(a) of the Code, together with copies of
each such letter; (vii) any Borrower or any member of the
Controlled Group shall receive a notice regarding the imposition
of withdrawal liability, together with copies of each such
notice; (viii) any Borrower or any member of the Controlled
Group shall fail to make a required installment or any other
required payment under Section 412 of the Code on or before the
due date for such installment or payment; (ix) any Borrower or
any member of the Controlled Group knows that (a) a
Multiemployer Plan has been terminated, (b) the administrator or
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plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (c) the PBGC has instituted or will
institute proceedings under Section 4042 of ERISA to terminate a
Multiemployer Plan.
9.16. Additional Documents. Execute and deliver to
Agent, upon request, such documents and agreements as Agent may,
from time to time, reasonably request to carry out the purposes,
terms or conditions of this Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events
shall constitute an "Event of Default":
10.1. failure by any Borrower to pay any principal or
interest on the Obligations when due, whether at maturity or by
reason of acceleration pursuant to the terms of this Agreement
or by notice of intention to prepay, or by required prepayment
or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any
Other Document;
10.2. any representation or warranty made or deemed
made by any Borrower in this Agreement or any related agreement
or in any certificate, document or financial or other statement
furnished at any time in connection herewith or therewith shall
prove to have been misleading in any material respect on the
date when made or deemed to have been made;
10.3. failure by any Borrower to (i) furnish financial
information when due or when requested, or (ii) permit the
inspection of its books or records;
10.4. issuance of a notice of Lien, levy, assessment,
injunction or attachment against a material portion of any
Borrower's property which is not stayed or lifted within thirty
(30) days;
10.5. except as otherwise provided for in Sections 10.1
and 10.3, failure or neglect of any Borrower to perform, keep or
observe any term, provision, condition, covenant herein
contained, or contained in any other agreement or arrangement,
now or hereafter entered into between any Borrower and Agent or
any Lender except for a failure or neglect of Borrower to
perform, keep or observe any term, provision, condition or
covenant, contained in Sections 4.6, 4.7, 4.9, 4.11, 6.1, 6.3,
6.4, 9.4 or 9.6 hereof which is cured within ten (10) Business
Days from the occurrence of such failure or neglect;
10.6. one or more judgments are rendered or judgment
liens filed against one or more Borrowers for amounts in the
aggregate in excess of $250,000 which within thirty (30) days of
such rendering or filing are not either satisfied, stayed or
discharged of record;
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10.7. any Borrower shall (i) apply for, consent to or
suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of
itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy
laws (as now or hereafter in effect), (iv) be adjudicated a
bankrupt or insolvent, (v) file a petition seeking to take
advantage of any other law providing for the relief of debtors,
(vi) acquiesce to, or fail to have dismissed, within thirty (30)
days, any petition filed against it in any involuntary case
under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;
10.8. Borrowers shall admit in writing their inability,
or be generally unable, to pay their debts as they become due or
cease operations of their present business;
10.9. any corporate Affiliate or any Subsidiary of any
Borrower, or any Guarantor, shall (i) apply for, consent to or
suffer the appointment of, or the taking of possession by, a
receiver, custodian, trustee, liquidator or similar fiduciary of
itself or of all or a substantial part of its property, (ii)
admit in writing its inability, or be generally unable, to pay
its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of
creditors, (iv) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (v) be
adjudicated a bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the
relief of debtors, (vii) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against
it in any involuntary case under such bankruptcy laws, or (viii)
take any action for the purpose of effecting any of the
foregoing;
10.10. any change in any Borrower's condition or affairs
(financial or otherwise) which in Agent's opinion has a Material
Adverse Effect;
10.11. any Lien created hereunder or provided for hereby
or under any related agreement for any reason ceases to be or is
not a valid and perfected Lien having a first priority interest;
10.12. an event of default has occurred and been
declared under the Debenture which default shall not have been
cured or waived within any applicable grace period and for which
the Trustee is permitted to take action pursuant to the terms of
the Debenture as in effect on the Closing Date;
10.13. a default of the obligations of any Borrower
under any other agreement to which it is a party shall occur
which materially adversely affects its condition, affairs or
prospects (financial or otherwise) which default is not cured
within any applicable grace period;
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10.14. termination or breach of any Guaranty or similar
agreement executed and delivered to Agent in connection with the
Obligations of any Borrower, or if any Guarantor attempts to
terminate, challenges the validity of, or its liability under,
any such Guaranty or similar agreement;
10.15. any Change of Ownership or Change of Control
shall occur;
10.16. any material provision of this Agreement shall,
for any reason, cease to be valid and binding on any Borrower,
or any Borrower shall so claim in writing to Agent;
10.17. (i) any Governmental Body shall (A) revoke,
terminate, suspend or adversely modify any license, permit,
patent trademark or tradename of any Borrower, the continuation
of which is material to the continuation of any Borrower's
business, or (B) commence proceedings to suspend, revoke,
terminate or adversely modify any such license, permit,
trademark, tradename or patent and such proceedings shall not be
dismissed or discharged within sixty (60) days, or (C) schedule
or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of
any Borrower's business and the staff of such Governmental Body
issues a report recommending the termination, revocation,
suspension or material, adverse modification of such license,
permit, trademark, tradename or patent; or (ii) any agreement
which is necessary or material to the operation of any
Borrower's business shall be revoked or terminated and not
replaced by a substitute acceptable to Agent within thirty (30)
days after the date of such revocation or termination, and such
revocation or termination and non-replacement would reasonably
be expected to have a Material Adverse Effect on any Borrower;
10.18. any portion of the Collateral shall be seized or
taken by a Governmental Body, or any Borrower or the title and
rights of any Borrower or any Original Owner which is the owner
of any material portion of the Collateral shall have become the
subject matter of litigation which might, in the opinion of
Agent, upon final determination, result in impairment or loss of
the security provided by this Agreement or the Other Documents;
10.19. the operations of any Borrower's (other than
HEC's) manufacturing facility are interrupted at any time for
more than two (2) consecutive days, unless such Borrower shall
(i) be entitled to receive for such period of interruption,
proceeds of business interruption insurance sufficient to assure
that its per diem cash needs during such period is at least
equal to its average per diem cash needs for the consecutive
three month period immediately preceding the initial date of
interruption and (ii) receive such proceeds in the amount
described in clause (i) preceding not later than thirty (30)
days following the initial date of any such interruption;
provided, however, that notwithstanding the provisions of
clauses (i) and (ii) of this section, an Event of Default shall
be deemed to have occurred if such Borrower shall be receiving
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the proceeds of business interruption insurance for a period of
thirty (30) consecutive days; or
10.20. an event or condition specified in Sections 7.16
or 9.15 hereof shall occur or exist with respect to any Plan
and, as a result of such event or condition, together with all
other such events or conditions, any Borrower or any member of
the Controlled Group shall incur, or in the opinion of Agent be
reasonably likely to incur, a liability to a Plan or the PBGC
(or both) which, in the reasonable judgment of Agent, would have
a Material Adverse Effect on any Borrower.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies. Upon the occurrence of (i)
an Event of Default pursuant to Section 10.7 all Obligations
shall be immediately due and payable and this Agreement and the
obligation of Lenders to make Advances shall be deemed
terminated; and, (ii) any of the other Events of Default and at
any time thereafter (such default not having previously been
cured), at the option of Required Lenders all Obligations shall
be immediately due and payable and Lenders shall have the right
to terminate this Agreement and to terminate the obligation of
Lenders to make Advances and (iii) a filing of a petition
against Borrower in any involuntary case under any state or
federal bankruptcy laws, the obligation of Lenders to make
Advances hereunder shall be terminated other than as may be
required by an appropriate order of the bankruptcy court having
jurisdiction over Borrower. Upon the occurrence of any Event of
Default, Agent shall have the right to exercise any and all
other rights and remedies provided for herein, under the Uniform
Commercial Code and at law or equity generally, including,
without limitation, the right to foreclose the security
interests granted herein and to realize upon any Collateral by
any available judicial procedure and/or to take possession of
and sell any or all of the Collateral with or without judicial
process. Agent may enter any of Borrower's premises or other
premises without legal process and without incurring liability
to any Borrower therefor, and Agent may thereupon, or at any
time thereafter, in its discretion without notice or demand,
take the Collateral and remove the same to such place as Agent
may deem advisable and Agent may require Borrowers to make the
Collateral available to Agent at a convenient place. With or
without having the Collateral at the time or place of sale,
Agent may sell the Collateral, or any part thereof, at public or
private sale, at any time or place, in one or more sales, at
such price or prices, and upon such terms, either for cash,
credit or future delivery, as Agent may elect. Except as to
that part of the Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, Agent shall give Borrowers reasonable
notification of such sale or sales, it being agreed that in all
events written notice mailed to Borrowers at least five (5)
Business Days prior to such sale or sales is reasonable
notification. At any public sale Agent or any Lender may bid
for and become the purchaser, and Agent, any Lender or any other
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purchaser at any such sale thereafter shall hold the Collateral
sold absolutely free from any claim or right of whatsoever kind,
including any equity of redemption and such right and equity are
hereby expressly waived and released by each Borrower. In
connection with the exercise of the foregoing remedies, Agent is
granted permission to use all of each Borrower's trademarks,
trade styles, trade names, patents, patent applications,
licenses, franchises and other proprietary rights which are used
in connection with (a) Inventory for the purpose of disposing of
such Inventory and (b) Equipment for the purpose of completing
the manufacture of unfinished goods. The proceeds realized from
the sale of any Collateral shall be applied as follows: first,
to the reasonable costs, expenses and attorneys' fees and
expenses incurred by Agent for collection and for acquisition,
completion, protection, removal, storage, sale and delivery of
the Collateral; second, to interest due upon any of the
Obligations; and, third, to the principal of the Obligations.
If any deficiency shall arise, Borrowers shall remain liable to
Agent and Lenders therefor.
11.2. Agent's Discretion. Agent shall have the right
in its sole discretion to determine which rights, Liens,
security interests or remedies Agent may at any time pursue,
relinquish, subordinate, or modify or to take any other action
with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3. Setoff. In addition to any other rights which
Agent or any Lender may have under applicable law, upon the
occurrence of an Event of Default hereunder, Agent and such
Lender shall have a right to apply any Borrower's property held
by Agent and such Lender to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumera
tion of the foregoing rights and remedies is not intended to be
exhaustive and the exercise of any right or remedy shall not
preclude the exercise of any other right or remedies provided
for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Each Borrower hereby waives
notice of non-payment of any of the Receivables, demand, present
ment, protest and notice thereof with respect to any and all in
struments, notice of acceptance hereof, notice of loans or
advances made, credit extended, Collateral received or
delivered, or any other action taken in reliance hereon, and all
other demands and notices of any description, except such as are
expressly provided for herein.
12.2. Delay. No delay or omission on Agent's or any
Lender's part in exercising any right, remedy or option shall
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operate as a waiver of such or any other right, remedy or option
or of any default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS
AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE
AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the
benefit of and shall be binding upon the respective successors
and permitted assigns of each Borrower, Agent and each Lender,
shall become effective on the date hereof and shall continue in
full force and effect until January 9, 2002 (the "Term") unless
sooner terminated as herein provided. Borrowers may terminate
this Agreement at any time upon ninety (90) days' prior written
notice upon payment in full of the Obligations. In the event
the Obligations are prepaid in full prior to the last day of the
Term (the date of such prepayment hereinafter referred to as the
"Early Termination Date"), Borrowers shall pay to Agent for the
benefit of Lenders an early termination fee in an amount equal
to (x) $450,000 if the Early Termination Date occurs on or after
the Closing Date to and including the date immediately preceding
the first anniversary of the Closing Date, (y) $300,000 if the
Early Termination Date occurs on or after the first anniversary
of the Closing Date to and including the date immediately
preceding the second anniversary of the Closing Date, and (z)
$150,000 if the Early Termination Date occurs on or after the
second anniversary of the Closing Date to and including the date
immediately preceding the third anniversary of the Closing Date.
Notwithstanding the foregoing, Borrowers may terminate this
Agreement at any time upon ninety (90) days prior written notice
upon payment in full of the Obligations, but without payment of
the Early Termination Fee, in the event Agent or Lenders
exercise their rights under Sections 3.7 or 3.9 hereof.
13.2. Termination. The termination of the Agreement
shall not affect any Borrower's, Agent's or any Lender's rights,
or any of the Obligations having their inception prior to the
effective date of such termination, and the provisions hereof
shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have
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been fully disposed of, concluded or liquidated. The security
interests, Liens and rights granted to Agent and Lenders
hereunder and the financing statements filed hereunder shall
continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrowers'
Account may from time to time be temporarily in a zero or credit
position, until all of the Obligations of each Borrower have
been paid or performed in full after the termination of this
Agreement or each Borrower has furnished Agent and Lenders with
an indemnification satisfactory to Agent and Lenders with
respect thereto. Accordingly, each Borrower waives any rights
which it may have under Section 9-404(1) of the Uniform
Commercial Code to demand the filing of termination statements
with respect to the Collateral, and Agent shall not be required
to send such termination statements to each Borrower, or to file
them with any filing office, unless and until this Agreement
shall have been terminated in accordance with its terms and all
Obligations paid in full in immediately available funds. All
representations, warranties, covenants, waivers and agreements
contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
XIV. REGARDING AGENT.
14.1. Appointment. Each Lender hereby designates IBJS
to act as Agent for such Lender under this Agreement and the
Other Documents. Each Lender hereby irrevocably authorizes
Agent to take such action on its behalf under the provisions of
this Agreement and the Other Documents and to exercise such
powers and to perform such duties hereunder and thereunder as
are specifically delegated to or required of Agent by the terms
hereof and thereof and such other powers as are reasonably
incidental thereto and Agent shall hold all Collateral, payments
of principal and interest, fees (except the fees set forth in
Sections 3.3(a) and 3.4), charges and collections (without
giving effect to any collection days) received pursuant to this
Agreement, for the ratable benefit of Lenders. Agent may
perform any of its duties hereunder by or through its agents or
employees. As to any matters not expressly provided for by this
Agreement (including without limitation, collection of the Note)
Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and
such instructions shall be binding; provided, however, that
Agent shall not be required to take any action which exposes
Agent to liability or which is contrary to this Agreement or the
Other Documents or applicable law unless Agent is furnished with
an indemnification reasonably satisfactory to Agent with respect
thereto.
14.2. Nature of Duties. Agent shall have no duties or
responsibilities except those expressly set forth in this
Agreement and the Other Documents. Neither Agent nor any of its
officers, directors, employees or agents shall be (i) liable for
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any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere)
negligence or willful misconduct, or (ii) responsible in any
manner for any recitals, statements, representations or
warranties made by any Borrower or any officer thereof contained
in this Agreement, or in any of the Other Documents or in any
certificate, report, statement or other document referred to or
provided for in, or received by Agent under or in connection
with, this Agreement or any of the Other Documents or for the
value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement, or any of the Other Documents or
for any failure of Borrower to perform its obligations
hereunder. Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions
of, this Agreement or any of the Other Documents, or to inspect
the properties, books or records of any Borrower. The duties of
Agent as respects the Advances to Borrowers shall be mechanical
and administrative in nature; Agent shall not have by reason of
this Agreement a fiduciary relationship in respect of any
Lender; and nothing in this Agreement, expressed or implied, is
intended to or shall be so construed as to impose upon Agent any
obligations in respect of this Agreement except as expressly set
forth herein.
14.3. Lack of Reliance on Agent and Resignation.
Independently and without reliance upon Agent or any other
Lender, each Lender has made and shall continue to make (i) its
own independent investigation of the financial condition and
affairs of each Borrower in connection with the making and the
continuance of the Advances hereunder and the taking or not
taking of any action in connection herewith, and (ii) its own
appraisal of the creditworthiness of each Borrower. Agent shall
have no duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or other
information with respect thereto, whether coming into its
possession before making of the Advances or at any time or times
thereafter except as shall be provided by any Borrower pursuant
to the terms hereof. Agent shall not be responsible to any
Lender for any recitals, statements, information,
representations or warranties herein or in any agreement,
document, certificate or a statement delivered in connection
with or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement
or any Other Document, or of the financial condition of any
Borrower, or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or
conditions of this Agreement, the Note, the Other Documents or
the financial condition of any Borrower, or the existence of any
Event of Default or any Default.
Agent may resign on sixty (60) days' written notice to each
of Lenders and Borrowing Agent and upon such resignation, the
Required Lenders will promptly designate a successor Agent
reasonably satisfactory to Borrowers.
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Any such successor Agent shall succeed to the rights,
powers and duties of Agent, and the term "Agent" shall mean such
successor agent effective upon its appointment, and the former
Agent's rights, powers and duties as Agent shall be terminated,
without any other or further act or deed on the part of such
former Agent. After any Agent's resignation as Agent, the
provisions of this Article XIV shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
14.4. Certain Rights of Agent. If Agent shall request
instructions from Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or
any Other Document, Agent shall be entitled to refrain from such
act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall
not incur liability to any Person by reason of so refraining.
Without limiting the foregoing, Lenders shall not have any right
of action whatsoever against Agent as a result of its acting or
refraining from acting hereunder in accordance with the
instructions of the Required Lenders.
14.5. Reliance. Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or
telecopier message, cablegram, order or other document or
telephone message believed by it to be genuine and correct and
to have been signed, sent or made by the proper person or
entity, and, with respect to all legal matters pertaining to
this Agreement and the Other Documents and its duties hereunder,
upon advice of counsel selected by it. Agent may employ agents
and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by
Agent with reasonable care.
14.6. Notice of Default. Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or
Event of Default hereunder or under the Other Documents, unless
Agent has received notice from a Lender or a Borrower referring
to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a
"notice of default". In the event that Agent receives such a
notice, Agent shall give notice thereof to Lenders. Agent shall
take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders;
provided, that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the
best interests of Lenders.
14.7. Indemnification. To the extent Agent is not
reimbursed and indemnified by Borrowers, each Lender will
reimburse and indemnify Agent in proportion to its respective
portion of the Advances (or, if no Advances are outstanding,
according to its Commitment Percentage), from and against any
and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever which may be imposed on, incurred
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by or asserted against Agent in performing its duties hereunder,
or in any way relating to or arising out of this Agreement or
any Other Document; provided that, Lenders shall not be liable
for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses
or disbursements resulting from Agent's gross (not mere)
negligence or willful misconduct.
14.8. Agent in its Individual Capacity. With respect
to the obligation of Agent to lend under this Agreement, the
Advances made by it shall have the same rights and powers
hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term "Lender" or
any similar term shall, unless the context clearly otherwise
indicates, include Agent in its individual capacity as a Lender.
Agent may engage in business with any Borrower as if it were not
performing the duties specified herein, and may accept fees and
other consideration from any Borrower for services in connection
with this Agreement or otherwise without having to account for
the same to Lenders.
14.9. Delivery of Documents. To the extent Agent
receives documents and information from any Borrower pursuant to
the terms of this Agreement, Agent will promptly furnish such
documents and information to Lenders.
14.10. Borrowers' Undertaking to Agent. Without
prejudice to their respective obligations to Lenders under the
other provisions of this Agreement, each Borrower hereby
undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for
the account of Agent or Lenders or any of them pursuant to this
Agreement to the extent not already paid. Any payment made
pursuant to any such demand shall pro tanto satisfy the relevant
Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this
Agreement.
XV. BORROWING AGENCY.
15.1. Borrowing Agency Provisions.
(a) Each Borrower hereby irrevocably designates
Borrowing Agent to be its attorney and agent and in such
capacity to borrow, sign and endorse notes, and execute and
deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of
such Borrower or Borrowers, and hereby authorizes Agent to pay
over or credit all loan proceeds hereunder in accordance with
the request of Borrowing Agent.
(b) The handling of this credit facility as a co-
borrowing facility with a borrowing agent in the manner set
forth in this Agreement is solely as an accommodation to
Borrowers and at their request. Neither Agent nor any Lender
shall incur liability to Borrowers as a result thereof. To
induce Agent and Lenders to do so and in consideration thereof,
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each Borrower hereby indemnifies Agent and each Lender and holds
Agent and each Lender harmless from and against any and all
liabilities, expenses, losses, damages and claims of damage or
injury asserted against Agent or any Lender by any Person
arising from or incurred by reason of the handling of the
financing arrangements of Borrowers as provided herein, reliance
by Agent or any Lender on any request or instruction from
Borrowing Agent or any other action taken by Agent or any Lender
with respect to this Section 15.1 except due to willful
misconduct or gross (not mere) negligence by the indemnified
party.
(c) All Obligations shall be joint and several, and
each Borrower shall make payment upon the maturity of the
Obligations by acceleration or otherwise, and such obligation
and liability on the part of each Borrower shall in no way be
affected by any extensions, renewals and forbearance granted to
Agent or any Lender to any Borrower, failure of Agent or any
Lender to give any Borrower notice of borrowing or any other
notice, any failure of Agent or any Lender to pursue or preserve
its rights against any Borrower, the release by Agent or any
Lender of any Collateral now or thereafter acquired from any
Borrower, and such agreement by each Borrower to pay upon any
notice issued pursuant thereto is unconditional and unaffected
by prior recourse by Agent or any Lender to the other Borrowers
or any Collateral for such Borrower's Obligations or the lack
thereof.
15.2. Waiver of Subrogation. Each Borrower expressly
waives any and all rights of subrogation, reimbursement,
indemnity, exoneration, contribution of any other claim which
such Borrower may now or hereafter have against the other
Borrowers or other Person directly or contingently liable for
the Obligations hereunder, or against or with respect to the
other Borrowers' property (including, without limitation, any
property which is Collateral for the Obligations), arising from
the existence or performance of this Agreement, until
termination of this Agreement and repayment in full of the
Obligations.
XVI. MISCELLANEOUS.
16.1. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York applied to contracts to be performed wholly within the
State of New York. Any judicial proceeding brought by or
against any Borrower with respect to any of the Obligations,
this Agreement or any related agreement may be brought in any
court of competent jurisdiction in the State of New York, United
States of America, and, by execution and delivery of this
Agreement, each Borrower accepts for itself and in connection
with its properties, generally and unconditionally, the non-
exclusive jurisdiction of the aforesaid courts, and irrevocably
agrees to be bound by any judgment rendered thereby in
connection with this Agreement. Each Borrower hereby waives
personal service of any and all process upon it and consents
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that all such service of process may be made by registered mail
(return receipt requested) directed to Borrowing Agent at its
address set forth in Section 16.6 and service so made shall be
deemed completed five (5) days after the same shall have been so
deposited in the mails of the United States of America, or, at
the Agent's and/or any Lender's option, by service upon
Borrowing Agent which each Borrower irrevocably appoints as such
Borrower's Agent for the purpose of accepting service within the
State of New York. Nothing herein shall affect the right to
serve process in any manner permitted by law or shall limit the
right of Agent or any Lender to bring proceedings against any
Borrower in the courts of any other jurisdiction. Each Borrower
waives any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on
lack of jurisdiction or venue or based upon forum non
conveniens. Any judicial proceeding by any Borrower against
Agent or any Lender involving, directly or indirectly, any
matter or claim in any way arising out of, related to or
connected with this Agreement or any related agreement, shall be
brought only in a federal or state court located in the City of
New York, State of New York.
16.2. Entire Understanding. (a) This Agreement and
the documents executed concurrently herewith contain the entire
understanding between each Borrower, Agent and each Lender and
supersedes all prior agreements and understandings, if any,
relating to the subject matter hereof. Any promises,
representations, warranties or guarantees not herein contained
and hereinafter made shall have no force and effect unless in
writing, signed by each Borrower's, Agent's and each Lender's
respective officers. Neither this Agreement nor any portion or
provisions hereof may be changed, modified, amended, waived,
supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an
agreement in writing, signed by the party to be charged. Each
Borrower acknowledges that it has been advised by counsel in
connection with the execution of this Agreement and Other
Documents and is not relying upon oral representations or
statements inconsistent with the terms and provisions of this
Agreement.
(b) The Required Lenders, Agent with the consent in
writing of the Required Lenders, and Borrowers may, subject to
the provisions of this Section 16.2 (b), from time to time enter
into written supplemental agreements to this Agreement or the
Other Documents executed by Borrowers, for the purpose of adding
or deleting any provisions or otherwise changing, varying or
waiving in any manner the rights of Lenders, Agent or Borrowers
thereunder or the conditions, provisions or terms thereof of
waiving any Event of Default thereunder, but only to the extent
specified in such written agreements; provided, however, that no
such supplemental agreement shall, without the consent of all
Lenders:
(i) increase the Commitment Percentage of any
Lender.
(ii) extend the maturity of any Note or the due
date for any amount payable hereunder, or decrease the rate of
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interest or reduce any fee payable by Borrowers to Lenders
pursuant to this Agreement.
(iii) alter the definition of the term
Required Lenders or alter, amend or modify this Section 16.2(b).
(iv) release any Collateral during any calendar
year (other than in accordance with the provisions of this
Agreement) having an aggregate value in excess of $250,000.
(v) change the rights and duties of Agent.
Any such supplemental agreement shall apply equally to each
Lender and shall be binding upon Borrowers, Lenders and Agent
and all future holders of the Obligations. In the case of any
waiver, Borrowers, Agent and Lenders shall be restored to their
former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of
a specific Event of Default shall extend to any subsequent Event
of Default (whether or not the subsequent Event of Default is
the same as the Event of Default which was waived), or impair
any right consequent thereon.
16.3. Successors and Assigns; Participations; New
Lenders.
(a) This Agreement shall be binding upon and inure to the
benefit of Borrowers, Agent, each Lender, all future holders of
the Obligations and their respective successors and assigns,
except that no Borrower may assign or transfer any of its rights
or obligations under this Agreement without the prior written
consent of Agent.
(b) Each Borrower acknowledges that in the regular course
of commercial banking business one or more Lenders may at any
time and from time to time sell participating interests in the
Advances to other financial institutions (each such transferee
or purchaser of a participating interest, a "Transferee"). Each
Transferee may exercise all rights of payment (including without
limitation rights of set-off) with respect to the portion of
such Advances held by it or other Obligations payable hereunder
as fully as if such Transferee were the direct holder thereof
provided that Borrowers shall not be required to pay to any
Transferee more than the amount which it would have been
required to pay to Lender which granted an interest in its
Advances or other Obligations payable hereunder to such
Transferee had such Lender retained such interest in the
Advances hereunder or other Obligations payable hereunder and in
no event shall Borrowers be required to pay any such amount
arising from the same circumstances and with respect to the same
Advances or other Obligations payable hereunder to both such
Lender and such Transferee. Each Borrower hereby grants to any
Transferee a continuing security interest in any deposits,
moneys or other property actually or constructively held by such
Transferee as security for the Transferee's interest in the
Advances.
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(c) Any Lender may with the consent of Agent and
Borrowing Agent which shall not be unreasonably withheld or
delayed sell, assign or transfer all or any part of its rights
under this Agreement and the Other Documents to one or more
additional banks or financial institutions and one or more
additional banks or financial institutions may commit to make
Advances hereunder (each a "Purchasing Lender"), in minimum
amounts of not less than $5,000,000, pursuant to a Commitment
Transfer Supplement, executed by a Purchasing Lender, the
transferor Lender, and Agent and delivered to Agent for
recording. Upon receipt by Borrowing Agent of a notice of
intent by a Lender to sell, assign or transfer any portion of
its interest, Borrowing Agent shall have two (2) Business Days
to accept or reject such assignment. If a written response is
not delivered to Agent within such period, such failure shall be
deemed Borrowing Agent's consent to such assignment. Upon such
execution, delivery, acceptance and recording, from and after
the transfer effective date determined pursuant to such
Commitment Transfer Supplement, (i) Purchasing Lender thereunder
shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations
of a Lender thereunder with a Commitment Percentage as set forth
therein, and (ii) the transferor Lender thereunder shall, to the
extent provided in such Commitment Transfer Supplement, be
released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that
purpose. Such Commitment Transfer Supplement shall be deemed to
amend this Agreement to the extent, and only to the extent,
necessary to reflect the addition of such Purchasing Lender and
the resulting adjustment of the Commitment Percentages arising
from the purchase by such Purchasing Lender of all or a portion
of the rights and obligations of such transferor Lender under
this Agreement and the Other Documents. Borrowers hereby
consent to the addition of such Purchasing Lender and the
resulting adjustment of the Commitment Percentages arising from
the purchase by such Purchasing Lender of all or a portion of
the rights and obligations of such transferor Lender under this
Agreement and the Other Documents. Borrowers shall execute and
deliver such further documents and do such further acts and
things in order to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of
each Commitment Transfer Supplement delivered to it and a
register (the "Register") for the recordation of the names and
addresses of the Advances owing to each Lender from time to
time. The entries in the Register shall be conclusive, in the
absence of manifest error, and Borrowers, Agent and Lenders may
treat each Person whose name is recorded in the Register as the
owner of the Advance recorded therein for the purposes of this
Agreement. The Register shall be available for inspection by
Borrowers or any Lender at any reasonable time and from time to
time upon reasonable prior notice. Agent shall receive a fee in
the amount of $2,500 payable by the applicable Purchasing Lender
upon the effective date of each transfer or assignment to such
Purchasing Lender.
(e) Borrowers authorize each Lender to disclose to
any Transferee or Purchasing Lender and any prospective
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Transferee or Purchasing Lender any and all financial
information in such Lender's possession concerning Borrowers
which has been delivered to such Lender by or on behalf of
Borrowers pursuant to this Agreement or in connection with such
Lender's credit evaluation of Borrowers.
(f) Notwithstanding any other provision set forth in
this Agreement, any Lender may at any time create a security
interest in all or any portion of its rights under this
Agreement (including, without limitation, the Advances owing to
it and the Notes held by it in favor of any Federal Reserve Bank
in accordance with Regulation A of the Board of Governors of the
Federal Reserve System).
16.4. Application of Payments. Agent shall have the
continuing and exclusive right to apply or reverse and re-apply
any payment and any and all proceeds of Collateral to any
portion of the Obligations. To the extent that any Borrower
makes a payment or Agent or any Lender receives any payment or
proceeds of the Collateral for any Borrower's benefit, which are
subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver, custodian or any other party
under any bankruptcy law, common law or equitable cause, then,
to such extent, the Obligations or part thereof intended to be
satisfied shall be revived and continue as if such payment or
proceeds had not been received by Agent or such Lender.
16.5. Indemnity. Each Borrower shall indemnify Agent,
each Lender and each of their respective officers, directors,
Affiliates, employees and agents from and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, fees and
disbursements of counsel) which may be imposed on, incurred by,
or asserted against Agent or any Lender in any litigation,
proceeding or investigation instituted or conducted by any
governmental agency or instrumentality or any other Person with
respect to any aspect of, or any transaction contemplated by, or
referred to in, or any matter related to, this Agreement or the
Other Documents, whether or not Agent or any Lender is a party
thereto, except to the extent that any of the foregoing arises
out of the gross negligence or willful misconduct of the party
being indemnified.
16.6. Notice. Any notice or request hereunder may be
given to any Borrower or to Agent or any Lender at their
respective addresses set forth below or at such other address as
may hereafter be specified in a notice designated as a notice of
change of address under this Section. Any notice or request
hereunder shall be given by (a) hand delivery, (b) overnight
courier, (c) registered or certified mail, return receipt
requested, (d) telex or telegram, subsequently confirmed by
registered or certified mail, or (e) telecopy to the number set
out below (or such other number as may hereafter be specified in
a notice designated as a notice of change of address) with
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electronic confirmation of its receipt. Any notice or other
communication required or permitted pursuant to this Agreement
shall be deemed given (a) when personally delivered to any
officer of the party to whom it is addressed, (b) on the earlier
of actual receipt thereof or three (3) days following posting
thereof by certified or registered mail, postage prepaid, or (c)
upon actual receipt thereof when sent by a recognized overnight
delivery service or (d) upon actual receipt thereof when sent by
telecopier to the number set forth below with electronic
confirmation of its receipt, in each case addressed to each
party at its address set forth below or at such other address as
has been furnished in writing by a party to the other by like
notice:
(A) If to Agent or IBJ Schroder Bank & Trust
Company
IBJS at: One State Street
New York, New York 10004
Attention: Chris Norrito
Telephone: (212) 858-2438
Telecopier: (212) 858-2151
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118-0075
Attention: Steven J. Seif,
Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
(B) If to a Lender other than Agent, as specified on
the signature pages hereof
(C) If to Borrowing Agent
or any Borrower, at: Health-Chem Corporation
1212 Avenue of the Americas
New York NY 10038
Attention: Marvin M. Speiser
Telephone: (212) 398-0700
Telecopier: (212) 398-0884
with a copy to: Health-Chem Corporation
Aberdeen Road
Emigsville, PA 17318
Attention: Paul Moeller
Telephone: (717) 764-1191
Telecopier: (717) 764-5211
16.7. Survival. The obligations of Borrowers under
Sections 3.7, 3.9, 4.19(h), 14.7 and 16.5 shall survive
termination of this Agreement and the Other Documents and
payment in full of the Obligations.
16.8. Severability. If any part of this Agreement is
contrary to, prohibited by, or deemed invalid under applicable
laws or regulations, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid,
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but the remainder hereof shall not be invalidated thereby and
shall be given effect so far as possible.
16.9. Expenses. All costs and expenses including,
without limitation, reasonable attorneys' fees and disbursements
incurred by Agent, Agent on behalf of Lenders and Lenders (a) in
all efforts made to enforce payment of any Obligation or effect
collection of any Collateral, or (b) in connection with the
entering into, modification, amendment, administration and
enforcement of this Agreement or any consents or waivers
hereunder and all related agreements, documents and instruments,
or (c) in instituting, maintaining, preserving, enforcing and
foreclosing on Agent's security interest in or Lien on any of
the Collateral, whether through judicial proceedings or
otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Agent's or any
Lender's transactions with any Borrower, or (e) in connection
with any advice given to Agent or any Lender with respect to its
rights and obligations under this Agreement and all related
agreements, may be charged to Borrowers' Account and shall be
part of the Obligations.
16.10. Injunctive Relief. Each Borrower recognizes that,
in the event any Borrower fails to perform, observe or discharge
any of its obligations or liabilities under this Agreement, any
remedy at law may prove to be inadequate relief to Lenders;
therefore, Agent, if Agent so requests, shall be entitled to
temporary and permanent injunctive relief in any such case
without the necessity of proving that actual damages are not an
adequate remedy.
16.11. Consequential Damages. Neither Agent nor any
Lender, nor any agent or attorney for any of them, shall be
liable to any Borrower for consequential damages arising from
any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.
16.12. Captions. The captions at various places in this
Agreement are intended for convenience only and do not
constitute and shall not be interpreted as part of this
Agreement.
16.13. Counterparts; Telecopied Signatures. This
Agreement may be executed in any number of and by different
parties hereto on separate counterparts, all of which, when so
executed, shall be deemed an original, but all such counterparts
shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed
to be an original signature hereto.
16.14. Construction. The parties acknowledge that each
party and its counsel have reviewed this Agreement and that the
normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any
amendments, schedules or exhibits thereto.
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16.15. Confidentiality. Agent, each Lender and each
Transferee shall hold all non-public information obtained by
Agent, such Lender or such Transferee pursuant to the
requirements of this Agreement in accordance with Agent's, such
Lender's and such Transferee's customary procedures for handling
confidential information of this nature; provided, however,
Agent, each Lender and each Transferee may disclose such
confidential information (a) to its examiners, affiliates,
outside auditors, counsel and other professional advisors, (b)
to Agent, any Lender or to any prospective Transferees and
Purchasing Lenders, and (c) as required or requested by any
Governmental Body or representative thereof or pursuant to legal
process; provided, further that (i) unless specifically
prohibited by applicable law or court order, Agent, each Lender
and each Transferee shall use its best efforts prior to
disclosure thereof, to notify Borrower of the applicable request
for disclosure of such non-public information (A) by a
Governmental Body or representative thereof (other than any such
request in connection with an examination of the financial
condition of a Lender or a Transferee by such Governmental Body)
or (B) pursuant to legal process and (ii) in no event shall
Agent, any Lender or any Transferee be obligated to return any
materials furnished by any Borrower other than those documents
and instruments in possession of Agent or any Lender in order to
perfect its Lien on the Collateral once the Obligations have
been paid in full and this Agreement has been terminated.
16.16. Publicity. Each Borrower hereby authorizes Agent
and Lenders to make appropriate announcements of the financial
arrangement entered into among Borrowers, Agent and Lenders,
including, without limitation, announcements which are commonly
known as tombstones, in such publications and to such selected
parties as Agent or Lenders shall in its sole and absolute
discretion deem appropriate.
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Each of the parties has signed this Agreement as of the
day and year first above written.
HEALTH-CHEM CORPORATION
HERCULITE PRODUCTS,INC.
PACIFIC COMBINING CORPORATION
HERCON LABORATORIES CORPORATION
By:/s/ Paul R. Moeller
Name: Paul R. Moeller
Title: V P Finance of each of the
foregoing corporations
TRANSDERM LABORATORIES CORPORATION
By:__/s/ Robert D. Speiser
Name:____Robert D. Speiser
Title:_President
HERCON ENVIRONMENTAL CORPORATION
By:__/s/Paul R. Moeller
Name:___Paul R. Moeller
Title:__President
IBJ SCHRODER BANK &
TRUST COMPANY,
as Lender and as
Agent
By: /s/David Cunn
Name: David Cunn
Title: Vice President
Commitment Percentage: 100%
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STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 9th day of January, 1997, before me personally came
Paul R. Moeller, to me known, who, being by me duly sworn, did
depose and say that he is the Vice-President of Finance of each of
HEALTH-CHEM CORPORATION, HERCULITE PRODUCTS, INC., PACIFIC
COMBINING CORPORATION and HERCON LABORATORIES CORPORATION, the
corporations described in and which executed the foregoing
instrument; that he knows the seal of said corporations; that the
seal affixed to said instrument is such corporate seal; that it was
so affixed by order of the board of directors of said corporations,
and that he signed his name thereto by like order.
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 9th day of January, 1997, before me personally came
Robert D. Speiser, to me known, who, being by me duly sworn, did
depose and say that he is the President of TRANSDERM LABORATORIES
CORPORATION, the corporation described in and which executed the
foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the board of directors of said
corporation, and that he signed his name thereto by like order.
/s/ Richard Roel
NOTARY PUBLIC
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 9th day of January, 1997, before me personally came
Paul R. Moeller, to me known, who, being by me duly sworn, did
depose and say that he is the President of HERCON ENVIRONMENTAL
CORPORATION, the corporation described in and which executed the
foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the board of directors of said
corporation, and that he signed his name thereto by like order.
/s/ Richard Roel
NOTARY PUBLIC
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STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this 9th day of January, 1997, before me personally came
David Cunn, to me known, who, being by me duly sworn, did depose
and say that he is the Vice-President of IBJ Schroder Bank & Trust
Company, the corporation described in and which executed the
foregoing instrument and that he signed his name thereto by on
behalf of said corporation.
/s/ Richard Roel
NOTARY PUBLIC
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List of Exhibits and Schedules
Exhibits
Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.4 Term Note
Exhibit 3.2 Letter of Credit Fees
Exhibit 2.9 Letter of Credit and Security Agreement
Exhibit 5.5(b) Financial Projections
Exhibit 8.1(i) Financial Condition Certificate
Exhibit 15.3 Commitment Transfer Supplement
Schedules
Schedule 1.2(A) Guarantors
Schedule 1.2(B) Permitted Encumbrances
Schedule 1.2(C) Pledged Subsidiaries
Schedule 4.5 Equipment and Inventory Locations
Schedule 4.15(c) Location of Executive Offices
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries
Schedule 5.4 Federal Tax Identification Number
Schedule 5.6 Prior Names
Schedule 5.7 Environmental Claims
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Agreements
Schedule 7.3 Guarantees
CONTACT: -or- HEALTH-
CHEM'S INVESTOR RELATIONS FIRM:
Health-Chem Corporation The Equity Group Inc.
Bruce M. Schloss Tamara Ehlin (212) 836-
9607
Vice President Robert Goldstein (212) 371-
8660
FOR IMMEDIATE RELEASE
HEALTH-CHEM CORPORATION NEARLY DOUBLES CREDIT CAPACITY
WITH NEW $15 MILLION BANK FACILITY
New York, NY -- January 13, 1997 -- Health-Chem Corporation
[ASE:HCH] today announced that it has closed on a new up to
$15 million aggregate senior secured financing with IBJ
Schroder Bank & Trust Company, New York, New York. The new
credit facility is comprised of up to $7 million in term
loans and up to $8 million in revolving credit and will be
used to repay outstanding indebtedness under an aggregate
$7.75 million facility with equal terms with The First
National Bank of Maryland.
The Company noted that the expanded credit facility will
also enable Health-Chem to repurchase, repay and/or redeem
up to $7 million of its 10 3/8% convertible subordinated
debentures due April 15, 1999, as market conditions warrant.
Health-Chem Corporation is the parent company of Transderm
Laboratories Corporation (OTC:TLCC), a manufacturer of
controller release pharmaceuticals, as well as other
subsidiaries which manufacture products utilizing
technologies for laminating or coating fabrics and
materials.
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